A MARATHON MAN WITH MARKETING POWER
Big companies--who needs 'em? In 1986, marathoner Brian Maxwell wrote a letter to Quaker Oats Co. and other giant food manufacturers asking them to consider licensing a new nutrient-rich, low-fat concoction for athletes he called the energy bar. "They responded: `We have our own R&D department, thank you very much, please leave us alone,"' Maxwell recalls.
Guess who's having the last laugh. Maxwell eventually dubbed his product the PowerBar and decided to go it alone. Now, the 41-year-old entrepreneur is king of a market that is growing an estimated 20% annually, and giants such as Quaker are running to catch up. Maxwell's privately held Powerfood Inc., based in Berkeley, Calif., will sell $30 million worth of its carbohydrate boosters this year. Customers such as Neil Iscoe, a 39-year-old electronics industry executive and cyclist in Austin, Tex., can't get enough. "I'm a heavy PowerBar user," Iscoe says. "I buy them by the case."
SMALL POTATOES. That sort of endorsement--and Powerfood's 40% annual growth rate--has inspired Quaker's $800 million Gatorade sport drink division to whip together a competitor called GatorBar. Hoping to capitalize on the fact that the PowerBar has something of an acquired taste, Quaker thinks it can catch up with what it insists is a more savory product. Both companies are betting the market will expand to include not just high-performance athletes but mainstream snackers looking for a healthier alternative to fat-laden candy bars and breakfast bars. Gatorade Marketing Vice-President Debbie Kelly estimates the energy bar market could approach $200 million in five years.
Of course, Powerfood's $30 million in revenues is small potatoes in the food business. But Maxwell's story shows how a tidy fortune can still be made in an old-line industry like food by applying intense dedication to a bright idea--even if there's not much capital to start with. As Kelly levels her sights on his market, she has nothing but admiration for Maxwell's persistence. "He created the category," she says. "I have the utmost respect for what Brian Maxwell and his family have done. I think it's awesome."
Born in England, raised in Toronto, and schooled at the University of California at Berkeley, Maxwell was a world-class marathon runner who ranked third internationally in 1977. He made the Canadian Olympic team in 1980 but missed the Moscow games because of the Western nations' boycott that year. His idea for a high-energy, low-fat snack came after he narrowly lost one race when low blood sugar made him dizzy in the last mile. Although there were some products on the market that claimed to boost energy, Maxwell didn't think they worked. So he began trying to cook up his own using a mix of ingredients and the stove in his kitchen.
The basic energy bar recipe is a balance of simple carbohydrates for quick energy, complex carbohydrates for sustained energy, and low fat to make it easy to digest. The trick is making it palatable. The first stuff out of the pan was "horrible glop," says Maxwell. He teamed up with his girlfriend (now wife), Jennifer--a marathon runner and nutritionist--and for three years they experimented, wrapping the bars in plastic for their runner friends to try. "We got to be a joke," Maxwell says. Instead of improving performance, the bars sometimes sent their friends "running straight to the bathroom."
Eventually they hit on a mix of fructose, oat bran, maltodextrins, and milk proteins. They packed the bars with vitamins, minerals, and amino acids and flavors such as chocolate or berry. The result hardly tasted like a Snickers bar, but it was a lot healthier. Amateur and professional athletes snapped them up. The first U.S. cycling team to ride the Tour de France asked for free PowerBars in return for sponsorship. That prompted CBS Sports to broadcast a short profile of the company in 1987, after which sales through bike shops and mail order took off. Today, PewerBars are found from Kroger stores to price clubs, where they are discounted off their high $1.69 suggested retail price. Maxwell also sees plenty of opportunity overseas. International sales already make up 9% of the total.
Maxwell built his company on a mere $75,000 in capital--"not enough money for a downpayment on a house in Berkeley," he says. The bulk of that came from posing in an ad for Xerox Corp.'s Marathon line of copiers. His dad kicked in $5,000, and Maxwell added $10,000 of his own savings. He used the money to move out of the kitchen and contract with a candymaker to produce PowerBars. But early on, Maxwell learned the value of a motivated workforce and the need to control his own manufacturing.
The quality of the PowerBars churned out by the contractor he hired was inconsistent, and the workers seemed disengaged. "So on the days they'd be making PowerBars, we'd go over there in the morning and slip each of the workers a $20 bill," Maxwell says. Quality improved dramatically.
Still, the contractor's equipment kept choking on the gooey PowerBar formula, because the low fat content failed to keep the machinery properly lubricated. Maxwell, an architecture major, helped design his own machines and opened his own plant in 1989. A "disciple of Tom Peters," Maxwell says he works hard to motivate his workforce of 100. One tool is to add 10% of operating profits to their paychecks each year. "We share mur numbers with all the employees," Maxwell says. "Everyone's aware that a PowerBar wrapper costs 4 cents and a shipping carton $1.28."
Motivating new customers is a different challenge. People need to be educated on "why it doesn't taste quite like a candy bar," Maxwell says. Dozens of tiny competitors are nibbling at Powerfood's market, with brand names such as Edge and BTU Stoker. But Maxwell says he is worried only about Gatorade, which is trying to gain an edge on taste by using a fruit juice-fig concentrate as the base ingredient in its GatorBars, while coating them with nuts and grains.
LIFTING ALL BOATS? Maxwell recently got a chilling demonstration of the Quaker division's clout: Gatorade grabbed PowerBar's sponsorship of the Ironman Triathlons, a sports marketing coup, given the publicity the Ironman contest attracts among amateur athletes around the U.S. Maxwell is hoping Gatorade's aggressiveness will only expand the category--giving a lift to all products. But he's also taking pains to ensure he doesn't get stomped. To professionalize operations, he is seeking a new chief financial officer and a new vice-president for sales and marketing, functions he has been handling on his own.
Given the PowerBar brand name, however, the Maxwells could probably sell the company for a tidy profit. Indeed, Jennifer Maxwell, 29, says they've been approached several times. For now, though, the couple is still having fun; the GatorBar rollout seems only to have inflamed their natural competitiveness. As any marathon runner knows, the adrenaline really starts flowing when someone's breathing down your neck.Russell Mitchell in Berkeley, Calif.