MadeGood: Salma and Nima Fotovat Lost Their First Business.They Grew Their Next One Into a Snack Giant.

0:10 It took a lot. Like some of the things we said yes to, I think probably retailers went to many other suppliers first and they said no and they're like okay I guess made good will say yes. Yeah. We had one thing called a pizza box, where it had probably thirteen different products in it. You know what a nightmare it is in manufacturing to make one skew that has thirteen different products in it?

0:34 Hm. But we did it. We said yes to things, not because it was easy, but because we had to do it. That was the only way. Welcome to How I Built This. A show about innovators, entrepreneurs, idealists, and the stories behind the movements.

0:58 They built. I'm Guy Raz and on the show today. How three siblings teamed up to create a bite-sized granola snack. screw it into made good. An organic brand that sold in tens of thousands of stores.

1:19 A lot of the founders I've had on this show started with a clear vision. They knew there was a product they wanted to create. It's just that they had no idea how to make it. Take Krishna Kalyanan, the founder of Catalina Crunch. He had to figure out how to make breakfast cereal from scratch.

1:37 Or Ben and Jerry. They wanted to make ice cream, but they literally had to take a correspondence course to learn how. But my guests on today's show had the opposite problem. Nima and Salma Photovat, our brother and sister. And before they ever thought about launching their own brand. They already knew how to make snack foods.

1:56 Their family business, co-founded by their dad, manufactured fruit and nut bars for other companies. They were Kopackers. So they understood the machinery, the supply chain, production, inventory. All of the complicated stuff that goes into making food at scale. But what they didn't have was a brand.

2:15 And eventually they decided to create one. Their first attempt was a line of fruit and nut bars that wasn't all that different from the products they were already making for other brands. It turned out to be a modest success. But For reasons we'll get into later on.

2:30 Launching those bars ended up with the Photovats actually losing their share of the business in a painful split with their partner. After the dust settled, they came up with a much more focused idea. Instead of trying to make just another snack bar, they asked a very practical question. How do you make a snack that parents would actually feel good about putting into their kids' lunchboxes? Something that's organic, tastes good, and is free from the allergens so many schools worry about.

3:01 So no dairy, no gluten, no nuts. That idea became made good. They launched in 2014 with bite-sized granola bites. granola bars came next. Then cookies, crackers, cereal, baked snacks.

3:16 And a few ideas that didn't really work. but they kept iterating, kept expanding, and over time they built one of the fastest growing organic snack brands in North America. Today, Made Good products are sold in over 40,000 stores across the US and Canada, and the company has sales in the hundreds of millions of dollars. Nima, Sama, and their sister Saba all still work together at the company in Toronto.

3:42 You'll hear from Nima and Salma in this interview. Their story starts long before Made Good, of course. They grew up in Iran, where their father owned a canning business. But in 1980, after the Iranian Revolution, A brutal eight-year war broke out between Iran and Iraq.

4:01 Yeah, so I was actually born the the year uh when the war started and I remember the blackouts due to the war, and my dad would come out with his instruments and sing, or we would play games. So I remember it being a time of togetherness. But at the same time I do have this one memory There was bombings and then we were forced to um leave school early. So my grandmother came to pick me up and we're walking home And the bombings are happening at that time, so we can hear them on the streets.

4:33 And I'm holding my grandmother's arm. And I'm saying I'm not scared, but I don't know why my knees are shaking. So to this day. Thunderstorms always remind me. Of the war. Yeah, as a kid everything has a bit of a

4:49 you know, you don't know the depth of the problem. You're just taking it as it comes. You know, we're gonna go Uh and hide underneath the stairway because the bombing is here. It just becomes a normal part of uh Uh life. D did you just get a curiosity'cause you know, uh there was uh I mean at a time the the the Iranian army and or actually I should say the Basis, which was the sort of the

5:13 units that were working for the IRG C They were recruiting boys, thirteen, fourteen year old boys to go to the front lines. And I imagine I mean you were a kid But I imagine it It had to be in the back of your parents' mind. That is simple, you might be recruited to go fight.

5:29 Absolutely. They actually ban boys from leaving Iran at the as soon as they turned thirteen. So you could not leave the country. That's why We left as a family, but the month that we left was a month before my thirteenth birthday. Wow.

5:46 I mean uh f we c we probably can't delve too deep into it, but just for some context for people listening. I mean the Iran Iraq war Uh, I was I was reading about it recently, actually in preparing for this this conversation, and I I didn't know was it's still the bloodiest war between two developing countries in history. Do you remember Your parents being really careful about

6:09 what they said in the house or even what they said around you Just because they were worried about You know, I mean you're living in essentially You know I guess you could say it's kind of a totalitarian society.

6:22 Mm-hmm. I have a memory I I remember because my parents speak English. So when they didn't want us to h to understand, uh huh, they would turn to English. а на дірем де с дайко як сепертнес

6:37 To your point. Okay. At home, we were able to we we drank alcohol, we there was music, and all these things are banned in Iran. As soon as we left the house. I we had to women even girls my age five six we had to wear head scarfs. And you know.

6:53 Long coverings to cover our body and act in a certain way. So Outside world was very different. And when I came home, it was a whole different environment. Yeah. We could talk about this for hours and hours because It's a fa just a fascinating story about uh what happened and

7:11 Just the contrast between life before and after. So your family leaves nineteen eighty eight, which is actually the year that the the the war ends. It comes to ceasefire. Exactly. We sold everything. We were ready to leave and they announced a ceasefire. But we still decided to proceed and we left.

7:30 As planned. I also would like to think that one of their main motivations was their girls because women's rights were non existent and my grandmother is very active in women's rights and she was also Very adamant that we Leave the country so that

7:47 Her granddaughters could also have. Freedom, freedom of speech, freedom of expression. So I think it was for all three of us to have that freedom. Opportunity Better life.

8:00 So you you guys get to Canada as kids. You were thirteen, or maybe I was thir thirteen. I was a and we have another sister. Saba, right? Saba, yes. And she was how old is she? She must have been around ten. Got it. Okay, so now you're in Canada. Did you speak in English?

8:17 No. None. None. And did a Put you right into public schools? Yes. I have a very vivid memory. I remember my mom dropping me off at the door of the school.

8:30 Mrs Palmer was her name, that was my teacher. And we were at the edge of the door and I was holding on to my mom's leg and her dress and I wouldn't let go. So there was a whole half an hour back and forth. And I was like, I don't wanna go. I they look different than me, and they don't understand me. It's very scary. What do you remember, Lima? I remember Our schools in Iran academically they were incredibly

8:58 Good. However rigorous, yeah. Here the facilities like the gym

9:11 It was cool, but the access to all of this stuff for me was incredible. And the other thing that was different Was that it was coet. So you sit beside girls. I mean who doesn't like that? It's so funny you say that because I have the exact adverse reaction. I was scared of boys. So the fact that we had boys in our class Was A negative for me at that time. Um I I I wanna ask uh you guys about your dad for for a sec,'cause I know that he had a canning business back in Iran. Like he cannot uh fruits and and vegetables.

9:46 Uh and I guess that business did uh pretty well in Iran. And and so once your family relocated to Toronto. Uh did he did he w want to do that again, or d I'm assuming he wanted to start another business. Yes. He wanted to start a business right away. he was at a mall one day and he's walking and he runs into a high school friend they went to high school back in Iran like thirty years before twenty years before that.

10:15 Randomly. They start talking. His friend Alan has come back recently from a visit to Iran. He went to the city of Esfahan.

10:27 has an ancient recipe or an old recipe of nougat candy. He's like oh I have this recipe on a napkin, let's start a business together. Wow, that was that so he says let's start a nougat business together. Yeah. And my dad's like okay, let's do it. And and I guess we should mention Nougat is a very popular Middle East Italy too. It's basically

10:51 It's like whipped egg whites. And honey. That's the and and then you embedded with nuts, but the base of it is whipped egg white. And honey. And it it dries into This

11:02 Chewy. And so so w the he your dad was like, I'm in, let's go let's do it, let's start a new good business. Yes. They rented a three thousand square foot facility, they bought used equipment they had no food science background And

11:21 It sounds simple making nuguts, but making nugat is extremely difficult. It's a temperamental The moisture in the air, the humidity. They thought it's an easy thing to do, but it ended up being a very difficult thing. I was uh at Costco recently, actually last week and I noticed they sell uh nougat from Italy and I was thinking about you because you know, there's a it's not flying off the shelves, right? It's not I mean it might be in Iran or in Italy.

11:53 But or in other Middle Eastern countries, but it's just not a thing. So how did the Nougat business do in Canada? Well the insight that they had was that why are North Americans not eating nugget? Like there must be we are on to something here. Yeah. Let's create something they're missing. So It was a grind. They were able to make enough. Money to just keep this thing going.

12:19 А вона адхі, а тільки контакт коз-ар. The first job she had was selling vacuums door to door and that didn't last very long. In the winter too, selling vacuum cleaners door to door.'Cause again, they had to do anything in order to survive. Uh but she ended up getting a job at the uh board of education as a multicultural consultant. So that helped at least bring a bit of, you know, stability into the family until

12:48 Dad's business started to Gain some traction. Yeah, and I think about about four or five years into the business, things do pick up for your dad, right?'Cause he I guess he and his partner Expand from

13:01 nougat candy into uh bars, like fruit and nut bars. And actually start like co packing. Like Making these for other brands. Like a like a white label business? Exactly.

13:12 Given that they were already making bars. They All they had to do was to remove the nougat as the binder and create a syrup binder and add fruits and nuts and make your fruit nut bar. Yeah, makes sense. And and m meanwhile you guys are all obviously getting older. So tell me uh a little bit about your involvement as kids.

13:34 With with his business. What would you guys do? Some what do you remember would you guys go there on the weekends and like Pack boxes and help out? Yeah, I remember my first

13:45 job in the summer was actually going into the factory and stickering bars because I didn't have packaging machines at that time to do it. So I remember me and my sister would be lining them up and we'd race as who can do the more you know who can sticker the most amount of bar um fruit and nut bars. So that was our that was my first exposure into the into the family business and on the factory floor. And we'd work like eight in the morning till four in the afternoon with one half an hour of lunch, but we'd be on our feet all day and we'd get five dollars cash at the end of the day. And Nima, you were I mean

14:21 by nineteen ninety four when when when your dad uh starts to make these bars. I mean you're You're almost what, twenty. Uh so you're in the uh so you're trying to figure out what to do. Yes. But And and you've no intention of of of joining your dad's business. Like you don't want to do this. This is not what you want to do when you graduate. No, I I was open to it, but I was trying to first figure out if I could do something on my own. I even looked at

14:47 Uh Getting into the ostrich business. We went to look at ostrich farms. I wanted to start something for myself. What you do with ostriches? So I can tell you a lot about ostrich. Ostrich eggs? Ostrich meatriches are the most productive uh animal because every piece of an ostrich you can use so the eggs Yeah.

15:09 The skin, the leather, the meat. But it just It just never has never thank God I didn't get into the business'cause obviously it hasn't taken off, but My dad's like, why don't you just come and join us? I decided to

15:24 go and work for him and made the executive decision to drop out of university. Yeah. And uh when I joined I was able to do everything because it was so small. So I ended up sitting in the front desk as the receptionist. I started to cut POs for ingredients. I've learned how to change ballasts on lights up on uh the ceiling. You know, it's just it's a tiny business and you gotta do everything.

15:55 When you were when you joined, right, your uh in your early twenties And you're working with your dad and Did you start to think about You know, this could be bigger or I have ideas here or or or not. I did.

16:11 I was very much eager to take over stuff. I am a doer. I like to do things. So I came in, I'm like oh Alan, you're doing payroll, let me do payroll. Alan was uh my dad's part. So first it's internally First I was focused on taking work from them so I could learn. And then once I start in a few years I started to say, okay, now I want to get into how do I grow this business, right? And so uh I started to make calls. I started to look for customers. I'm like, how do we get more customers? What can we make? And so that's when I started to build a little bit of ambition. Once started once I got to know the inner workings of the organization, I think it took me a few years. Then I started to say, Okay, how do we

16:56 Start to grow this. Yeah. And I guess eventually you you and your your sisters and your dad You decide to

17:05 to take the fruit and nut bars that you've already been making for other Brands. Uh and then and essentially Sell them under your own name, under your own brand in Canada. Yes.

17:17 Being a co packer. seeing what other brands were doing, having helped launch a few brands, seeing what it takes to take brand to market. Кив ас а баксіт віу. Of what it takes. to build a brand as a co packer.

17:33 And so we took that and we decided to rebuild our ho house brand taste of nature and relaunch it in two thousand and eight. You know, both of you know. Making something isn't the challenge. It's selling it. It's br the the brand, building the brand is really hard.

17:51 So here you are, it's two thousand eight. How do you how do you Build a brand. What do you start to do? Get an advisor. You can bring somebody in to help you figure out how to turn it.

18:01 this into a bigger brand. It's exha like what is brand positioning Why do we need to exist? What problem are we solving? And he took us to a

18:13 Great. design agency as well. And we came out with this kick ass artwork and design, which really Stout on shelf. I thought it was I mean I can say it I'm transparent packaging. Uh huh. half the bar was branded and the other half was completely transparent.

18:34 It looked really sharp, really unique. uh with white boxes which weren't that common. So we kinda really knowing that we don't have a lot of marketing dollars, making sure the packaging worked really hard for us from day one. So that was the work that we did and we launch we launched Taste of Nature. In

18:57 Canada in two thousand and Eight. Okay, so you la and and you had relationships with companies and so how did you I mean were you able to get this product in Mainstream stores, grocery stores?

19:11 No, it was very difficult. I we didn't have relationship with retailers. We were doing co-packing, so I had no experience, no contacts whatsoever. The only thing I could get Master up was to f get a distributor. To list our products. Now what I needed is was a broker. a sales agency, a broker, because we didn't have our own sales, obviously internally. So what I needed was a broker and I

19:39 It was an interesting time because it was the same time that Kind was entering Canada. Right. And you're kinda competitor. Exactly, yes. Yeah. It this is w how business works, right? We had Daniel Lebetsky on and c the Kinebar story, and uh Yeah.

19:56 We know it's a it's a tough business. The bar business is tough. And it's competitive and it can you know Um kind really d worked hard to protect it. branding an image and at times even, you know, threatened uh other brands that had clear packaging, for example, with lawsuits, and did you kind of were you able to sort of stay under under the radar from all those battles at that time. Yes, we were in Canada, so it was

20:23 Not a big market for kind and uh Until two thousand and twelve. Taste of nature was much larger than kind in Canada. And it sounds like that this really becomes the business. That that it's It's really

20:37 what you're making. You're making these bars, right? Mm-hmm. We're still doing co co packing, contract manufacturing, yeah. Um but but how quickly did more revenue come from the bars or was it always coming from co-packing, co manufacturing.

20:53 No, it it flipped on becoming taste of nature more and more. Co packing became contract manufacturing became less and less important. Now it helped Because it covered rent. It helped with investing in the brand. You know, it was

21:10 I always say that This private label contract manufacturing is like having an investor because you generate the cash. to put into the brand. How big By twenty twelve.

21:23 How big was the business, I mean, in terms of of of revenue? Like was it over ten million? Yeah, it was over ten. We had a hundred employees. Yeah, we hired HR, we had like we started we it was starting to take shape. Departments were starting to take shape in the company. Professionalizing the business. Yeah. Yeah.

21:45 Okay, so you you're really gaining a lot of traction. twenty twelve. Your dad decides that he's gonna split with his partner and sell the business. Tell me What you understand about that.

21:57 About why that happened. As you heard, Saba Salma and I were the primary Uh people that were running the business. And

22:07 It piqued the interest of My dad's partner to c to be more involved. Both from the next generation coming in. as well as what is the purpose of owning this business. We were both thinking about Alright.

22:22 reinvesting and growth, and they were more thinking about uh dividends and taking cash so there were starting to be Misalignment in different areas are or values, principles. And it didn't happen in two thousand and twelve. It happened, it's you know, it's just things these things don't happen overnight. Uh

22:46 It was brewing and It wasn't being resolved. And so to separate from an equal partnership із на із процес No. Presumably there's a dispute about how to move it.

22:58 For which direction? Not unusual. We've had many examples of this on the show. It happens, right? This is the risk of starting a business with a friend is that it can also but people say don't start businesses with friends and family. You guys did both. You know, I think part of it.

23:18 Now that I think about it, part of it is also generational because Us as younger. Kids or individuals in the business. We l care less about taking dividends out and more about growth and growing, right. Older generation.

23:36 You don't need it as much. I think there's the there's disconnects in different areas. And we thought N

23:47 with the business because we were so deep in the business that Um anyone would who would want to buy this business or provide financing to the other family. They would want to have management included. But essentially they they

24:05 Said well actually You you've made an offer. Instead we're gonna Use the same dollar amount and buy the business out. Yeah.

24:13 Correct. And on july twenty sixth, two thousand and twelve. I was on my way to The office And my dad calls me that says Don't come in.

24:27 We were just delivered. A check and we were bought out. Well. And my sister and I were At the office.

24:37 And I see All I could see uh Are men in suits walking into a boardroom, and these are men I never seen before in house. Very curious because we're a very casual office, so anybody in suits I'm already like What's going on?

24:51 And um Dad's partner's son comes in and says, We need to talk to you. This is urgent. Come into the boardroom. And I knew obviously we had this um bit out and I was like I don't wanna talk to anybody. I d I need a lawyer. I was so panicking, I trying to gather my sister We're about to leave and

25:09 They're like, No, all this property is now not yours. Like you can't You can't take anything. I'm trying to take my keys and my cellphone like no if this is company property you can't So it was just very overwhelming and shocking that this was all happening. I don't even know how we made it from the from the office. To our parents' house, but then we all gathered in the basement. I think there was a lot of mixed emotions. But

25:33 each of you guys were gonna probably get a little bit of money from this sale, and your dad, I'm assuming, is gonna get the most from it. But you guys were gonna get some money, but was it Did you feel like okay? That's fine, we get some money, I'm gonna be okay for a while, or or were you n like what are we gonna do? We were not uh

25:49 uh generation two were not uh equity owners so the money went to It was essentially uh for my dad and then There wasn't let's say Wasn't this was not a windfall exit.

26:05 And I think beyond the money, I think the biggest thing that we I've least Top of mind for us was just the loss of Of of purpose and a loss of having work and the community that we had built.

26:17 So we were cut off from that world overnight. It's like getting fired. It felt like getting fired. Yeah, I guess we got fired. But I think my dad Being so It just

26:33 You know fierce and and Determined he's like okay. Let's go literally the next day we ended up going to Ikea buying furniture. Going to get cell phones, and we set up Make shift offices in the basement because he was like, We're moving forward, we're not gonna stalk.

26:54 This happened, what's next? He was literally like, We're gonna start a new business right away. Well, he was just like, You guys, I think that was his vision. But he's like, you guys will still need to come here every day. And after a few weeks, I think. We realize that this is a once in a lifetime opportunity where you actually get a forced blank. Slate.

27:18 And We're like this is a time where if you want to go our separate ways, we can go our separate ways. If you wanna go start A restaurant or do whatever, so we kinda started very broad. Like right now before we jump in and try to do the same thing. Let's go very wide and see okay, where do we want to go?

27:37 So so What were you you meant you mentioned a restaurant, for example. What were other ideas that you guys batted around? I wanted to buy an organic farm. Okay. I was really rooting for that, but that got shut down right now. From the farm?

27:51 And start to yeah, cultivate different crops or it could be yeah, commodities actually start to grow. Not an easy business. No. Glad you passed on that one. What else? What other ideas? I mean, don't think that we had some grand idea. It was like what is coming to us and let's explore. Yeah. But quickly Options started to tr Get eliminated were like because everything Required.

28:18 Risk and resources and experience which we did not have. Whereas if he started doing the same thing We brought with ourselves the most valuable thing, which was dec a decade or a decade and a half of experience. And there's no point in throwing that away. Forget about the money. The money was the least important thing we got from there. The most important thing was experience. And

28:43 The people we knew, the network, the reputation we had built. If we did anything else, we would sacrifice those two important assets. So we was a bit reactive. Until we settle down. Can I

28:57 accepted the reality, we went through the stages of grief and were like okay Then I think it was in January. It was in January that of twenty thirteen that we're like, okay. Now it's time to get serious about what we want to do next. Why don't we come back in just a moment? The Photovats make hundreds of thousands of granola bars, but have to scramble when they're accidentally stamped.

29:23 But the wrong date? Stay with us, I'm Guy Raz, and you're listening to how I built this. Hey, welcome back to How I Built This. I'm Guy Raz. So it's 2013, about a year after the Photovats had to walk away from their previous business. and they're starting to get serious about launching their next venture. And for Nima?

29:58 The inspiration begins With his kids. My kids were growing up on we were sending them to school. We were packing lunches and Because what we got from schools

30:10 Day cares was that hey. There's a kid that has a nut allergy, please make sure you don't send anything to school that has not allergies or may contain that sort of like a sunflower butter in my pantry that's not a little bit more than a little bit. I'm like it doesn't really matter to us because Our kids are gonna grow up. ultra healthy and they're never gonna even know what's in a package.

30:34 That lasted I would say, guy, for only a couple of weeks because as they went to school they got exposed to all sorts of snacks that were not Say. to our standard of healthy Whether it was the Quaker Chewy bars or

30:51 different cookies and um and snacks that were not free but not healthy. A not organic. And so this is where we're like we started to notice a tension point. There is this three dimensions of tension. There is the tension with the Parent, us wanting to do the best. There's the tension within society to want to be inclusive and keep everyone safe. And then it's ultimately the child, the kid, the tension of a treat, something tasty. So if we could solve

31:24 that tension between those three stakeholders We could have something that Yeah, so we also It listed a marketing firm. That actually went out and did research around

31:37 this white space and coming back with the fact that there is actually an opportunity of having a product that is Allergen free, but also healthier. Better ingredients, organic. That's The missing space. So that's something that NEMA felt tangibly, but then when we actually took it out into the market, we also saw The void in the market as well.

31:59 Alright, so this is twenty thirteen, it's not that long ago, but it was really there was a lot of focus on and had been for a while on gluten free um peanut free, soy free, nut free, right? I mean because Just an explosion. of kids with with particularly peanut allergies and gluten allergies and all kinds of things. So You thought that was interesting. You saw an opportunity

32:22 to kind of get into that space but also to kinda recreate the the Classic Quaker chewy chocolate chip granola bar. Yes, so I think there were some nuggets of insights that went beyond just

32:36 making a peanut free product. One of them was the fact that we realized when we did the research that it's not just the child that eats snacks. Snacks are bought by the parents. And it's a family consumption. It's not a child consumption thing. And a lot of brands had launched products that were kid forward. So that was an insight for us. So we did not Made Good is not a kid forward brand. It's an all family And fifty percent of our households actually don't have kids. And so there is a cross sanction of making it small for kids, but also hundred calories, so that it's portion control for the adults.

33:22 The other layer of insight that we had was that the allergen free should not be a pr prominent call out. It's something that it's a background. Yes, we're allergen free, but first and foremost We taste great. You didn't want people to think, Oh, this is not for me. Like you could call something for diabetics. people think it's just for diabetics, but it it could just be a healthy low sugar, no sugar product. And and was the first

33:49 product going to be Granola bars? No, it was Bites. our bikes. Is where we knew we wanted to disrupt the category.

34:00 So these like little round uh Garola chocolate chip or Fruit. Bites basically. Yes. They're sphere like a ball. Tell me about the name,'cause the name is amazing, made good.

34:12 Yes, so the name funny story is that when we launched Made Good, many people called us and said do you know that i mead good is grammarly incorrect Made well. Which exists, it's a clothing brand. Yeah. So I think the name was really important. And then we went to a design firm that was not actually a food forward design firm. They were a cosmetic forward design firm because we wanted a design That stood out on shelf.

34:42 And No CPG company would say you should make half your front panel your logo.

34:52 Made good takes up fifty percent of the pront front panel. And so this was all design disruption that we did. To stand out on shelf. Okay. So

35:03 Two thousand thirteen you start to really set this up. And from what I understand It sounds like it's a sim similar model to what you had earlier, which was you were gonna have your own production facility, right? Cause nor cause nor I should say normally, but oftentimes When when people want to build a food brand and they don't have a lot of money They work with a co-manufacturer because that is a more efficient way to do business. You you find a co-manufacturer, you give them your recipe.

35:29 They package it up, they g send you the finished product and then you distribute it, you get a distribution deal and you put it in stores, right? And by the way, this is the models you know f with many brands that we see at Whole Foods and and elsewhere. Um you guys decide to build your own production facility. That's gonna cost a lot of money. I mean imagine And you know, you'd

35:50 Yeah, and where was that money gonna come from? Yes, that was going to cost a lot more than working with a co packer. We Knew that was what we wanted to do because that's where we bring experience in. And being vertically integrated helps us with our cost model.

36:09 But also making a claim such as allergen free. I wanted to be able to sleep at night. You had to control the entire it had to be a Like a pharmaceutically clean. factory. Yeah, and this way we can we control that full supply chain, we control the manufacturing and

36:26 By nature we're manufacturers, not marketers. Right, so that was I think what we m felt most comfortable that we could succeed in first. Okay. Let's talk about the factory. 'Cause you're gonna build a twenty thousand square foot factory. Sounds huge, it's not actually, right? But but by you know, people but it is pretty significant. How did you finance that?

36:47 Well w the the bank of Parents retirement funds? Also we went to an actual bank and got a loan. We securitised it with the homes that we had and we went And it's rare to get

37:03 Pre revenue loans from a bank? Yeah. But Because they knew us and they saw what we did before in the previous business, they agreed. Before making a dollar in sales to Give us

37:18 A loan of two million dollars. But yes, you need m you can't build twenty thousand square feet of manufacturing with a hundred thousand dollars. Like that just doesn't work. Yeah. And and you gotta pay rent every month. You have to hire employees, you gotta certify the plant. There's just there's just a lot of things to do from zero

37:39 to manufacture. And you knew right away from the beginning you guys did not want to go seek outside funding, that you wanted to figure out how to do this yourselves without any outside funding or partners. Yeah, we didn't want to get into partnerships again. Yeah. Okay, so you are you you've g secure the financing against your homes and

38:01 you get your parents help you out a bit. You you get the money to build this factory. And uh h how long does it take before it's online, before you can actually start to feed it the ingredients and make this product. I wanna say was really quick.

38:19 From when we got keys to the to the site. To when we started to manufacture our first order. Yeah. Our first order was actually for Costco for a contract manufacturing brand. And it was three hundred thousand bars. And so it wasn't your brand, it was for somebody else. No. It was it was for another brand. Okay, so th and they were gonna go to Costco and so the contract manufacturing was gonna be a part of your business that was gonna enable you to fund the Brand essentially. Absolutely. You knew that you had to make pressure potentially competitors in order for you to have the capital. to launch Made Good as a Brand.

38:56 Yeah, if you think about it, we use the same model as we did at Taste of Nature, private label, contract manufacturing to fund the brand. So that's essentially What we knew worked and we started with that. It's interesting because that's that again, that could be risky, right? I mean, if you're making a product that is similar to the one that you want to build. that can kinda cannibalize your product if if If you want to start a brand, I mean there's always a risk in

39:23 in doing that. There is this particular fr order when we first started out was actually making fruit and nut bars. So it was distinctly separate than the brand that we ended up with and are made good. But this order was yeah, food and nut bars and it was two flavors uh that we had to produce and it really Sped everything up because we had a tight timeline. I think we had to deliver within like three to four weeks. We had very manual equipment. We had A very small team because really we just had to get people in, hired, trained. We needed to create processes, we had to get our organic certification, food safety certification. All of that happened in the in the four weeks, and we had to turn around three hundred thousand

40:07 units of bars. And it was not without its Heart ache because Three quarters into that order, we realize that we made a mistake on the date code. On the date code. On the date code. So it has a best before day. Should have been twenty fourteen.

40:27 Right? Because it's a year after. But it was dated twenty thirteen. So we're like just about done this order with blood, set and tears, and here we are. We had to rework. A significant amount of it. So we so we had to figure out what to do. And we weren't gonna make them again.

40:49 А видина, ордеор the resources, so We found Alcohol wipes? I kid you not. Okay, this is this is creativity at its best.

41:02 Alcohol wipes to wipe out the date code and run the bars. Through the equipment again with the right pass before day. How many bars did you have to do that to? Oh my god, Nim I don't remember. I know Sapa caught it and she was just beside herself. Two hundred thousand borrowed. I think more than half the order had to be repurposed. I don't even know how humans could do that. You have to get a bunch of people in to just carefully wipe that off. Yeah.

41:29 The story here is it's it just Looks easy, but we walked through fire to get This thing up and running. We used to call it you dig a hole and then you figure out a way to get out of it. We're gonna take this order.

41:44 We're gonna figure out a way to make it. Because that's who we are. We will deliver. When we come back in just a moment, the family business finally begins to roll out its own branded products, starting with granola bites and eventually expanding to dog treats.

42:05 Stay with us, I'm Guy Raz and you're listening to how I built this. Hey, welcome back to How I Built This. I'm Guy Raz. So it's late 2013, and until now, the Photovats have been funding their business by contract manufacturing granola bars for Costco, and at this point they haven't sold Made Good under its own name. But early the next year they're ready to roll out their own granola snacks for the first time. And the first uh retailer we went to is La Blah in Canada, which is the largest grocery store in Canada.

42:49 And the buyer. Had a Son who had a peanut allergy. And so he's like Everything that's peanut free is garbage.

43:00 I haven't Tasted anything that tastes good. Uh that's organic. And so I I can see why parents would buy it. I'm willing to give it give it a shot. So they list it four items. on it, you know how you get in, you get to the top.

43:14 of the shelf And the top of the shelf is not a great place to be'cause not at eye level. No. But we were able to sell in because the pro a value proposition

43:25 The way it was positioned back in two thousand and fourteen, fifteen was strong enough. For the retailers the not in the natural aisle, not in the conventional aisle, not sitting beside the conventional player players, but sitting in the natural aisle, we were able to sell in pretty quickly. Then the second part was that the packaging worked really f well for us because it would pop. That kind of created that noticeability and picking up The shopper, the consumer picking it off the shelf.

43:54 And then It the product delivered ultimately been Consumers took it home. Kids liked it and they came back and the repeat was there. Okay, here here's a question because I I mean it's

44:07 to me becomes kind of crazy and and I say that in both a good way and a bad way because I love I love it when we have episodes where it's like, Okay, we launched in twenty fourteen and nobody's buying it and it's like de dead and we're just not and then and it slowly grows and then it become This is different. Like you launched this thing and it really took off quickly.

44:29 And so I'm wondering. What explains that because you didn't really have a lot of money for promotion. Right, or for uh marketing costs. So Um'cause you know, you really kind of

44:42 You you start to distribute this in twenty fourteen. Yes. And uh you debuted this at Expo West in the US in twenty fifteen, but initially you're really just in Canada. You're not gonna break into the US for another year or so. No. But how did you get

44:58 I mean if it if it if it's carried in. you know, grocery stores in Canada on the top shelf. How did you get people to notice it and to to to to try it and to buy it? So I believe in the one hundred mile radius. marketing strategy so when we started we're like let's make sure we own

45:17 Where we are. So because we can drive there. If I can drive there, and if my team can drive there, we can merchandise store, we can demo. And on the with the help of my wife, she did A ton of events. Farmers markets. Every weekend she was at a farmers market. And today, I would say our brand awareness in Toronto is.

45:42 Incredibly high. Maybe ninety percent of the people know. Yeah, and we build proof of concept. And that you could take to the rest of the regions. And we didn't have a marketing team or even a marketing manager for many years after that, so

45:56 And you were f Sama, you really began to focus on procurement on on sourcing of of Ingredients. Yeah, I did uh end to end supply chain, so called up the same vendor partners, started to build those relationships. The only difference was that instead of, you know, buying pallets of products, I would be picking up, you know, boxes of raisins, putting it in my car. Yeah, like bringing it in. So it was just that different scale, but it was incredible how

46:25 How much also that community trusted and believed in us that Again, not a lot of sales, not a lot of proof of concept, but really willing to lean in and Forget about credit apps. Like what do you need? How can we help? Ah, that really helped us to kind of get things going to make sure we have materials. Okay, so you are by by the by twenty fifteen it sounds like you are

46:48 distributed across Canada, right? Is that fair to say? Yeah, yeah, by twenty fifteen we're Pretty much across Canada. I'm curious, when you take the loan out, how long to pay back that bank loan, how long did it take?

47:02 I don't know if We've ever paid uh anything back'cause you just grow and you borrow more. So I don't know if we ever we're we're never out of debt. We're we have uh much bigger debt today because we keep Uh manufacturing is a capital intensive intensive business. So every time you double the business we

47:22 Essentially have to double our footprint, double the output. And so I guess my question is did you Did you know you were not gonna be profitable for a while? Yeah, so it took us a couple of years, but I think we got into profitability pretty quickly because

47:40 I am a great believer in a healthy gross margin. You gotta build Whatever one designs, whether it's co-packing, whether it's private label, which is for a retailer, or whether you're doing your own brand, having a strong PL, a good knowledge of your gross margin and when you can grow into it. is really important, and we were as the volume came in. we were able to get to breakeven and profitability by maybe twenty fifteen. I gotta go look back, but it was pretty s early. So all right, so you are and when do you get into U into the US market and how?

48:16 interesting the US We get in just into the northeast. One region of whole foods, the north east region of whole food. So we kinda do a little test. First in two thousand fifteen. With ten stores that are that

48:31 Ten top stores in Manhattan. I hire a merchandiser. I hired a demo crew and I made sure that when we were listed there. We have great numbers. And so we launched nationally in whole foods in two thousand and uh sixty.

48:47 I I I saw that by twenty seventeen, so about three a little over three years in. You guys are doing about fifty million dollars in sale. So at that point. Yeah, you had You are doing much more business than than than Taste of Nature had been doing when you left.

49:04 Mm-hmm. It's crazy. That was not part of the plan. Another enabler for us was getting into Costco. I remember I did a road show in the US and we went to see five or six regions and

49:24 Um, one of the regions, the North West, said okay, I like these bites are really cool, but Can you Put these bites, these pillow packs in a pouch. I don't want it in a box. And so when you're us when you're able to make three hundred thousand bars by hand, like this is a piece of kit, of course I can put in a pouch.

49:45 So I'm like, yes, of course I can print a pouch. And then I pick up the phone and call Sawa and Sama and say, Hey, we gotta put these in a pouch, okay? There's the there's the sibling dynamic right there. So Nima says yes to opportunities and then Sap and our left figuring it out. So It took a lot. Like some of the things we said yes to, I think Probably retailers went to many other

50:12 suppliers first and they said no and they're like okay, I guess Riverside or Made good will say yes. Yeah. And it was just You know value packs. Six flavor. We had one thing called the pizza box, or it had probably 13 different products in it. And you know what a nightmare it is in manufacturing to make one skew that has three thirteen different products in it? But we did it. We said yes to things, not because it was easy, but because we had to do it.

50:39 It was the only way. Okay. I I wanna just be clear. Riverside, of course, is the parent company, Made Good is the main brand. But Um Riverside

50:51 would also I mean th through Riverside you could also launch other brands, right, under that That parent company. And um you decided to I I don't know if it was a separate brand or if it was under Made Good, but a new brand called Good To Go. which you launched in twenty eighteen. Th this was g this is the sort of like um

51:11 It was a part of the keto. I shouldn't say craze,'cause it never became a craze, but I think there was always this Assumption I was keto for a year and I always assumed that this was gonna blow up. And it just it just hasn't. It's really hard. You gotta eat a lot of fat, a lot of protein. Tell me about this experiment. Wha what was the that idea was create a s s totally separate brand

51:32 That was for people who are Keto? Mm-hmm. Yeah. And

51:38 Another One of the challenges with an entrepreneur I think that I am is uh the the shiny object syndrome. It's like oh there's an opportunity here. Let's run after it. We can do it.

51:52 And I think One lesson that I've learned and it it took a it's it it's Taken a number of these examples. that we gotta be really careful on how we deploy our resources and against but Riverside is here so that we can become one day a house of brands. And we are looking for creating that next brand.

52:15 that we want to house under Riverside, and that is intentional. Got it. Okay, so The good to go brand didn't quite take off. I mean i I guess you discontinued it uh uh not that long ago. Right. And and I mean this was out there for I don't know, six years or so or a little bit more.

52:34 What what was the kind of the signal? That told you it's time to kinda sunset this product. Well, I think we had several signals. Maybe we didn't listen to some of them. If I'm gonna be perfectly telling you.

52:49 Because I think we had Uh earlier on we had some quality issues with the product. So we had to reformulate the the product in turn. I don't think we put in enough marketing behind it. it it wasn't growing. So the product wasn't growing and it's an opportunity cost. Anytime you're distracted doing something, you're not we weren't focusing on the on growing made goods.

53:13 Which brings me to another product that you put out, Cookie Pal, which is for pets. I mean I'm I'm it's to me it's really interesting because I I love just trying different things, but some Other people might say, Well, you really want to stay disciplined, like focus on the core thing and really Go deep and you know build out the brand and the things coming out of that. So tell me about But the

53:37 Cookie about the dog treats. I didn't go to business school as you can see. I'm I'm learning everything on the I didn't they didn't tell me about the focus part. I or I skipped Well you got your pet and you you love your dog and you're like let's make something for the dog Actually he didn't have a pet at that time. It's funny. It's interesting. But Cookie Pal is still alive, so that's a different kind of story. It's a good business, yeah. It's what we did is we separated it. So it's got its own team And it's operating independently, so it's not Distracting us.

54:12 Part of the story of Cookie Pell it it it connects to the Saying є кастомер. So At a Costco bar out of Western Canada, she moved her desk from department twelve, which was the bar, to the pet side, and she call me and she said, Nima, I see a great opportunity. There aren't any human great pet treats. If you can get me something, I will list it here for you. Human great, I mean in other words, something that humans could also eat. Yes, so right now Cookie Pal, you can eat Cookie Pal yourself, or you can give it and you can give it to your dog. I've heard that about like other dog food that it's human grade. You know, you can eat this dog food. I just I have two dogs, I love them. I even if it's human grade, I'm just not gonna eat it. Well, you haven't tried cookie pal yet, guy. That's why I haven't.

55:00 Um all right, so you've got you've got that going and and Um I I'm I'm also just kinda curious about um You know, some of the Just the the

55:11 The As you grow, right, and as your you you get more sort of awareness around made good products Um How do you start to think about other Skews, other things, right? You've got granola bars and you're and then you you've got the bites, and then eventually you're gonna move to like

55:29 muffins and cookies and Uh you know, even now Like Snacks like um uh not not goldfish, but goldfish like puffed snack. So tell me how you start to think about

55:43 uh developing new products. So early on we didn't have uh the discipline of marketing and insights and research. So innovation was Done by primarily by me.

55:58 And My thesis was Mm. Goldfish. Wouldn't it be nice if he did what

56:07 Um we did for chewy granola bars for goldfish. Right. So that was the It was literally that was it. There was no like market research, no like uh And consulting group that came in. It was just a thought. Yes. And then I like it. And then I love equipment. I love machinery. I'm manufacturing guys. I'm like

56:28 Oh I go to Юру, а сіди з кракалай. It looks so good. I'd like to We'll buy it. Machinery can make crackers. Yes, because you need the machine. We have to make it. We're not calling it. That's the thing that makes it difficult. Like every time we have an idea, we have to build the capability from ground up. So that's how it used to be.

56:49 Right. Навич смарти, моркал пепл. That are looking at these decisions like who made these decisions? Cleaning up. How much time do you give something before you decide? Or is there a formula or is it more just intuition? Like, or do uh do you really now use data? I mean, let's say the you know the the the the puffs, the pizza puffs or the cheddar puffs.

57:18 uh you know, you put them out there and and how m how long before you're like, okay We're good, this is working. Well There is the emotional barometer. Yes.

57:28 And then there's the factual data barometer. Which is the one that matters. Really? Okay. Yeah. Okay. We've been going on the latter one for a while, so So yes, we are moving from the emotional to the data. uh barometer to make these decisions. So You heard Salma describe the reformulations that we did on the good to go product. I'm like

57:54 No, we cannot give we gotta make it better. What can we do? Like it's just like I'm not g I'm not letting go. But again, it's another Is it worth the fight? And is the energy that I'm putting against it can I deploy it against something else that has more potential? And I need to move myself.

58:16 or remove myself and allow others to make those calls. Yeah. Um, and I know that there are a couple of things that that some challenges you guys had run into. There was a drought in twenty twenty three which affected You know. supply chain, but I wanna I wanna jump into something that happened in twenty twenty four, which happens to a lot of brands. It's

58:35 Not uncommon. Um you you've got product on a on a f on the on the line and Some tiny you know, m piece of machinery breaks off at some point and somebody discovers a little m metallic piece in a product it ha it's a a nightmare.

58:54 happened to you guys. A tiny little br bristle from a brush uh had gone into a product. And this really Help help us understand,'cause you have to recall like two and a half million cases. Help us understand P. effects of that on the business. Like what That's like a huge hit, right?

59:13 It was such an incredible learning experience. I am today sitting here, I'm grateful it happened. A few things. Nobody got hurt. And sometimes I wonder, did we overreact? But that's okay, because I rather be on the safe side. And

59:32 recall as much product as I'm just If I'm if there's a little bit of a d chance of it not being Safe then we should Just call it, right? So those are hard d that's a hard decision. cheap decision and it could uh have a lasting impact on the organization. But yeah when you put principles in place the decision becomes really a black and white decision. Just make the call.

59:57 But I think not that it was easy, but I think once we made that decision, it kind of there was I know for me was a bit of a relief as well that okay, we're owning this. Everybody showed up. Again, our values at play. Uh I think it was remarkable to see how Much Everybody cared to show up it was over Christmas.

1:00:21 Christmas was canceled. I bet, yeah. For most of us. No vacations. And you got a lot of press attention, which you probably didn't want at the time a around this. Absolutely. Um now there was a lot of turbulence inside Biverside because we were scrambling. We hadn't done this before. Yeah, I think the the I think silver lining is that.

1:00:42 our relationship with our customers is so much better because every time we go there they're like this was the best in class recall. If you wanna have a recall this is the way you do it. We Calm reverse. If you wanna have a recall called reverse. Let me ask you about, you know, just kind of overall. I mean you you've you've built this business now hundreds of millions of dollars in sales a year. It's this is a big brand now.

1:01:07 And What I mean What's your sense? It's still privately owned. I think you guys own most of it. You did bring in some I think one strategic investor at a certain point, if I'm not wrong about that, right? Correct. Um but privately owned. And so what's the game plan? I mean

1:01:25 What do you think? Do you think you're gonna your kids are gonna take over it? Do you think you're gonna go public with this? Do you think that one day you're gonna sell this to I don't know, a bigger like a General Mills or a Unilever or whoever Mondalese or something like that? For the last decade, we've been so focused on growing the business that we have not had the luxury to contemplate, okay, what are we doing? Why are we here? What's gonna happen? What do we wanna do next? I think we're just I'm speaking for myself. really starting to reflect on what is it, how do I bring value? What is my purpose? Why are we in this business together? And we don't get calls.

1:02:05 Yeah, Nima gets calls all the time. He has a lot of suitors. Right. Who wanna put in money, maybe private equity or Other companies or right who want to buy you outright. Yes. Yeah. And I'm

1:02:17 Polite. I like to listen because I say to myself I don't know. what the future is. The way I'm trying to reframe

1:02:26 This is That we are caretakers of this business. As long as I don't get distracted with cookie pal and Uh, good to go and stuff like that. You're getting a little bit better. Keep up the good work. Yeah.

1:02:42 Can you give a rough s I mean it's a privately h held company, so I can't verify it, but I mean How much do you do a year, roughly? were not a billion dollar brand. We're in the hundreds and uh Pretty great. Yeah, it's it's amazing. And it's Canada US. In Canada we're the number two brand.

1:03:01 I in the US we are number six and the fastest growing brand in the category, whereas you know We have ambition to get to number two. Uh I didn't go to business school, but I think I am experiencing the big The Most incredible

1:03:17 education one could ever have. to be in my seat or for some and some for us to be in our seats, even for our leadership team. Like everyone's here because this experience is very unique. It's unique. Yeah. So when you think about the the journey you took and where you where you got to today. Right.

1:03:38 And it all kind of collapsed in twenty twelve and then he kind of re Birth this idea, new idea. How much of where you got to now do you attribute to to the work and the grind and how much do you think it had to do with with being lucky. First first to you, uh Nima.

1:03:54 I am a little bit of a believer that it's more than luck, I think it's karma or universe, I don't know. It's God it's not me. Whatever it is, it's not me, but I don't know. Luck sounds a little bit Uh we were blessed with this opportunity.

1:04:13 Half of it is that and then half of it is we showed up and took took advantage of this. uh opportunity that was Sewn on our lap. I'm a believer that everything happens for a reason. In twenty twelve, I didn't know what that reason was and

1:04:29 it was scary and it was it w I was angry and there's all the emotions but Everything happens for a reason and I think we're here today. Again, not just the three of us, it's everybody else that is either here with us today, not here with us today. That helped us to get to where we are. That Salma and Nima photo that.

1:04:50 who, along with their sister Saba, are co-founders of Made Good and its parent company, Riverside Foods. Hey, thanks so much for listening to the show this week. Please make sure to click the follow button on your podcast app so you never miss a new episode of the show. And if you're interested in ideas, insights, and lessons from some of the world's greatest entrepreneurs, please do sign up for my newsletter at gyros.com or on Substack. This episode was produced by Catherine Cypher with music composed by Ramteen Arablui. It was edited by Neva Grant with research help from Chris Massini. Our audio engineer was Jimmy Keeley. Our production staff also includes Casey Herman, JC Howard, Alex Chung, Carrie Thomson, Carla Esteves, Sam Paulson, John Isabella, and Elaine Coates. I'm Guy Raz and you've been listening to how I built this.

What you see above is a preview of the first minutes. One unlock costs 10 credits and covers this episode forever: full segment and word-level timestamps on this page, plus .txt, .srt, .vtt and word-level JSON downloads, as many times as you like.