Kate McAleer, founder of Bixby & Co., which manufactures organic chocolate bars and other products out of its facility in Rockland, attributes a lot of her success to plain, old, get-your-hands-dirty-and-stop-complaining grit and perseverance.
“You may not be the perfect person, but if you work really hard and put a lot of passion and grit into something, you’ll keep getting somewhere,” she told me. “I think that really exemplifies my modus operandi.”
Kate founded her company at the end of 2011 while still in New York and only in her early 20s (she’s 29 now). It remained “a beta effort” for the next year or so before she pre-sold a prototype of her Bixby Bar to Whole Foods. This happened right before she moved to Maine in January 2013, which sent her scrambling to find enough manufacturing space to fill the order. The first place she lined up fell through at the last minute. She then moved into a shared commercial kitchen in Belfast, which worked for about a year before she needed to expand to a larger space, which she found in Rockland, and where her business is still located.
“It was a hairy time of trying to find somewhere to manufacture product, but it all works out if you keep hustling,” she told me.
Her products are now in more than 1,000 stores across the country and she says her sales are growing 30% a year. She’s had noticeable success in pitching her business. In 2015, she won Gorham Savings Bank’s Launchpad competition and $30,000. Last year, she was named a Tory Burch Foundation Fellow and ended up winning the concluding pitch competition along with $100,000 (half in grant money and the other half in a low-interest loan).
In her Founder Forum interview, Kate speaks candidly about the personal challenges of building her business, why she hasn’t taken on outside investors, and offers her advice for new entrepreneurs (hint: develop grit). This interview was edited for clarity and length.
Maine Startups Insider: When was your first entrepreneurial experience?
McAleer: I came to entrepreneurship out of college. I went to NYU for undergrad and pursued a liberal arts degree, but was trying to find my passion. I found that I really wanted to be in control of my own destiny. And my mom suggested starting my own business. Food and food businesses became an intersection of a lot of my interests.
I should explain that my interest in natural and organic food came from a family experience of my mother surviving breast cancer numerous times. My mom was diagnosed my freshman year at college, so I was 18 I think. That’s a pretty alarming, shocking experience. When someone gets cancer, you start to really look at a lot of things, including food, differently. And I saw a void in the candy space. I wanted to do chocolate and did a lot of market research. Candy was this stagnant category that hadn’t been innovated, was unhealthy, made with all sorts of strange ingredients (which I know now why people use—for shelf life, stability and all sorts of cheapening that comes from mass producing something that has little nutritional value), so really I was trying to turn that on its head and wanted to make candy with real food in a more holistic approach and make it in Maine, which is an unlikely place to manufacture candy. It was really diving head first into entrepreneurship. It quickly became my passion once I dove into it.
You mentioned you did a lot of market research. What else did you do to prepare before making that entrepreneurial leap of faith in starting your business?
I did a lot of programming. When I was living in New York, I attended pastry school instead of going back to graduate school. I was thinking bakery or confectionary at that time, and then I started to hone in on chocolate after six months. When you live in New York City, there’s something called New York City Business Solutions, which is this free entrepreneurial education classes funded by the Kauffman Foundation and Bloomberg underwrote a lot of it. So I heard about that through someone. I don’t even remember. I just started networking like crazy when I decided I wanted to do my own business. See, I didn’t study business in undergrad, which is hilarious because I played varsity golf and all the guys on the golf team were all taking classes at Stern, NYU’s business school, and I think my 18-year-old self was a little intimidated and thought I’m not going to take classes at Stern, I’m just going to do my Chinese thing, which in retrospect was really dumb. Anyway, it turns out I’m the only person who started a business, and then my co-female golf teammate she started a business, so it was funny how the women started businesses and the men all went and worked for Goldman Sachs. It was a funny realization I had recently.
When I got to Maine, we were in Belfast and there was a community of food producers there and through that I was networked into the startup community in Maine. I was doing a demo at Cellardoor Winery really early on and this guy came up and I was pitching my product and serving and whatever, and he said, ‘You should write this down, you should look at this program called Top Gun.’ I was new to Maine at the time and I was thinking, that’s a really strange name for a program, but I’ll write it down. And then he introduced himself and he was Bill Williamson, head of Bank of America for Maine, who was just in Lincolnville, Maine, at Cellardoor Winery. I think he was on the board of MCED at the time. I followed up on it, because that’s what I do. About a month later I applied for Top Gun and drove to Portland every Wednesday—there wasn’t a midcoast Top Gun at the time—and started navigating the support system in Maine, which is incredible. I learned about MTI, applied for TechStart grants, and then a seed grant, found about the Libra Future Fund, received two of their grants, so really I found the networking and opportunities in Maine to be incredibly supportive—if you go out and look for it. I think a lot of people aren’t aware of these programs, or don’t want to dedicate the time or energy to researching it. But, man, any time I was pointed in some direction, I followed up. So then I found about Gorham Savings Bank through Top Gun. Applied for that. So you know it was a whole series of trying to find resources to help a startup business.
What have been the largest challenges you’ve faced?
I would say the biggest challenges have been navigating a complex industry where you have federal regulations and state regulations. As a smaller manufacturer, I’ve taken all that learning the law, how to comply, food-safety compliance, upon myself. I don’t see that as a challenge, but it’s something that I had to reconfigure in my mind. When you think about starting a company, you’re not sure what you’re going to have to deal with, but I didn’t imagine digging into food law. But I’m glad that I did; I’m glad that I do. I think I need to be on top of it anyway, but it wasn’t what I thought I’d be dealing with all the time.
I think the whole distribution aspect of the business is really eye opening. When you’re a consumer, you have this idea that the food that’s available to you is available because you want to buy it. And the reality is what’s available on the shelf is because people have paid to be on the shelf. So fighting for space as a small, emerging brand is a challenge when you’re up against large conglomerates. There’s no disruptor in the food-distribution business. I mean, maybe you could consider e-commerce as a disruptor, but that’s even complicated with a perishable product. There’s not a cold-supply chain with Amazon, so they don’t sell chocolate during the summer. So the oldest part of this business is the distribution side of it—and so you’re new and innovative, but you have to deal with this antiquated system. That was a challenge and eye opening, too. Because you think you could bring innovation to the marketplace, but it’s very much a pay-to-play model.
Even Amazon is becoming a pay-to-play model, which I don’t think consumers are aware of. If you want your product to come up in search on Amazon, you have to pay Amazon marketing fees for that. What you’re buying is because people are paying to have access to you. We were just accepted into Amazon Launchpad, though, which is their program for startup businesses, so I’m eager to see how that helps us from an Amazon perspective.
You’ve done well when pitching your business. You won Launchpad and the Tory Burch money. Tell me about what you did to prepare and improve your pitch. Any tips others could use to improve their pitches?
I really attribute a lot of learning my pitching skills to the Top Gun experience. I think I was the first person on the first day they called on to make a pitch. Don Gooding called on me and I think it was a blabbering, terrible pitch. It was really good shock therapy of realizing that I better be on my game at all times to explain my business. That was one of those moments I’ll probably never forget. I’m sure it wasn’t that bad, but I thought it was terrible myself. That program was awesome. Lots of practice, research. I did some videoing of myself, which was kind of awkward, but watching that was helpful. It took a lot of practice and intention in saying I want to improve in this aspect, which is pretty important. It’s a lot of work. You really need to hone your messaging and presentation skills. I’m probably rusty now. I haven’t pitched in a while.
Besides the pitching, what else do you attribute to your success?
Incredible hard work and grit. I met the woman who wrote Grit—have you heard of that book? I met her [Angela Duckworth] through the Tory Burch programming. She sent me a copy and I read it and felt it spoke right to me. It’s a complicated, scientific book, but there are elements of pure, great non-scientific, speak-to-you writing. I thought it really was a great expression of how I feel. You may not be the perfect person, but if you work really hard and put a lot of passion and grit into something, you’ll keep getting somewhere. And so I think that really exemplifies my modus operandi, which is work really hard, research everything, and just keep pushing forward. I think entrepreneurship is not for the faint hearted. It’s not an easy task whatsoever. So I think that’s really all I can say. I just work really hard and try to stay focused on what is driving me, which is trying to make better food for more people and creating jobs in Maine.
What have been the personal challenges or sacrifices you’ve faced in being an entrepreneur? Do you have a family?
I am not married and I don’t have kids. I feel like I work all the time, so I give anyone who is raising a family a lot of kudos on doing that. I would say there’s a tremendous amount of personal sacrifice. I really have not seen my friends in a very long time. I mean my friends from college or New York, if I have seen any of them, they’ve come to Maine to see me. And then I think I put them on the line wrapping candy bars. ‘If you want to hang out with me, we need to finish this product and then we can go have a lobster roll.’ [Kate laughs] I think that it’s not a 9-to-5 thing you can turn off—at least I can’t. Maybe some people can. The business is in the back of your mind always. There’s a lot of sacrifice in terms of working every weekend, almost every day for a very long time. And just trying to get things done.
Can you give me a sense of how fast you’re growing?
We’ve been growing 30% each year. We’re in about 1,000 stores right now with a goal to grow. I think what’s been really good for us is we are distributed by the two largest natural food distributors in the country, and we gained partnerships with L.L.Bean and now Hannaford, which have been great. We have a growing online business, and then we’ve innovated a lot of new products and have more products in the pipeline that I’m really excited about. We started with Bixby Bars, which are the candy bars, then we launched Bixby Bites with the Tory Burch investment, which is a snackable version of the candy bar in a pouch form. That’s really been tremendous for us. We have other products coming down the pipeline. The Bixby Bites was just named a finalist at the National Confectioners Association candy show, which is great because the judges for that are buyers who control over $14 billion of candy sales, so I was told that’s a very indicator for us in terms of our ability to innovate delicious new products that are on trend.
And we are now launching the first bean-to-bar chocolate in the state of Maine. Through an MTI seed grant we have been researching and developing how to make chocolate in small-scale from the cocoa bean to the bar, and that is really exciting. So akin to craft beer, this is craft chocolate. And we’re going to have tours out of our factory for that new sub-kitchen on bean-to-bar chocolate. We are the first in the state to do this.
Are there a lot of chocolate businesses in Maine? I know we have a thriving little specialty food industry here, but I don’t know how much of that is focused on the chocolate and candy market.
There isn’t a lot. There’s more retail confectioners in Maine. There’s not a lot of food manufacturing going on here compared to other states.
Absolutely. I think Massachusetts and Connecticut has thousands of food companies, whereas Maine has only a couple hundred.
There’s so much discussion about how specialty food is a strength of Maine’s. Do you think that’s overblown?
Well, we’re undergoing a third-party audit right now called SQF, which is Safe Quality Food, and if we obtain that certification, we will be the seventh company in the state and the only woman-owned company in the state to be SQF-certified. So I think that number is a pretty interesting indicator. I think there’s a lot of small-scale manufacturing in Maine, but not large-scale.
Have you always had the big vision of growing a large-scale company with national distribution? Or did you start off with a more local idea and after gaining some traction suddenly realize this could be a bigger business?
I went into it with a big vision. I would say we’ve gone more in reverse, since now we’re trying to gain more of a local market. People started showing up at our factory, knocking on the door. I didn’t have a way to welcome them, so we’re doing this bean-to-bar build-out, which is going to be awesome for us and really great for Rockland, too. You know, the chocolate we make from bean to bar, local chefs are looking to use an ingredient, but I see that more as our Maine, regional business, but Bixby Bars and Bixby Bites and all our other products, I’ve always had the intention of being a national pioneer.
Do you have investors?
We don’t have outside investors.
So you own 100% of the business?
My mother and I are the sole owners of the company.
Was not taking on outside investors a conscious choice? Did you think about in your need to scale to get into more markets , there’s probably a lot of capital expenditures… did you think about getting investors to get the cash to scale, and decided against it?
It was a conscious choice. It really depends on the entrepreneur’s goal. I’m a really impassioned entrepreneur who wants a product and business that has a conscious and certain values, and I think there’s many case studies where food businesses—and I’m talking food specifically here—that raise outside money and then go down a trajectory of raising, raising, raising, and then getting acquired, and then the brand that was acquired and everyone worked so hard on ends up being dumbed down or killed off. And so, I’d ask myself, what was the point of all that? A really good example is Green & Black’s chocolate. They were one of the first organic chocolate bars and they were acquired by, I believe, Mondelez Kraft, and most recently they have a new iteration of their packaging and it’s no longer organic. [Editor’s note: Green & Black’s was first acquired in 2005 by Cadbury, which was then acquired in 2010 by Kraft Foods, which in 2012 spun off its snack and food brands, including Cadbury and Green & Black’s, as Mondelez International.] So, they’re just taking this brand halo and completely changing that product, but there’s going to be people who don’t realize it’s not organic any longer, but will think it’s organic. That’s just an example. I’m not saying this is the way everything goes. I think some people do find conscious capital or investors who align with them. But really the end goal if you take on outside capital is to be acquired. I don’t really see any other option because people want an exit. I was looking for a long-term career and want to control my own destiny and being part of this brand I am really passionate about. So that’s why I’ve pursued alternative sources of capital and decided to work really, really hard.
You just alluded to this, but maybe you can expand on it. Do you have a long-term plan or an exit plan?
Not for the foreseeable future, no. I don’t have an exit plan. I have a long-term plan for the business, where we’re going to go, what we’re going to do. I intend on working here for a long time.
What are your long-term plans of the business?
We have some amazing new products that can go into alternative channels. And with SQF certification, we can pursue new types of business that third-party certification is required for, so that’s exciting. I think we’re well positioned to continue on our growth trajectory. I’m really excited about what’s going on in the candy industry, and I think that I can be one of the voices of the natural organic alternatives to the mainstream that’s been out there. If you ever read the ingredients of the mainstream candy products, you really can’t pronounce a lot of the ingredients. Even GMOs. Candy is full of GMOs and I think the Vermont labeling law brought that to light. So I think there’s a new awareness coming to the consumer mindset: Where’s my food’s coming from? Who’s making it? How’s it being made? I think it’s really exciting to be part of the food industry right now and part of this movement to offer cleaner and better options. I think that really aligns with what Maine is about in terms of authentic and natural produced items.
What advice would you give a new entrepreneur that’s preparing to start their first business?
I’d say to really try to research the support networks that are available. In Maine, the programs like MTI and Top Gun, have been tremendous for me. Go after those resources, invest the time in it. I think you reap a lot of benefits that are tangible and intangible. And I’d say make sure you’re ready to work very hard.