Kellogg raised eyebrows last week by acquiring RXBAR, a startup maker of “whole food” protein snack bars, for $600 million.
It joined other big food companies in tapping a startup to help make up for the limitations of a traditional CPG company and its big, older brands to adjust quickly and nimbly to the fast-changing preferences of consumers for more nutritious and simpler foods.
The deal is one of the first big moves by new Kellogg Company CEO Steven Cahillane, whose predecessor failed to capitalize on the trends driving the consumer packaged food industry, even though Kellogg’s Special K was one of the pioneers in the better-for-you positioning.
On the other hand, RXBAR co-founder and CEO Peter Rahal has lived a charmed life since he and co-founder Jared Smith started RXBAR in Chicago more than four years ago, driving it to more than $100 million in annual sales and attracting the interest of big CPG companies.
What attracted Kellogg’s was what had inspired the co-founders—the search for a healthy protein bar with “whole, quantifiable ingredients,” Rahal told brandchannel. “And there wasn’t a clean protein bar. We identified a huge white space in the marketplace.”
The duo’s RXBAR certainly fit the bill. The brand boasts simple ingredients that are listed—in an eye-catching hallmark of its visual identity—on each package, such as “3 Egg Whites, 6 Almonds, 4 Cashews, 2 Dates, No B.S.” The bars come in flavors such as Coffee Chocolate and Maple Sea Salt.
The products did so well that RXBAR launched a line for kids, with more conventional flavors and brighter packaging, in addition to the continued transparency of listing the ingredients.
Consumers love them, and so does Kellogg’s, which is counting on this kind of acquisition to reignite growth and help inspire the company to figure out where else it should be playing—and how to become more agile and innovative in the process.
Meanwhile, RXBAR has launched a new ad campaign riffing on its “No B.S.” line on adults and kids’ bars; the latter ad cleverly ends with the tagline “No Bad Stuff” instead of “No B.S.”
“With the kids’ ad, we were thinking, ‘What can we tweak to make it kid-like without totally going into the space where things become fun, like with a cereal brand or gummy bears,” Kevin Jones, CEO of creative agency Juniper Jones, told us.
When did you first learn of Kellogg’s interest? What was your response?
In March of 2017. We’ve always made decisions after the best interests of all stakeholders. We’ve always been open-minded and willing to pursue something if it was good. Objectively what we’re all looking for is growth opportunities and fuel for growth. Think of it as muscle. That was the framework. How can we get help and how can we grow faster?
There’s a huge misconception: Kellogg is an amazing company. A lot of people don’t know how much good they do. People think they only sell sugar cereal. They’re a great organization, extremely philanthropic. It’s a mindset thing.
There was a total alignment on values and culture and how they run their organization. Their philosophy on integration or lack thereof was totally aligned. We wouldn’t have done a deal if they were going to integrate accounting. We don’t want to do that.
Did Kellogg’s stumble with Kashi give you pause?
No pause. It was actually a reassurance. Everyone learns from mistakes. That was a lesson and a good case study of how they want to not do that again. They’re looking at decentralizing. We’re a growth company; they want to provide growth. That’s the main goal.
We’re focusing on keeping what has made us successful—providing value for our customers; continue to make a better product; continue to over-serve and stay ahead of problems and needs. We’d like to grow faster.
What insights drove the launch of your kids’ bars?
We noticed a lot of customers were giving the product to their kids and wishing there was one for their kids. A lot of it was customer-driven. And we examined kids’ products and saw a big gap just like with adults—no minimum ingredient, clean label protein bar. Customers were passively influencing us and we went with it.
Are you going to stick with the company?
I’ll keep my job as chief executive and president and co-founder. It’s not really a job.
So how do you plan to grow RXBAR with the backing of Kellogg’s?
We have new flavors. We are putting our resources toward new products and line extensions. There’s nothing concrete yet. But we are planning to expand beyond bars. What we don’t want to do is compromise our approach to food and our philosophy. We want quantifiable whole food ingredients. What’s most important for us as a team is high-value ingredients.
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