RXBAR has a New CEO, New Products, and New Holding Company
First, before I get started, if you don’t know the backstory on RXBAR, listen to this NPR How I Built This podcast episode
For me, my journey with the fastest growing major bar company in the US started in late 2013 or early 2014, when I was training at a high-level CrossFit gym in Denver. I was actually writing a 6-month long piece for the wildly popular lifestyle publication in Denver 303 Magazine about the growing CrossFit trend and all of the ancillary lifestyle trends. These trends included trying the Paleo diet and consumer packaged goods (CPG) that were positioned in the CrossFit world.
Being that my “day job” was running my CPG strategy consulting business, I become very interested in the CPG brands that were positioning their products in the growing fitness platform. That meant I really dug into RXBAR and ate my weight in them over that period and even into present time.
Fast forward to about 18 months ago and the Kellogg’s Co. bought RXBAR for $600 million…
In 2017, sales of RXBAR was estimated at $130 million and was the fastest growing bar brand. I remember working on a protein bar project with a client during 2017 and they shared the contract manufacturer with RXBAR. Let’s just say getting a day of manufacturing line time was like going to battle!
After the acquisition from Kellogg’s Co., it is estimated that 2018 sales essentially doubled to an estimated $275 million. Based on projections by the M&A team at Kellogg’s Co., they stated the acquisition price would be 12–14X the EBITDA in 2018. Quick math on those numbers gets us to that RXBAR made about $42–50 million on that $275 million revenue (which is about 15–18%).
To be honest, there is nothing out of the ordinary in those numbers, so why did RXBAR lay off about 20% of the staff in late 2018?
Firstly, this is a semi-normal action for the year after the acquisition. As the larger strategic looks at the costs, it is normal to cut redundancies in the SG&A area. Secondly, the company noted cutting positions in product lines that would not be needed in the future. That should have been an indicator for more changes in 2019…
So, what’s up in 2019 you ask? The first 75 days of 2019 is definitely marking more drastic changes!
CEO Change?!?
Current CEO and Co-Founder Peter Rahal is stepping “down” to focus on product and brand strategy. The company is putting Jim Murray, the previous CFO, in charge of the growing protein bar company.
So, what will Peter Rahal be up to in his new position?
Product and Brand Strategy Changes
When Kellogg Co. paid $600 million for the maker of RXBAR, they saw more than just a brand of protein bars made with egg whites, dates and nuts, but a platform for disruptive innovation in the food industry. Now, the vision behind the valuation is coming into focus.
Truth is…protein bar styles have about 1–2 years to get sales velocity and another 3–5 years of growth before the product life cycle fizzles out for something disruptive or incremental comes into market. Kellogg’s knows this fact too…
That is why they launched RXBAR Nut Butters last year. This was a way for them to “tiptoe” to see if the RXBAR brand had extension potential. I believe they found those tests to be acceptable because they are set to launch RXOats in late 2019. RX Oats combines egg white protein, almonds, dates and oats in single-serve cups. Flavors include apple cinnamon, chocolate and maple.
The “RX” name has transcended the CrossFit community which created it and set it on fire for the world to see. If you weren’t aware, “RX” describes the “prescribed” level in which the CrossFit workout is to be performed.
In my opinion, the next moves for the RX brand is to extend further into different sections of the FDMC channels. The beautiful thing about RX is they have very clear principles and they will take that simplistic approach to diversify the functional CPG offerings similar to the product development movements that Quest Nutrition has made in the last 1–2 years.
Creating a Portfolio Mentality
Additionally, I think Peter Rahal had various creative product and brand thoughts that wouldn’t fit those clear principles of RXBAR. Kellogg’s Co. believes in Peter Rahal, so I assume they wanted to keep him around to tap into those thoughts about emerging trends.
That is why Kellogg’s Co. changed RXBAR’s holding company to Insurgent Brands. Insurgent Brands first action was to launch TIG Snacks at the 2019 Natural Products Expo West event. TIG is a brand of savory snack bars featuring chickpeas and lentils, with 140 calories and one or two grams of sugar per serving. Varieties include barbecue, buffalo, chili lime and pizza.
So, WTF does TIG stand for?
TIG Snacks seems to be the opposite of RX in taste profiles and not necessarily functional protein.
So, what would be next with Insurgent Brands?
- Expect more heavy use of direct to consumer channel to test new product launches under RX and TIG. This will help the company gather and respond to consumer feedback before rolling out to retail stores
- Products will likely be focused on the microbiome or “plant-based 2.0”
I don’t believe Kelogg’s Co. has a wholly-owned incubator, but it did invest in a dual one with Conagra. They also have a venture fund and if they do acquire emerging snack brands, they will likely use the Insurgent Brands holding company to house those brands, similarly to Amplify Snack Brands and Hershey’s in Austin, TX.
