Live Episode! RXBAR: Peter Rahal

In 2013, Peter Rahal was obsessed with CrossFit, but noticed it didn't sell any snacks to align with its pro-paleo philosophy. So instead of joining his family's business, Rahal Foods, he recruited his friend Jared Smith to start making their own protein bar. They made the first RXBAR in a Cuisinart in Peter's parents' home in suburban Chicago. By 2016, RXBAR was doing over $36 million in sales, and in November 2017, the founders sold the company to Kellogg's for $600 million. Recorded live in Chicago. See Privacy Policy at https://art19.com/privacy and California Privacy Notice at https://art19.com/privacy#do-not-sell-my-info.

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:03Guy Raz?

  And one more quick thing before we start this episode. Just a little warning that my interview with Peter Rahal has some salty language in it. Peter definitely drops a few, you know, F-bombs. So if you're listening with kids, just bear that in mind. And here it is.

• 0:24Guy Raz?

  You got this idea. You have a plan. Did you think, yeah, let's go raise money?

• 0:31Speaker 01

  So that was actually our initial plan. And I remember Jerry and I talking about, all right, who are we going to raise money from? I remember asking my dad, like, do you know any rich people I can, like, you can connect me with who'd give us some money?

• 0:45Guy Raz?

  Yeah.

• 0:46Speaker 01

  And my dad was like, he's old school. He's like, super traditional. And he's like, you need to shut the fuck up and sell 1,000 bars.

• 0:59Guy Raz?

  From NPR, it's How I Built This, a show about innovators, entrepreneurs, idealists, and the stories behind the movements they built.

• 1:11Guy Raz?

  I'm Guy Raz, and on today's show, how Peter Rahal turned egg whites, cashews, and dates into a $600 million brand called RX Bar.

• 1:29Guy Raz?

  If you go to a website like Amazon and you type in "energy bars," and you start counting all the different types of bars that come up, and I mean brands, not flavors, brands of energy bars, you will probably lose count at around 300. And the actual number is a lot higher, maybe as many as 1,000 brands. No one really knows. The point is, is that energy bars, this is a really crowded sector. But six years ago, Peter Rahal walked into that extremely crowded space, and he said, you know what the world could really use? Another energy bar. So Peter and his co-founder started RX Bar in Chicago with almost no money and no experience in the field.

• 2:14Guy Raz?

  What they did have was an interesting idea, a way to market energy bars that few people had thought of before, kind of a side door into a very jam-packed marketplace. And that side door was making energy bars for a very niche group of fitness freaks. Now, even though they started small, you can now find RX Bars in just about any major grocery chain in America. You've probably seen them. They've got those distinctive packages with the ingredients listed right on the front of the label, three egg whites, four almonds, six cashews, et cetera, et cetera. Now, that label and that approach sent Peter Rahal's little startup into the stratosphere.

• 2:57Guy Raz?

  In 2017, less than five years after launching in Peter's parents' basement, RX Bar sold to Kellogg's for $600 million. It's an incredible story. And I was super excited to hear Peter tell it when I sat down with him in front of a live audience at the Athenaeum Theater in Chicago.

• 3:30Guy Raz?

  Peter, wow.

• 3:33Guy Raz?

  You are-- I think some of your friends are here.

• 3:38Speaker 01

  Yes.

• 3:39Guy Raz?

  Yeah. Amazing, amazing. So Peter, tell me a little bit about your home life as a kid. You didn't grow up too far from here, about a 20-minute drive or something?

• 3:51Speaker 01

  Yeah, so it's about 16 miles from Chicago, so just a pretty picturesque suburb. And both sides of my family are Lebanese, and I attribute a lot of my-- Strengths and weaknesses to that DNA.

• 4:05Guy Raz?

  Right, right. And so what did that mean? Like, did you guys eat Lebanese food? Did you, like, I don't know, were there cultural things that you did growing up?

• 4:16Speaker 01

  Yeah, I think comfort in conflict, valuing trade and commerce.

• 4:22Guy Raz?

  But like, I mean, around the dinner table, was there comfort in conflict?

• 4:26Speaker 01

  Yeah, it's just normal. I mean, you know, you get in a fight and the next thing you know, nothing's wrong.

• 4:32Guy Raz?

  Yeah.

• 4:34Speaker 01

  It's unusual for, I think, American culture, but that's how our family was.

• 4:40Guy Raz?

  Yeah. And what did your parents do? What was their business?

• 4:44Speaker 01

  So my father works in, he's a broker, trader, agent for juice concentrate or different industrial fruit products. So they represent processors in Europe, South America, Asia. Like, for example, apple juice concentrate, they'll represent the processor in China and then sell it into the United States. So a global trading brokerage.

• 5:10Guy Raz?

  And it's called Rahal Foods, right?

• 5:11Speaker 01

  Yes.

• 5:12Guy Raz?

  So you kind of grew up a little bit in this world of the food industry.

• 5:15Speaker 01

  Oh, totally. Like, I grew up listening to my dad at all hours, talking about, you know, selling loads of apple juice and drums and all this language and jargon. And like, for me, I just knew the food is all I really know.

• 5:30Guy Raz?

  Yeah.

• 5:31Speaker 01

  So he really introduced the business to the family. Like, business, his business was part of his life. And so I grew up, like, that was like, normal.

• 5:42Guy Raz?

  What about school? Was school easy for you or was it difficult?

• 5:49Speaker 01

  Yeah, school was probably the first bit of adversity I faced in my life. So I was miserable at school. I'm not meant to do anything linear. For example, and I remember specifically in like, 7th grade, where my friends were going to study hall. And I was pulled out of the normal study hall. And...

• 6:15Speaker 01

  I was put into a special study hall.

• 6:18Speaker 01

  And so for me, I've always just interpreted like, oh, I'm not normal, or I'm slow, or I'm stupid. So I kind of always punted school and formal education.

• 6:31Guy Raz?

  Yeah, did you, I guess your mom had you tested, right?

• 6:36Speaker 01

  Yeah.

• 6:37Guy Raz?

  For sort of. What's wrong with him? You went through a battery of cognition tests and it came out that you were dyslexic.

• 6:44Speaker 01

  Yeah.

• 6:44Guy Raz?

  How old were you when you knew that?

• 6:47Speaker 01

  Well, they always knew something was wrong when I just, I think I learned to read like way later, or like speech therapy, all this shit.

• 6:54Guy Raz?

  Were you embarrassed by your ability at school, even in junior high and high school?

• 6:59Speaker 01

  Yes, for sure. I mean, from, I always say this, like from second grade to 22, I just thought I was like not successful. Because you think about today in our society, like when you're 12 years old or 16 and even in high school and college, your performance or success is determined based on your marks in school.

• 7:17Guy Raz?

  Sure.

• 7:18Speaker 01

  I mean, I was a D student, like, and I tried. I worked really hard. Like I was, to get Ds, I like had to climb a hill with an airplane on my back. So it was great conditioning for me to kind of go on and survive. And I think about some of the early days of our experiment in particular, like with Jared, it was like survival.

• 7:38Guy Raz?

  Yeah. But you did get into the marijuana business.

• 7:44Speaker 01

  Yeah. It's an overstatement, I think, but.

• 7:47Guy Raz?

  You did sell, you started to sell marijuana to friends in high school. First of all, how did you know what to do?

• 7:54Speaker 01

  So as a child, I was always fascinated by the cycle of life with gardening. So like.

• 8:00Guy Raz?

  Yes.

• 8:02Speaker 01

  I'm justifying it. So, but I think it's really fascinating that you can like plant a seed, you take care of it, you put it in a good spot, you nurture it, and then it grows into, say, a tomato, and then you can harvest it. And so, and for real, as a kid, I always was into gardening. I had vegetable gardens. And then as a curious 16 or 17 year old, this is when pot used to have seeds in it. Apparently it doesn't have seeds in it anymore. I got, had seeds and I just innocently put it in my, yeah, germinated it inside with a light. And then my parents, my parents have a beautiful house and the roof is really flat.

• 8:45Speaker 01

  And it's one of those houses that's in the forest, a little bit on a hill. And so I just put it on the roof and, you know, and it grew beautifully and...

• 8:57Speaker 01

  And then it came to harvesting and I'm not a good salesperson. I was trying to sell it, but no one wanted to buy it. So we really, I really just gave it to all my friends and it was just a fun process.

• 9:06Guy Raz?

  Right.

• 9:07Speaker 01

  The next year I grew it again. I got more sophisticated, but then the landscapers saw it and my dad had enough and took it down. And then I planted it in the yard, but then they mowed it over.

• 9:20Guy Raz?

  That was it. That was the end. All right, so it was time to go to college, right, I guess? And you were, as you, as you say, you were not a good student. Um, what did you, uh, did you have a hard time getting into college?

• 9:35Speaker 01

  Yeah, so my family's legacy was through Dennison. And I applied and I didn't get in.

• 9:43Speaker 01

  So I went to school where I could get in.

• 9:46Guy Raz?

  Right.

• 9:47Speaker 01

  And I, like, the whole process, I just, like, I didn't want to, like, my mom filled out my paperwork.

• 9:52Guy Raz?

  Well, I mean, it was probably challenging. I mean, dyslexia is not a joke. I mean, this, right?

• 9:58Speaker 01

  And it's hard to explain, but I just...

• 10:00Guy Raz?

  Yeah, how do you, how do you explain to people when they say, well, what does it, what does it actually mean? Like, can you not read easily? Like, what does it mean?

• 10:06Speaker 01

  I think the best way to describe it is any sort of sequential task. So tasks in a sequence is really challenging. Paying the bills, when you think about, like, something as simple as that. Dyslexics have a really hard time following those things. But I think it's important to understand what they're good at. And so what dyslexics are good at is pattern recognition. So like facial recognition, recognizing shapes, holistic thinking, things that are really good in strategy.

• 10:34Guy Raz?

  Did you know that at the time when you were in college? No. You just thought, I cannot read, I can't do, it's, my brain just doesn't work that way.

• 10:42Speaker 01

  Yeah, I just, like, I didn't know what I was good at. Honestly, I think a lot of entry-level jobs require sequential task and linear thinking, and I'm just not set up for it. And I think that's why you see a lot of entrepreneurs who are dyslexic.

• 10:55Guy Raz?

  So you made it through, you graduated.

• 10:58Speaker 01

  Yeah.

• 10:58Guy Raz?

  You're done, you get your cap and gown. And what did you do? What was your first job out of college?

• 11:03Speaker 01

  So my father always was grooming me for to work in the family business, and that was like my plan.

• 11:09Guy Raz?

  Your plan was to go work at Ray Hall Foods. You'd been going there since you were in diapers.

• 11:14Speaker 01

  Yep.

• 11:15Guy Raz?

  Clearness. So what was the job that you did?

• 11:18Speaker 01

  So I had a bunch of internships at different fruit processing plants. And so what they do is they take, like, say, apples, and then they will press them, and they turn it into like different products. So juice concentrate, industrial products. So like juice companies like Moth's would buy and put into their product. And so my father was able to give me an opportunity at Mondi Foods, which was in Belgium. And they're a red fruit processor. So red fruits are strawberries, raspberries. And I wanted to learn the business, right? Just learn, to prepare me for the family business. And so I graduated in May, and I had one week off. And then the next Friday, I was on a plane with a suitcase to go to Belgium to go and move into an apartment to start Monday.

• 12:02Guy Raz?

  Yeah.

• 12:03Speaker 01

  And I remember showing up my first day of work. I showed up in a suit that was like oversized and looked like shit. And no one's wearing suits. So I didn't get the memo.

• 12:16Guy Raz?

  And was there somebody there who was like, "Oh, Peter, I know your dad, and come on in"?

• 12:20Speaker 01

  Yep.

• 12:22Guy Raz?

  I mean, right? Because your dad had been in this industry his whole life. So naturally, he wanted you to get experience. You wanted that experience, and it made sense. So they were processing like, what, strawberries and raspberry, we did red fruits, right?

• 12:37Speaker 01

  Yep, absolutely.

• 12:39Guy Raz?

  How long did you end up staying there in Belgium?

• 12:41Speaker 01

  Uh, like 13 months.

• 12:43Guy Raz?

  And I guess there was a period, like sort of a four-year period after you graduated college where you did that job, and then you kind of tried different things. You went to Lebanon. And for a while, for how long did you go to Lebanon for?

• 12:57Speaker 01

  I was there for a year.

• 12:58Guy Raz?

  And what did you do there?

• 13:00Speaker 01

  So I was a student, not working for a degree.

• 13:03Guy Raz?

  Uh huh.

• 13:05Speaker 01

  And so for me, I have a great pride in my family's origin. And like I had to be there.

• 13:12Guy Raz?

  Yeah.

• 13:13Speaker 01

  You gain a lot of empathy when you are seeing how other people live.

• 13:16Guy Raz?

  Sure.

• 13:18Speaker 01

  So there were really valuable experiences and really shaped me as a person.

• 13:23Guy Raz?

  So when you came back to the US, did you like go to your dad and say, okay dad, I'm ready, I've done my internship and where's my office at Ray Hall Foods?

• 13:34Speaker 01

  No, I came back, well, the origin of coming back, I was like sick of being a foreigner. But I came back because I, I felt like I was being selfish and pursuing these self-serving things and being away from my family and I felt, I felt like my career wasn't getting anywhere, like, so I came back and I kind of knew, I knew I needed other experience. So I wanted, and my dad was like, no, just go get a job somewhere else.

• 14:01Guy Raz?

  He said, go get a job, so you wanted to go work at Ray Hall Foods?

• 14:05Speaker 01

  I think if they wanted it, I would have said yes, for sure.

• 14:10Speaker 01

  But if they didn't, if they didn't want me.

• 14:13Guy Raz?

  Now, let's just pause here because had you gone to work for Ray Hall Foods, your life would have been totally different and, and you might not be sitting here on the stage telling this story. So, but at the time, did that sting at the time?

• 14:29Speaker 01

  I was, well, if you look back in my history, I was used to eating shit.

• 14:34Guy Raz?

  Because you were a bad student or?

• 14:35Speaker 01

  Yeah, like failing was not something foreign to me.

• 14:39Guy Raz?

  I've read that at that time, in retrospect, you describe yourself as an angry young man. Angry, what were you, what, what did that mean?

• 14:49Speaker 01

  I think, I think a combination of like hunger and drive and then being lost and, and I think probably honestly, a sense of entitlement. You know what I mean? Like I should be going here and I just was short-tempered and I wear my emotions on my sleeve, I was unable to self-regulate. I hadn't softened my edges a little bit.

• 15:10Guy Raz?

  Were you living with your folks, with your parents at that time?

• 15:13Speaker 01

  Yes.

• 15:14Guy Raz?

  So you're like 24. Uh, no job. What did, so what did you do? What, what did you go work?

• 15:20Speaker 01

  So I worked for Transportation Brokerage.

• 15:24Guy Raz?

  In, in?

• 15:25Speaker 01

  In Chicago.

• 15:25Guy Raz?

  Okay.

• 15:27Speaker 01

  And that was a great place to start. Those places hire like crazy. They're like mills, you know?

• 15:32Guy Raz?

  Yeah.

• 15:32Speaker 01

  People mills.

• 15:33Guy Raz?

  What's Transportation Brokerage?

• 15:34Speaker 01

  So if you look at like moving something from A to B, there is someone who needs something moved and then there's like the person who's gonna move it. So a middleman between the person who owns the truck and then the shipper.

• 15:47Guy Raz?

  Right. How were you able to do that with dyslexia? Were you able to kind of navigate that job without having to look at spreadsheets and?

• 15:55Speaker 01

  No, I mean, I wasn't good at the job.

• 16:00Speaker 01

  I mean, I can like sell stuff sometimes. I'm easily distracted and I think I actually did okay.

• 16:10Speaker 01

  But like nine months I like left.

• 16:14Guy Raz?

  You're there for nine months and obviously we know what you went to go start, but how did the idea for an energy bar even come about?

• 16:26Speaker 01

  So the, I think, two origins of that. So one is I had a miserable job. I needed a new job.

• 16:35Guy Raz?

  You needed, just a necessity. You needed to find something that was gonna get you excited about the world.

• 16:39Speaker 01

  Yes. So I, there was that drive to go solve a problem, right? Or find an opportunity. I was a early adopter of CrossFit. I was introduced to it playing rugby and I just really fell in love with it. It was painful. It worked. It gained results. It was a great community. They advocated for like a paleo, lypic diet.

• 16:58Guy Raz?

  Grain-free, dairy-free, sugar-free.

• 17:02Speaker 01

  Yeah. And so I started, you know, obviously being influenced by that. And the question was like, why isn't there a good tasting like bar that, that fits that? That was missing, right? And then working out at CrossFit gyms, you start to see like, oh my gosh, there's these group of people that all do the same activity that prescribe to the same nutrition values. And yet there's, they're selling water, they're selling T-shirts. And so like, okay, kind of see a retail landscape.

• 17:32Guy Raz?

  And there was nothing like that. I mean, there was no energy bar that fulfilled the paleo, you know, criteria?

• 17:43Speaker 01

  I mean, they're no.

• 17:44Guy Raz?

  And there was Lara bars, but not really a protein bar.

• 17:47Speaker 01

  But from a protein perspective, there's one called Amrap Nutrition. But it kind of sucked.

• 17:52Guy Raz?

  And so, so you, so, okay.

• 17:56Guy Raz?

  All right. So 2012, the wheels start to turn in your head. And when you first approached, let's say you're friends. And you were like, yeah, I'm gonna quit my job and start an energy bar company. In the most, possibly the most crowded sector in the food business. If I was your friend at the time, I'd be like, dude, you don't want to do that. That's like getting into the bottled water business.

• 18:25Speaker 01

  Yeah, and I think a lot of people, when, you know, I'd be very excited about it. We'd talk about it. The look on their face was like, that's a dumb, dumb fucking idea.

• 18:35Guy Raz?

  And they weren't wrong necessarily, I mean.

• 18:38Speaker 01

  No, no, I mean, it was.

• 18:41Guy Raz?

  It was.

• 18:42Speaker 01

  No one, the market didn't need another protein bar, that's for sure.

• 18:46Guy Raz?

  But you were like, no, this, I think this is gonna work.

• 18:50Guy Raz?

  Or did you just not talk about it to many people?

• 18:52Speaker 01

  I, I don't have many friends, and so there's an advantage of not.

• 18:56Guy Raz?

  I see, okay.

• 18:56Speaker 01

  Having many friends. No, I mean, we were, I was kind of private about it. But we were just focused and we would get some feedback, but, you know, if it's negative, you're kind of like, oh, fuck off, we're just gonna do it anyway.

• 19:10Guy Raz?

  And did you, I guess, like, pretty early on, did you decide to call your friend Jared, Jared Smith, to join you?

• 19:17Speaker 01

  Yeah, absolutely.

• 19:17Guy Raz?

  You called him and you said what?

• 19:20Speaker 01

  Yeah, I think we said, yeah, let's look, let's, you know, it's not like, there's these moments where it's not like, oh my, we're gonna do it and commit. It's like a process. So at first, like, let's go to the Whole Foods. We looked at it.

• 19:29Guy Raz?

  You looked at the ingredients of other bars, just to get a sense, yeah?

• 19:32Speaker 01

  Yeah, exactly. So we just kind of like, did some preliminary market research and then started learning, really.

• 19:39Guy Raz?

  And what did Jared bring to this that you didn't have?

• 19:45Speaker 01

  So one of the main advantages of being dyslexic is you know very clearly early on in your life what you're not good at. So it was like, I knew I couldn't do it by myself.

• 19:57Guy Raz?

  That you couldn't like do the spreadsheets and that?

• 19:59Speaker 01

  Just any, like I couldn't do a lot. And I knew I needed someone to really balance me out. Jared's temperament in general like was perfect for mine. We had amazing rapport. I've known him since first grade. It was a natural fit.

• 20:16Guy Raz?

  And, and what did you guys do? Like, what was the first thing you did? Like, you bought a bunch of ingredients and you like got a Vitamix and you just threw it in there and blended it up? Like, how did you start to even make prototypes?

• 20:32Speaker 01

  So first was, we went to Whole Foods and just toured the market. On that tour, we're like, let's start playing around with ingredients. And so we always had the vision for like what the product would be like. So like a real, like, the jargon term is like a minimal ingredient fruit nut protein bar. And the general like principle or philosophy around the product was like we, whatever part of the like formula we needed, we wanted to make sure the ingredients were the best possible. So you think about like binders, like honey or tapioca syrup, like we wanted the best binder possible. And so we went with dates. It's a fruit, it's real food. And then when you think about protein, you can do soy or whey or these other things and...

• 21:14Guy Raz?

  But they're not paleo?

• 21:15Speaker 01

  No. And from our world, like egg whites were superior protein source, the highest bioavailability. And you think about Americans and our culture, like people eat eggs every day. So they're so closely associated with health and breakfast and bodybuilding even, like they eat crazy amount of eggs. And so that's like the protein side, right? And then the other side is like inclusions or flavor components. So like, we wanted almonds, the king of nuts. And then we think about chocolate, like, we searched the US to find a hundred percent chocolate.

• 21:44Guy Raz?

  No sugar?

• 21:44Speaker 01

  No sugar added.

• 21:45Guy Raz?

  So can't eat sugar on a paleo diet?

• 21:47Speaker 01

  No. So we found these like hundred percent chocolate, basically cacao. And so that was like how we approached the philosophy of the product.

• 21:57Guy Raz?

  How much money did you put into this business?

• 22:01Speaker 01

  To start, it was like $5,000 each.

• 22:03Guy Raz?

  So you had $10,000.

• 22:05Speaker 01

  And I borrowed the five.

• 22:06Guy Raz?

  From your dad?

• 22:08Guy Raz?

  So he gave it a five. And what kind of equipment did you have? Like a Cuisinart? Like, I interviewed Laura American, who created Laura Bars. And you may have heard this episode. I mean, she just took dates and nuts and put them in her Cuisinart, and then rolled it out and shaped it, and that was how she did it. How did you do it in your little, you know, kitchen?

• 22:31Speaker 01

  So making protein bars is pretty similar to like making cookies or any sort of like dough. So we just used a Cuisinart. And the funny thing-

• 22:41Guy Raz?

  So you used a Cuisinart?

• 22:42Speaker 01

  Yeah.

• 22:43Guy Raz?

  Just anybody interested in starting an energy bar business, get a Cuisinart.

• 22:47Speaker 01

  Yeah.

• 22:47Guy Raz?

  You're gonna need it.

• 22:48Speaker 01

  Just like a little bowl mixer. They're really good machines. And so the funny thing is, in our lab, or where we do all product development today, we have the same red mixer that the first recipe was made-

• 23:02Guy Raz?

  Oh, it's a red Cuisinart?

• 23:02Speaker 01

  Yep. And we have like four other ones that are silver, but there's this red one in our lab still. That's the original one. It's still used today.

• 23:10Guy Raz?

  So you guys would take dates and stick them in the Cuisinart?

• 23:14Speaker 01

  Mm-hmm.

• 23:14Guy Raz?

  And you have cashews or only-

• 23:17Speaker 01

  Well, actually, cashews came later. We had, we used, so like, we were so obsessed with being differentiated. We wanted to be differentiated from Laura Bar, so we actually used dates and figs early on.

• 23:27Guy Raz?

  Right.

• 23:28Speaker 01

  So that was like our original formula.

• 23:30Guy Raz?

  So who was testing them? Were you giving it to friends and asking for feedback?

• 23:35Speaker 01

  Yeah, so I, to, so like, August 2012 to March 2013, you know, we'd have like logs of this RX Bar dough. And I remember showing up to the CrossFit gym that I was a member of. I was the weirdo with like Tupperware of this stuff.

• 23:55Guy Raz?

  And what was the first flavor that you made?

• 23:58Speaker 01

  Uh, coconut chocolate.

• 23:59Guy Raz?

  So you would, you actually made the bars, put them in a Tupperware, and went to your CrossFit gym?

• 24:04Speaker 01

  Unpacked, just in Tupperware. And Jared would do the same at his gym he was a member of.

• 24:09Guy Raz?

  And what did you do? Did you say, "May I speak to the manager"?

• 24:11Speaker 01

  Well, I was pretty entrenched in that community, so I knew the owners, I knew everyone. I was like obsessed with working out, so- But it was like, it wasn't just once, it was all the time. You know, we collected tons of data of like, does this, do you like this? Do you not like this? What would you like? Would you pay this?

• 24:27Guy Raz?

  Yeah.

• 24:27Speaker 01

  You just ask a ton of questions.

• 24:29Guy Raz?

  Yeah, at what point did you say, okay, we got it. We can actually start to try and sell these?

• 24:35Speaker 01

  So like, IDH stream was August 2012. And then the first time we like, collected revenue or made some sales was March 13th, 2013. And we moved pretty quick, so we were really small. Like, we started in my parents' basement. We didn't have much exposure. We were manufacturing ourselves. We were doing literally every part of the business, from filling it, website, ordering ingredients.

• 25:00Guy Raz?

  Yeah.

• 25:01Speaker 01

  Like, literally designing packaging, printing it, labeling it, all of it.

• 25:06Guy Raz?

  How did it, what did, what did the packaging look like?

• 25:09Speaker 01

  I actually have some.

• 25:10Guy Raz?

  Ah, alright.

• 25:12Speaker 01

  It's not staged, don't worry.

• 25:15Guy Raz?

  For our podcast audience, I should describe this package, because it, it could have been the same package you sold marijuana in, in high school. It's just a brown package, and there's just a sticker on the front with some coffee beans. It says RX Bar Coffee Cacao, and on the back, it says, you know, a bunch of stuff.

• 25:33Speaker 01

  You know, we couldn't afford a like, proper packaging. So, we designed it on PowerPoint, and then we would send the-

• 25:42Guy Raz?

  Well, there you go, PowerPoint.

• 25:44Speaker 01

  We would send the file to like, Staples, and I remember Jared going to Staples in Naperville and like, negotiating with a guy to get better rates. We eventually developed a relationship with the guy. His name is Steven.

• 26:00Guy Raz?

  Here's the thing, how did you guys know that this was going to be safe? That it wouldn't go rotten? That it was gonna be shelf-stable? Like, did you, was there a point where you had to hire somebody to do that, or?

• 26:15Speaker 01

  No. So, the hypothesis was, all these ingredients by themselves are stable alone.

• 26:22Guy Raz?

  Okay.

• 26:24Speaker 01

  So you put them together, they'll be stable.

• 26:26Guy Raz?

  Simple as that.

• 26:27Speaker 01

  Yeah. And like, in an early stage of a business, you can't, you can't break the law, but you kinda have to break the rules a little bit. And like, we were eating it, and we were fine.

• 26:39Speaker 02

  Oh my god.

• 26:42Speaker 02

  Oh wow.

• 26:43Speaker 01

  But, but, I mean, all the ingredients are stable and food safe. So it really wasn't a concern with it. And you know, you look at the market, well, Larbar has the, like, you know, you kind of connect the dots.

• 26:56Guy Raz?

  And how did you come up with the name RX Bar?

• 26:59Speaker 01

  So from the early days, like, the whole strategy was to make a product that is for CrossFit that market and for the paleo consumer and build it online. We build a web store and sell directly to gyms. And then byproduct of that would be like consumers coming directly to us. And we would scale that and eventually cross the chasm and go to a co-packer and then go into more traditional retail.

• 27:27Guy Raz?

  How was it that there was no energy bar that was directed toward the CrossFit community? How is it that no one thought about that?

• 27:35Speaker 01

  Well, I think a lot of people look at niches and/or look at a small segment and then it's not big enough for them.

• 27:44Guy Raz?

  Huh. It was like a side entrance almost. It wasn't like, well, start at Whole Foods. It was, let's just start with CrossFitters.

• 27:50Speaker 01

  Yeah, and we were very disciplined with it. I remember being like, I rather, we rather have a CrossFit customer in California than a local Chicago independent grocery store. Just because in the grocery store, we're among the sea of competition. We had no awareness. The product didn't really make sense for everyone. Whereas in a CrossFit gym, we were by ourselves. It was literally engineered and designed for that occasion. So it was perfect. And so we really focused on that. And actually, back to the name, I remember sitting in Jared's apartment, which he still lives in.

• 28:24Speaker 01

  And I remember a funny story, like, so we had to like go get the domain, right?

• 28:30Guy Raz?

  Right.

• 28:31Speaker 01

  And this guy, some, you know, cyber squatter had the domain.

• 28:34Guy Raz?

  RX Bar.

• 28:35Speaker 01

  Yeah. And he wanted 10,000 for it.

• 28:38Guy Raz?

  That was all your money.

• 28:39Speaker 01

  And I was like, fuck. Jared's like, well, let's offer 1,000. I was like, alright, let's just do it. He offered 1,000 and he gave it to us. And ever really, Jared, I was like, we should have offered 500.

• 28:52Guy Raz?

  Wow. 1,000 bucks. So early on, did you think-- and we've had a lot of people on the show who, early on, go out and seek funding. Did you-- I mean, you got this idea, you have a plan. Did you think, yeah, let's go raise money?

• 29:10Speaker 01

  Yeah, and so that was actually our initial plan. And I remember Jared and I were talking about, who are we going to raise money from? I remember asking my dad, do you know any rich people that can-- you can connect me with who'd give us some money? And my dad was like-- he's old school, he's like, super traditional. And he's like, you need to shut the fuck up and sell a thousand bars.

• 29:40Guy Raz?

  Coming up in just a minute, how Peter and Jared sold those first 1,000 bars, and a whole lot more. I'm Guy Raz, and you're listening to a live episode of How I Built This from NPR.

• 30:10Guy Raz?

  Hey, welcome back to this live episode of How I Built This from Chicago. So it's 2012, and Peter Rahal's dad has just told him, no, I'm not going to find some rich people to loan you money to start your energy bar company. You have to go out and prove yourselves first and sell some bars. So Peter and his partner Jared, well, they listen.

• 30:34Speaker 01

  And here Jared and I are just these entitled kids who think raising money will solve our problems. That message is really powerful because it allowed us to focus on what's important. And what was important was proving it. What was important is figuring it out. And so just, you know, instead of going to a kitchen, we moved to my parents' basement. Instead of going to a designer, we went to PowerPoint. Like, instead of going to a printer, we went to Staples. Instead of going to a third-party designer website, we went to Shopify.

• 31:09Guy Raz?

  You did what you could do, right? You had very limited resources.

• 31:14Speaker 01

  Yeah, basically. So we both quit our jobs and-- And started hustling, like emailing, calling.

• 31:22Guy Raz?

  And you would say, hey, we have these, can we send you some to test out?

• 31:27Speaker 01

  Well, first, we would try to like sell and like, hey, we're selling this, it's $2, you resell it for $3. You know, if they're reluctant or unwilling, we would give it on consignment. We'd do anything.

• 31:40Guy Raz?

  Right. And were the, I mean, if you're cold calling a CrossFit gym, were they receptive? Did they blow you off? What was their response?

• 31:49Speaker 01

  So it was an interesting time in CrossFit where like the idea of retail was just beginning. So a lot of CrossFit gyms were very principled and like, our job is to focus on training and physical fitness, not selling goods.

• 32:05Guy Raz?

  Right.

• 32:06Speaker 01

  And then some were like more open to it. And then there was a little bit of education like, hey, you know, your customers are, you're training them, you're doing a great job, but they're going to buy like across the street to buy product. Don't think of it about as like capitalizing and selling out, it's actually like delivering a great good and service to your customers. And so that's where the CrossFit world really shifted and became really explosive in popularity. And you'd see gym members, you know, becoming good operators and starting to build a retail upfront of like selling t-shirts and really developing the retail side of their business.

• 32:38Guy Raz?

  And how, I mean, with $10,000, how were you, you know, making enough bars and then bringing enough revenue back? It's definitely at the beginning, in the middle of 2013.

• 32:50Speaker 01

  So one of the advantages of manufacturing ourselves and, you know, like to give you an idea, from like 8:00 AM to noon every day, Jared and I would make like three to seven batches.

• 33:04Guy Raz?

  Which produced how many bars?

• 33:06Speaker 01

  It was like 440 bars a batch.

• 33:08Guy Raz?

  Okay.

• 33:10Speaker 01

  And then we had a team of girls that would pack them in the afternoon and then we would go back. But that was our day and so.

• 33:15Guy Raz?

  Just like temp hires that you would?

• 33:17Speaker 01

  Mm-hmm. No, they're, I don't know what their status was, but.

• 33:23Guy Raz?

  Didn't you hire, didn't you hire your mom at some point to help you pack bars too?

• 33:28Speaker 01

  Yeah, so when we were first launching in my parents' basement, Mrs. Smith and Mrs. Ray Hall volunteered and, um, you know, putting labels on the front and back of this was the biggest pain in the ass. And it requires a lot of stamina and accuracy.

• 33:49Speaker 01

  My poor mother just couldn't label them correctly. And Mrs. Smith was just nailing it.

• 33:57Speaker 01

  And, and I was like, "Mom, you got it. You can't put the front panel twice on the package." And she's like in love with it. She's like, you know, it's a romantic idea of her son starting her basement, so she's in love with it. And then after like two or three times, I'm like, "This, this isn't working."

• 34:14Guy Raz?

  So you had to fire your mom?

• 34:16Speaker 01

  Yeah, basically.

• 34:18Guy Raz?

  Wow. So, yeah, so I mean, you guys are making about 440 bars or so a day?

• 34:23Speaker 01

  No, no, no, a batch. So we were up to 10, 10,000 was our capacity.

• 34:27Guy Raz?

  You could make 10,000 in how, how long?

• 34:30Speaker 01

  A shift, so eight hours.

• 34:32Guy Raz?

  You could make 10,000 bars in eight, just the two of you?

• 34:35Speaker 01

  And like some, yeah, like 12 other people.

• 34:40Guy Raz?

  Wait, who are the 12 other people?

• 34:41Speaker 01

  The 10.

• 34:42Guy Raz?

  You would hire like people to help you make them?

• 34:45Speaker 01

  Yes.

• 34:46Guy Raz?

  And, and did you, you, you no longer were working in, in your parents' basement? This is, you, you went to work at like a professional kitchen, a place you could like rent out?

• 34:55Speaker 01

  No, it was a place called Allison Flavors, which is a repacker of juice concentrate that used to be a customer of my father's. So we just got 1,000 square feet there and then started operating. And it was food safe, it was a great place.

• 35:09Guy Raz?

  Month to month and you would make the product there?

• 35:11Speaker 01

  Yep, make it, ship it, sell it, work, work out of it. It was, it was actually like a really proud moment to like move out of your home and like, it was like, this is real. So the advantages to manufacturing and doing it in small batch is you keep your inventory really low. And so that's where your cash ultimately lays. And so we didn't really need to raise a lot of money because we... Made 100 bars and then went online and sold it. When you think about selling it online, you're collecting that cash.

• 35:39Guy Raz?

  But how did people know about it online? Just word of mouth?

• 35:43Speaker 01

  Yeah, it was word of mouth and, you know, we had a really clear early adopter. Like, we didn't have these ambitions of like going national or like, we were solving a problem for CrossFit.

• 35:53Guy Raz?

  CrossFit.

• 35:53Speaker 01

  And CrossFit gym owners. Like, we wanted to serve them.

• 35:56Guy Raz?

  Because when you're done with CrossFit, you want quick protein.

• 35:59Speaker 01

  Oh, yeah.

• 35:59Guy Raz?

  And it's convenient, right there.

• 36:01Speaker 01

  Or in the morning, if you want to like, do a workout, have a protein shake and then grab a bar to go for later. Like, it was a perfect fit. So that's how the awareness was really like organic in that community. And like, it was, we talk about like product market fit. It just fit really well. And that's where a lot of the organic word of mouth traction came from.

• 36:19Guy Raz?

  Within nine months of launching this company, you guys did $600,000 in sales.

• 36:28Speaker 01

  Yeah, so April 2013 to end of year, we did 600.

• 36:33Guy Raz?

  It's unbelievable, right?

• 36:34Speaker 01

  It was a clear sign of like real traction early on. There's just a lot of demand for what we were making. And so, so we knew it was special. We didn't realize how special the ultimate become.

• 36:46Guy Raz?

  So by the time you hit $600,000 in revenue in year one, that, all that money is coming back into the business. You're using that to buy more supplies. And were you able to keep up with demand?

• 36:58Speaker 01

  No.

• 36:59Guy Raz?

  So how long was the wait time? If like, were there CrossFit gyms that had to wait like weeks or months?

• 37:04Speaker 01

  So like, our capacity was based around our mixer and our people. And so, like, we couldn't send an email, for example, or like promote too much because it would stimulate demand and then we wouldn't be able to fulfill it, which was actually a good constraint. It was, it was healthy. We didn't grow too fast. And we, most important thing is we had great empathy for the whole business.

• 37:29Guy Raz?

  I guess production, uh, demand became so intense that by the middle of 2014, you just hired an outside manufacturer to make it. You guys decided, concluded you could not make this yourselves anymore.

• 37:41Speaker 01

  Yeah. And so, the whole plan was to manufacture ourselves, scale it to a point and then commercialize.

• 37:47Guy Raz?

  Right.

• 37:47Speaker 01

  So find a good partner to.

• 37:49Guy Raz?

  And the partner was in, here in Illinois?

• 37:52Speaker 01

  No, originally it was upstate New York.

• 37:54Guy Raz?

  And good to go, right?

• 37:57Speaker 01

  No, it was quite a disaster. Right. I'm sure you, it's like manufacturing food's really hard. So I went to go oversee production, Jared is at home base, making sure we're filling orders. You were going to New York, upstate New York? Yeah, to oversee production, we were there for a week and, you know, this is like my baby and so I'm like a lunatic, like walking around, making sure the bars are made right and like Sure. overseeing everything and, um, so we come back home and I'm like, Jared, this is, they're not the right partner for us. You just didn't feel it when you were there? Yeah, I mean, their leadership, like, I, for example, I was posted up in an office for

• 38:36Speaker 01

  four days, next to me was the president and I, we were the only customer there. He didn't even acknowledge my presence. He just hid in his office. And so if you think about what that says about the company and the leadership there and, Yeah. Um, so it just wasn't a good vibe and two, two weeks later after that production run, Jared gets an email from the president, who I never even like shook his hand, who was next to me. And what'd he say? Just basically like, Peter's not allowed at the plant anymore.

• 39:10Speaker 01

  He was disrespectful to our employees. Your pricing is going to go from 16 cents or like whatever, double. So Jared and I are like, fuck. Yeah. Remember I talked about retains? So our product, like, we never did shelf life studies, we were just too busy like playing offense, I guess. And there's, there was some stability issues with it. And why was that? Well, we only learned because, you know, we used to make batch to sale and so the first time we, we commercialized, we made like a hundred plus thousand bars. Okay. And so here we are, sitting on this inventory and selling it through and then basically we had customers saying like, hey, it's, it's tasting funny or whatever. And so we had shelf life issues on some of our product. Yeah.

• 39:54Speaker 01

  And so, you know, I think one of the things we did that I'm really proud of is we took an insurance claim on all that inventory. I think most brands- You mean you just got rid of it, you dumped it? Cause it was not up to your standards? No. Okay. And like in reflection, most brands, I'm pretty confident would have sold through it. And it was a really dark period. Well, how much of, how, how much was that inventory worth at retail? Three hundred thousand dollars, four hundred thousand dollars. And I think about, so in May, we did like five hundred thousand dollars in sales.

• 40:24Guy Raz?

  Yeah.

• 40:24Speaker 01

  By the end of that, like, process, because we were out of stock for two to three months. While we, like, found a new partner.

• 40:31Guy Raz?

  Yeah.

• 40:33Speaker 01

  We didn't, by like August, we did a hundred twenty thousand a month.

• 40:36Guy Raz?

  By the end of that year, two million in revenue.

• 40:38Speaker 01

  Yeah, I know, exactly. Like, even despite not being able to sell stuff.

• 40:43Guy Raz?

  Still primarily CrossFit gyms and people buying online through word of mouth.

• 40:47Speaker 01

  Yes.

• 40:47Guy Raz?

  I remember first seeing these in 2016 in Trader Joe's. And I go off on paleo, sometimes easier, sometimes harder. But I was in the paleo phase, and I saw them, and I was like, oh, my God, I can eat this. How did you get into Trader Joe's?

• 41:06Speaker 01

  Yeah, so Trader Joe's was a huge milestone for us. Because you think about it, for the first time, when someone asked the company, like, where can I buy an RX bar? For the first time, our answer wasn't like, well, where do you live?

• 41:20Guy Raz?

  Yeah.

• 41:21Speaker 01

  So it was really amazing to have that, like, whole footprint.

• 41:25Guy Raz?

  How did they even, did you get in touch with them? Did you pitch them? Did they come to you?

• 41:29Speaker 01

  So it was at a trade show. They expressed some interest, and then our...

• 41:34Guy Raz?

  Like a buyer, I'd come by your booth?

• 41:35Speaker 01

  Yep, like a product scavenger.

• 41:37Guy Raz?

  And did you guys have a big booth, very expensive?

• 41:39Speaker 01

  No, a shitty ten by ten. That was under-resourced, probably.

• 41:43Guy Raz?

  And you just had, like, a tablecloth and just piles of RX bars?

• 41:46Speaker 01

  Yep.

• 41:46Guy Raz?

  So you get, and how long does it take you between the trade show and the time that these bars are in Trader Joe's? Is it a long...

• 41:53Speaker 01

  So it was like January to June.

• 41:55Guy Raz?

  And was that an instant game changer for you guys?

• 41:59Speaker 01

  Yeah, yeah. It was kind of like, all right, we're in the big leagues now. Because Trader Joe's, it's a hard place to get into. You think about it, like, if you go to that set, it's only the top brands. They don't carry local or little ones. Like, that was like a, oh, shit, this is really working moment. And then our performance there just continued to grow and...

• 42:19Guy Raz?

  That year, 2016, you did thirty-six million dollars in revenue.

• 42:25Speaker 01

  And our aggressive forecast was like sixteen to eighteen. Aggressive.

• 42:31Guy Raz?

  But, I mean... Did you even have time to sit back with Jared and say, "Whoa, this is crazy"?

• 42:38Speaker 01

  No, I think we were just too focused on like the what's next and like growing it. I think in reflection now, we always think about the fond memories, but in the moment, we were, we were-

• 42:48Guy Raz?

  It was just a grind.

• 42:49Speaker 01

  Yeah, we just keep going and keep going and-

• 42:51Guy Raz?

  So there was just a huge bombshell announcement in, I think, November of 2017. Kellogg's buys a company outright, $600 million. This is a company that was started in 2013 in your parents' kitchen, in your basement.

• 43:11Speaker 01

  Yeah.

• 43:17Speaker 01

  Yeah, I mean, the number, you know, we never dreamed of any sort of outcome like that. I think that number reflects like Kellogg didn't just buy a brand. That valuation, which everyone looks at is really, it's way more than just the bar. I mean, we have a ton under the hood, we have really special people. And so if you're a great company, you're going to get great value.

• 43:39Guy Raz?

  Yeah. So you are now a Kellogg's employee.

• 43:42Speaker 01

  Yeah.

• 43:43Guy Raz?

  You are the CEO of the company as you've always been. And you are 32?

• 43:50Speaker 01

  Yes.

• 43:51Guy Raz?

  You've got all of this money. Is it weird? I mean, does it even, do you even process it? Does it change anything practically? Does it change anything about the way you, the way you live your life or how you feel about it?

• 44:06Speaker 01

  No, it doesn't change me. I mean, I still dress like shit and have the same shitty shoes that people make fun of me. Like, and the only thing that changes is like where you sleep and how you, the opportunities to where you can travel. And I think the biggest thing is just freedom, like financial freedom. You don't have to worry about like providing for your future. And that's, I think that's a burden that is really hard. And so I think, you know, I mean, Jared still lives in his 400 square foot apartment. Think about that.

• 44:35Guy Raz?

  Oh my God, God bless you, Jared.

• 44:37Speaker 01

  You know, yeah.

• 44:38Guy Raz?

  Do you think that you're going to give away most of it over the course of your life?

• 44:41Speaker 01

  Probably, some capacity for sure. Like, I want to do good. I think it's a responsibility to-

• 44:45Guy Raz?

  I mean, you've got-

• 44:46Speaker 01

  I think it's a responsibility to society. Like, I've had some success and I think you owe it back at some, in some way, so.

• 44:54Guy Raz?

  So you've heard the podcast before. I know some folks in the audience have. I always ask one question at the very end, which is, how much of what happened to you do you attribute to your skill, your hard work, your intelligence? How much to luck?

• 45:11Speaker 01

  You know, I think I'm very lucky to be born in the United States. I think I'm very lucky to have the family. And, you know, if I didn't have my father and mother to raise me the way I did, I would be drunk at a bar miserable. You know what I mean? Like, so I'm very lucky for those things. I'm very lucky that I met Jared and had a humble partner to do this with. I'm very lucky to be dyslexic and the attributes and strengths and weaknesses with that. I'm very lucky this is the golden age of entrepreneurship and food. So I think a lot of it is luck, but talent has to play a variable in it.

• 45:53Speaker 01

  But it doesn't happen without good timing and luck.

• 45:58Guy Raz?

  Peter Rahal, founder of RXBAR. Thank you so much.

• 46:01Speaker 01

  Thank you.

• 46:01Guy Raz?

  It's been amazing.

• 46:02Speaker 01

  Thank you, everyone.

• 46:03Speaker 02

  Incredible story. Absolutely amazing.

• 46:10Guy Raz?

  I spoke to Peter at the Athenum Theater in Chicago, and Peter sat down with me, even though it was kind of a crazy time for him. I spoke to him just a few days before he was set to get married. And he told me that by Lebanese standards, the wedding was a pretty intimate affair, just 150 or so guests. And no, the menu was not paleo. Peter and his wife served lots of fettuccine salad, hummus, and mountains of Peter bread.

• 46:41Guy Raz?

  Hey, thanks so much for listening to this live episode of How I Built This from Chicago. Our show is produced by Ramtin Arablouei, who also composed the music. Our live team in Chicago was Ali Prescott and El Manion. Thanks also to Neva Grant, Sanaz Meshkhanpour, Jeff Rogers, and Benjamin Klemp. Our intern is J.C. Howard. I'm Guy Raz, and you've been listening to How I Built This from NPR.

• 47:29Speaker 02

  Your next great read is out there waiting for you, and NPR can help you find it. Visit npr.org/bookswe love to browse hundreds of books we loved, published this year, plus thousands in our archive. And, you know, books make great gifts for everyone on your holiday shopping list.