Peter Rahal and his co-founder spent $10,000 starting their protein-bar business. Five years later, they sold it to Kellogg.
Peter Rahal started RxBar, a protein-bar company known for its sleek, minimalist packaging, in 2012. Five years later, he and co-founder Jared Smith sold their startup to Kellogg for $600 million. —As told to Danielle Sacks
Why did you start a food business?
My father’s family is in the juice-concentrate business and my mother’s is in juice manufacturing. Both sides are Lebanese, and my parents were set up at my uncle’s funeral. I tried to get a job in the family business, but for internal political reasons, it wasn’t a good time. In 2012, I read that it cost only $10,000 to start a nutrition-bar company—any dumbass can make a bar. The category was so competitive in places like Whole Foods, but CrossFits were getting popular, so we sold it to gyms and directly online. Jared and I each put in $5,000 and thought it could be a $10 million business. Last year, net revenue hit $131 million.
How did you find the right buyer?
We considered interest from 10 companies and met with four. We knew what we didn’t want. We have an allergic reaction to private equity: They’re not operators. They’d want to maximize profit and go public. We also didn’t want to sell a portion of the company and then have to sell part of it again. We wanted to do a 100 percent sale, because the process takes a shitload of time. We first met with Kellogg in March, and it didn’t close until October.
Why did you decide to sell?
We never planned on exiting. Then, around January 2017, potential buyers started asking us to meet. That stimulated a conversation between Jared and me about what we wanted RxBar to be when it grew up. Ultimately, there are two paths to take: being a family business and keeping it private for generations; or going public or rolling into a great organization. I had experience in nepotism—family businesses are complicated. They’re subjective. We wanted to be objective and maximize the potential of the brand. So we chose the path of finding a partner that was culturally similar and had the muscle to accelerate our growth.
You’re still running RxBar, but now within this huge corporation. How do you make sure you don’t get swallowed up?
The number one way to protect RxBar is for us to earn it. If we overdeliver, we’ve earned that. But if we underdeliver and go south, then we’ll need to change. If you have a kid in school who’s doing well, with friends and playing sports, you wouldn’t change schools. But if the kid starts hanging out with a bad crowd and smoking pot, you’re going to change his school. We need to be a good student.