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Perfect Bar Finds Missing Ingredient

Perfect Bar’s big break came when a Whole Foods Market manager in the San Francisco Bay Area gave the fledgling company’s product a 30-day trial. That got its organic snack bars onto supermarket shelves.

Perhaps an equally significant opportunity for the San Diego-based company has been its partnership with San Francisco-based private equity firm VMG Partners.

Perfect Bar has used the undisclosed investment to scale up; over the 18 months following the deal, it increased the number of bars it made per shift from 20,000 to more than 100,000. And it is eyeing a possible expansion of its product line and its manufacturing base.

It’s been quite a journey for a company that was started in 2005 by 13 siblings after their nutritionist father, Bud Keith, fell ill. The product was inspired by amalgams of nut butter, honey and nutritional supplements he would feed them as children.

“It had 20 organic whole foods, it was high in protein and it was really good for you,” said Bill Keith, the oldest of the siblings and the company’s chief executive.

It was the first bar of its kind, which has since inspired competitors to launch similar products.

Getting onto the shelves of Whole Foods stores led the company to gain significant traction in the natural foods sector of food retail.

The Ingredients

Perfect Bar, which comes in flavors such as peanut butter and almond butter, ticks a number of boxes for consumers concerned about what’s in their grab-and-go bars: The ingredients are organic, kosher and gluten free; none are genetically modified.

Their portfolio of seven flavors has expanded by five in the last year, including the introduction of bars featuring dark chocolate, meant as more of a mid-afternoon snack rather than a meal replacement. They also introduced miniature versions with 100 calories, a lighter version than their typical bar, which can run more than 300 calories.

That’s part of the company’s strategy to broaden what they have dubbed “eating occasions,” where a Perfect Bar looks to a consumer like the right choice.

“Our consumers will see a lot more innovation a lot quicker now that we have the team to be able to execute on it,” said Leigh Keith, co-founder and chief operating officer.

While competitors have popped up since its inception, the company says it is its devotion to taste and flavor that sets it apart.

“There are quite a few bars out there that have the stats — they’re gluten-free, they’re organic, but when you try it, you go, you know what, I’m not going to eat this again,” Bill Keith said. “We want folks coming back for more. That’s how they’re going to involve it in your daily routine. We don’t want to be here today, gone tomorrow.”

Cold-Pressed

It took $100,000 in savings and $200,000 in credit card debt to get the company off the ground before they convinced a Whole Foods store to carry the bars. Because the bars are cold-pressed, rather than baked, they needed to buy specialized equipment to manufacture them.

“We were trying to break into an industry that had 750 bar brands,” Bill Keith said. (Today that’s closer to 4,500.)

By 2009, Perfect Bar had been picked up by warehouse club Costco, where it’s been sold since in a chain known for frequently rotating its inventory. The bars have also been sold at some conventional and mass retailers, such as supermarket chain Vons and retail giant Target.

About 10 years after the company’s founding, they sold a minority stake to VMG, which has invested in a number of branded consumer goods, such as nut butter business Justin’s LLC and fruit and nut bar maker Kind LLC. Terms of the Perfect Bar deal weren’t disclosed.

At the time, Perfect Bar and chia bar maker Health Warrior, another company in which VMG decided to invest, together generated about $15 million in revenue, according to published reports.

VMG, an active buyer and seller, sold back the stake it had in Kind to founder Daniel Lubetzky for about $220 million in 2014. In 2016, VMG sold its stake in Justin’s to Hormel Foods Corp. for $286 million.

Knowing they needed an investment to grow the company, Leigh Keith said the decision to work with VMG took about 18 months of talks. Perfect Bar wanted to make sure the firm would be OK with its strategy of managed growth, and not force expansion beyond its means.

After VMG took a minority stake, the company was able to recruit executives with experience in branded consumer goods, including people who had worked at La Jolla-based cereal company Kashi, General Mills and Living Essentials’ 5-hour Energy brand.

Before the deal, “I managed marketing, Bill managed sales; I managed finance, Bill managed operations,” said Leigh Keith. “We were so hung up on just making our core flavors for our growing customers for years, especially being self-manufactured.”

Running Trials

The bars are produced in a facility on Eastgate Mall; the company is also searching for co-manufacturing spaces that can accommodate its unique manufacturing method.

“We’re trying to figure out who’s going to be that partner to really grow us,” Bill Keith said.

Perfect Bar has run trials with some companies in anticipation of establishing manufacturing spots on each coast.

They have also worked with a facility on the West Coast to accommodate increased demand.

In 2014, they produced seven million bars by hand, rolling them in sets of 16 and cutting them manually. They were able to double the amount of bars they made the next year after custom-making equipment to take some of the labor out of the process.

The company moved into a new building in Sorrento Valley in December. The months since have been busy: Bill Keith has framed art resting on the floor of his office, which he hasn’t yet had time to hang. Visitors occasionally end up in an adjacent business because there is no building signage.

The Keiths said a key to their success has been managing their recent growth.

Rejects Tax Credit

This year Perfect Bar was granted a $170,000 tax credit through a state program for businesses that want to come to, grow or stay in California, but it decided to decline the credit because the requirement of the agreement didn’t match up with its business plan.

A previous credit of the same amount, which the company was awarded in 2015, required a total investment of $4.6 million in a manufacturing facility and the hiring of 90 new full-time workers by 2019. Now they employ 145.

Expanding Product Line

The Keiths are considering “expanding outside of bars,” though they wouldn’t say what type of products Perfect Bar may branch into.

The company will debut its first seasonal flavor this fall, one for which Perfect Bar was still testing a few weeks ago.

That kind of quick turnaround time gives the company a competitive advantage, Leigh Keith said.

“The Coca-Colas and the big companies can’t take risks like that as easily,” she said. “We can reach out to a broader base of consumers or influencers that we have a relationship with, we can gut check something and give it a try without having to do these big robust consumer research segmentation studies which turn a product launch into three years. We can do it in three months.”

The company is already in 95 percent of natural sales channel. The conventional and mass channels are where Perfect Bar sees the most opportunity.

“There’s tons of runway,” Leigh Keith said.

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