Secret Ingredients of Clif Bars Founder - Gary Erickson Leadership Keys

By the end of a 175-mile bike marathon in 1990, Gary Erickson was exhausted and disgusted. Well who wouldn't feel that way after that long of a ride. Even though the body is exhausted, with the right fuel, one can keep on keeping on, as we will find out with Gary Erickson's experience from that one ride.

"The energy bars I was eating tasted like dirt and they weren't working like they were supposed to," said Erickson in an interview with IBD. "Cyclists never complained about them, we just thought they were the bitter pill we had to swallow to help us perform."

Not satisfied with the current state of energy bars, he thought he could concoct something better as co-owner of a bakery in Berkeley, Calif. Erickson, his wife Kit Crawford, and his mom studied nutrition as they experimented. They learned that the highly processed ingredients of the typical bar provided a sugar rush, not sustained energy. They developed alternatives that were healthier and tastier and found an eager audience.

After a while experimenting, they launched the first Clif Bars in 1992 (named after Erickson's dad). By year's end their company, Kali's SportNaturals (renamed Clif Bar & Co. five years later), had sales of $700,000. Industry sources estimate that the privately-held Emeryville, Calif., company has had a compound annual growth rate of more than 20% in recent years, with 2016 revenues of over $700 million. The Ericksons are now co-chief visionary officers, with Kevin Cleary serving as CEO since 2013.

Erickson, 59, grew up in the San Francisco Bay Area. He did a wide variety of jobs that allowed him the free time to do a lot of rock climbing and extreme biking. He wrote in his 2004 memoir, "Raising the Bar: Integrity and Passion in Life and Business," that in 1990 he was living in a garage with no bathroom or heat, barely surviving on $10,000 a year. Two years later, he scraped together $1,000 to invest in his energy bar business.

The Clif Bars utilized brown rice syrup and barley malt, instead of corn syrup or lots of white sugar. In place of refined white flour, he used good sources of natural energy like nuts, soy and oats. Today, about 77% of the ingredients are organically grown or certified as being grown in a "sustainable" way.

And the Ericksons delivered on taste, with the line now including White Chocolate Macadamia, Peanut Toffee Buzz, Maple Nut and Chocolate Almond Fudge.

All of this has built up a fiercely loyal customer base, which shows that profits and idealism can be compatible in a successful business model.

With a low budget, like a lot of companies start out with, the initial marketing strategy was to pass out samples at sports events that might have as few as 200 attending, but would build buzz. "Most big corporations won't compete at that level," Erickson said. Within a few months of launch, demand led 700 bike shops to carry his products.

The company also sponsored up-and-coming athletes. "We'd rather sponsor someone who came in second place, and is humble, than another who came in first, but is arrogant," Erickson said. "We look for athletes who are hardworking, friendly and who know how to have fun. It's about more than getting to the finish line."

Erickson is proud of his company maintaining its original principles, rather than compromising to reach a larger audience faster. On a bike ride in 1986 he observed that the big roads on a map, marked in red, were the most direct ones, while white roads were small, meandering ones — which gave him an insight fundamental to his future business. "Companies on the red road listen to a lot of noise: the market, shareholders, the board, economic consultants, advisors and conventional wisdom," he said. "Clif Bar is a white road company."

Luna For Women

In 1999, the company launched its Luna line of bars, designed for women's nutritional and energy needs, and they have been marketed creatively at events like breast cancer walks and baby fairs. The company has organized an annual Lunafest of films by, about and for women, with 180 screenings across North America each year.

Also in 1999, sales reached $39 million.

Clif Bar's main competitors in the energy bar niche had been bought by deep-pocketed corporations: PowerBar by Nestle (NSRGY) and Balance Bar by what is now Kraft Heinz (KHC). Five companies approached Erickson about acquiring Clif Bar. When Quaker Oats, now part of PepsiCo (PEP) offered $120 million in 2000, he was tempted.

But before signing the contract, he took a walk around the block to think about the implications. By the time he returned, he had realized that selling would mean he would have no control over whether the new owners would maintain the integrity of the brand, so he terminated the discussions. His investment bankers told him he was crazy and predicted that he would be out of business within a few months.

"I had been relying on the logical side of my brain," Erickson said. "Once I started listening to the emotional side of my brain, I had more clarity and knew keeping the company private was the best decision."

Clif Bar has gone far beyond those basic bars since then. Its ever-expanding product line include bars with a nut butter filling; others with whey protein, an "energy food" for endurance athletes; Clif Bloks energy chews and Clif Shot energy gel (both providing a burst of energy while training or racing); and the Clif Hydration electrolyte drink mix (to help athletes retain fluid).

Thinking Big

At the time of the near-sale, there were 100 employees. There are now 1,100 and they own 20% of the company through an employee stock ownership plan (ESOP). Clif Bar is often ranked as one of the best places to work and it's no wonder that it has just a 5% turnover rate. Benefits include subsidized day care for kids, the ability to use the gym and yoga studio, walk dogs, do dry cleaning or volunteer in the community on company time.

Clif Bar moved into its Emeryville headquarters in 2010. Built as a valve factory in World War II, it still retains its industrial feel, but is certified platinum in Leadership in Energy and Environmental Design (LEED), the measure of impact on the environment in construction and operation. Most of the wood was reclaimed from old gym bleachers, barns and shipping containers. The space is almost silent because of sound-absorption panels made from recycled jeans. It features one of the largest "smart" solar arrays in U.S. business. And its trucks run on recycled vegetable oil.

All of these "touchy-feely" things make hard business sense because they appeal to customers who want to support companies whose values they share.

Erickson and Crawford set up a family foundation in 2006, largely to promote organic seed research and to conserve crop genetic diversity. In 2004, their Clif Family Winery and Farm had its first product release. Cleary runs the day-to-day Clif Bar operation, giving Erickson and Crawford the time and space to think about the larger strategy.

"Gary has always led with an unwavering commitment to his values and vision," said Cleary. "Clif Bar could have been just a successful energy bar company, but he recognized early on that we had greater purpose, that we could do well by doing good. We make decisions that add up to the long-term health of our company for our five bottom-lines: brands, business, people, community and the planet.

"We look forward to continuing to do that, while scaling our impact and continuing to innovate, finding new products that feed and inspire adventure and expanding our distribution domestically and internationally. We're celebrating our 25th birthday this year and truly feel like we are just getting started."

Erickson's Keys

Founded Clif Bar & Co. to provide great-tasting, nutritional energy foods and snacks.

Overcame: Temptation to sell the company for a high price when it was up against deep-pocketed competitors.

Lesson: Treat employees really well and they'll be very productive.

"I think the most important lesson a small business can learn is to be patient for growth, but impatient for profitability."