PowerBar Inc.

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PowerBar Inc.

2150 Shattuck Avenue
Berkeley, California 94704
U.S.A.
Telephone: (510) 843-1330
Toll Free: (800) 587-6937
Fax: (510) 843-1446
Web site: http://www.powerbar.com

Wholly Owned Subsidiary of Nestlé USA Inc.
Incorporated: 1986 as Powerfood Inc.
Employees: 250
Sales: $142 million (1999 est.)
NAIC: 31134 Non-Chocolate Confectionary Manufacturing

PowerBar Inc. is a leading producer of energy bars. Energy bars are concentrated high-carbohydrate snack bars designed to provide a quick between-meal calorie boost and usually fortified with vitamins and other substances. PowerBar was the first to market such a snack and still retains a leading share of the growing energy bar market. First aimed at runners and other athletes, PowerBars are now distributed through mainstream supermarkets, with ad campaigns targeting people in all walks of life. The PowerBar product line includes its signature bar, known as PowerBar Performance, and two other bars, PowerBar Harvest and PowerBar ProteinPlus. PowerBar Harvest contains whole grains and nuts. The ProteinPlus bar is geared more towards athletes, and contains 24 grams of protein, plus vitamins, amino acids, and L-Glutamine. PowerBar Inc. also markets a product called PowerBar PowerGel, a concentrated carbohydrate gel which is said to deliver a quick burst of energy. PowerBar has two subsidiaries, PowerBar Foods Canada, Inc., in Toronto, and PowerBar Europe GmbH, located in Munich, Germany. In 2000, Nestlé USA bought PowerBar for an estimated $375 million. The company is now a wholly owned subsidiary whose ultimate parent is the Swiss company Nestlé S.A., the largest food company in the world.

A Runner’s Niche Product

The PowerBar originated with Brian Maxwell, a world-class marathon runner. Maxwell was born in England and grew up in Toronto. By 1977, Maxwell was ranked third worldwide as a marathoner. He was on the Canadian Olympic team in 1980, although the team did not compete because of his country’s boycott of the Moscow games. Maxwell was running a British marathon in 1983 when he suddenly ran out of energy some three-quarters of the way through the race. He became dizzy and weak, and ended the race in seventh place. Maxwell was sure that low blood sugar had contributed to his loss, and he decided to find some way to combat this problem. His idea was to come up with a snack food that he could eat either before, during, or after a race. It would be low in fat, high in carbohydrates, and give the body an energy boost for the extreme stress of distance running. In 1985, Maxwell was still running marathons, supporting himself with a low-paying coaching position at the University of California-Berkeley. There he met Jennifer Bidulph, a 20-year-old sophomore nutrition student and cross-country runner. Maxwell and Bidulph moved in together and began working nights in their kitchen testing recipes for high-energy snack foods. In an interview with People Weekly, Maxwell described the product of their first endeavors as “this sort of horrible glop.” Maxwell and Bidulph wrapped their homemade bars in plastic and took them to races for runner friends to test. Despite mixed success with their early efforts, Maxwell and Bidulph persevered. By 1986, the couple thought they had perfected the recipe, a mixture of oat bran, maltodextrins, and milk protein sweetened with fructose and fortified with vitamins, minerals, and amino acids.

Now it was time for a serious product launch. Maxwell, Bidulph, and a Berkeley chemist together came up with a business plan which they peddled to potential investors. They asked for backing of $250,000. But people in the food business thought this amount was too low. Maxwell told Success magazine that investors advised him to rewrite the business plan and ask for $2 million or $3 million if he wanted serious consideration. Instead, Maxwell raised the money himself. He had appeared in an advertisement for Xerox’s Marathon brand copiers and netted $50,000. With this nest egg, plus $5,000 from his parents, Maxwell and Bidulph began producing PowerBars commercially. The couple invested $15,000 in Mylar wrappers and paid a local contractor to make the bars.

Maxwell and Bidulph continued their grass roots marketing efforts, pushing their PowerBars at athletic events. But they had to overcome some difficulties with production. The quality of the bars the contractor produced was quite variable. The bars frequently clogged the machinery, because the low-fat recipe lacked enough oil or fat to keep the equipment lubricated. Maxwell told People Weekly that he and Bidulph tried to ease things at the contractor’s plant by slipping each of the workers $20 on the days the energy bars were in production.

However, the Maxwells (they married in 1988) were able to afford their own plant within a few years of the product launch. The couple had worked tirelessly to promote PowerBars themselves, passing out samples at races along with coupons and mail-order information. In 1987, the U.S. cycling team in the Tour de France asked PowerBar to sponsor it. The athletes touted the bars on television, and CBS Sports ran a short profile of the young company. The mail-order business took off at that point, as well as sales through cycling shops.

Wider Marketing Efforts in the Early 1990s

By 1989, sales of PowerBars had gone so well that the company was able to afford its own production facility. The new factory used machinery that Brian Maxwell himself designed. This alleviated the sticking problems of the earlier equipment. The company promoted itself primarily through sponsorship of races and other sporting events. It advertised in fitness journals and sold PowerBars at places where athletes shopped.

The company grew by as much as 40 percent a year in the early 1990s. Sales for 1994 were approximately $30 million. The company began to advertise more extensively. It ran ads in about 80 different sports-oriented publications by the mid-1990s. But the product’s quick success and widening brand recognition led competitors to bid for the energy bar market as well. In 1994, Gatorade, well known for its sports drink, brought out a Gator Bar. The much larger company had deep pockets to fund advertising, and it managed to wrest away sponsorship of an amateur athletic competition, the Ironman Triathlon, from PowerBar that year. Many other smaller competitors had also flocked to the market. As the Maxwells knew, anyone with a kitchen and as little as $50,000 could bring out energy bars. Some companies produced imitations of the PowerBar. These were similar bars marketed to athletes under evocative names like BTU Stoker. Others tried to differentiate themselves from PowerBar. The Clif Bar, produced by Kali’s Sports Naturals Inc., also of Berkeley, California, described itself as both all-natural and good-tasting, two qualities the PowerBar was not known for. Its originator claimed he invented the Clif Bar after eating five PowerBars on a bike trip and finding he couldn’t stand any more.

Competition provoked PowerBar to expand its flavor range. The company put out a berry flavor in the mid-1990s and introduced peanut butter and oatmeal raisin flavors as well. It spent $8.6 million on advertising in 1996. In addition to print ads, the company began airing television commercials in several large urban markets. The TV spots featured football player Steve Young.

As PowerBars gained popularity, the energy bar category began to elbow into other, broader markets. Though the PowerBar was geared toward athletes, by 1996 it was finding its way into mass market distribution channels—supermarkets and drugstores. There it appeared to be a healthy alternative to the candy bar so traditional candy bar makers took note and began putting out their own energy bars. While Hershey Foods Corp. and cereal maker Kellogg Co. were reported to be testing their own energy bars in 1996, giant candy company Mars Inc. began limited marketing of its new player, called V02Max. Mars distributed it at first only in health food stores and sports shops in California. Print ads in sports magazines claimed V02Max was clinically proven to supply antioxidants, which helped the body to recover from athletic stress. This seemed to combine the best of two worlds. The energy bar was from a known candy manufacturer, yet it came accredited as an athletic performance booster.

Company Perspectives:

PowerBar and its employees take enormous pride in manufacturing, shipping, marketing, and providing customer and administrative support for the world’s best energy bar. PowerBar operates under eight principles that guide our actions and the kind of company we want to be. PowerBar Principles: 1. We value people —our team members, our consumers, our business partners, and our communities. 2. Honesty, openness, integrity, and humility are the foundations of our success. 3. Innovation, creativity, and positive energy add value to every activity. 4. We value team member participation, learning, diversity, and teamwork. 5. We believe in rewarding and recognizing team member for performance. 6. We recognize the importance of balance between work and personal life. 7. We value the environment and will do everything to minimize our impact on it. 8. We recognize that everything is subject to change —except our principles.

Pressure to Perform in the Late 1990s and Beyond

Sales continued to gallop for PowerBar, reaching an estimated $97 million in 1997, up $15 million from the year previous. But PowerBar’s market share fell as competition intensified. The energy bar market niche was exploding. Sales of energy bars in grocery stores grew almost 40 percent over 1997. The entire market was thought to be worth $200 million. In 1996, PowerBar led the energy bar market with a 70 percent share. But a year later, its share had fallen to 52 percent. Surprisingly, its chief competitors were not Mars or Gatorade. Both these companies shelved their energy bars in 1998. The Clif Bar almost doubled its sales over 1997, giving it the number three market spot. And another small company, Bio-Foods Inc., took the number two spot. Its Balance Bar, introduced in 1992, had sales of $42 million in 1997. It marketed its bars with celebrity endorsements and by tying into the faddish high-protein Zone diet.

The stream of new contenders in the energy bar category whittled away at PowerBar’s share. The company tracked a month-by-month decline of its clout and made several marketing decisions to try to turn things around. The Maxwells prepared for possibly taking the firm public, selling a 19 percent share of PowerBar Inc. to two private investment firms. The sale raised about $20 million. Then PowerBar diversified its product line and changed its advertising tactics. In 1998 it brought out a new bar called PowerBar Harvest. This was a crunchier, more granola-like bar, that was advertised with the tag line “for life’s daily marathons.” The Harvest bar was still aimed at people on the go, but the company promoted it for less grueling activities than biking and marathon running, such as hiking and camping. The Harvest bar’s improved texture set it against competitors like the Clif Bar, which was promoted for its appealing taste.

PowerBar brought out another new bar in 1998, the PowerBar Protein Plus. This one was keyed more closely to tough athletics than the original PowerBar. It had increased levels of protein, contained vitamins and minerals, and also had added methionine and so-called free-form glutamine, substances that were said to repair and build muscles. By 1999, the PowerBar product line had expanded to include such products as PowerBar Essentials, which ran under the tag line the “energy bar for mind and body.” It contained herbal extracts said to enhance mental performance. PowerBar also brought out some non-bar products. It launched a sports drink in 1999, PowerBar Perform, which came in two bottle sizes. It also marketed Perform Plus, a powdered form of the drink. These came in fruit flavors, fortified with time-released carbohydrates and mineral additives like magnesium and chromium. Its competitors also brought out wider arrays of bars and drinks. Balance Bar, trailing PowerBar in sales by about $20 million, brought out a Total Balance drink in 1999. Its drink, however, was aimed more at people wanting a quick meal or pick-me-up. Like the popular Slim Fast drink, Total Balance was supposed to be able to substitute for a full meal.

In addition to bringing out a wider array of products, PowerBar shelved its earlier ad campaign for something a bit more lighthearted. The company spent at least $12 million on a television campaign with the tag line “don’t bonk.” The ads were aired in major markets, primarily during sports shows. The spots showed athletes in competition, with the ones eating PowerBars performing effortlessly, while the hapless PowerBar-less competitors tripped, collapsed, or otherwise “bonked”—a runner’s term for a sudden loss of energy. PowerBar’s market share began to reverse its fall as soon as the ads began running in 1999. The company also continued to advertise in other ways, signing on more sports stars as sponsors, such as Nascar driver Dale Jarrett and the National Basketball Association’s rising player Jason Kidd.

PowerBar still claimed the leading spot in the energy bar market into 2000, but it was clear that competition would not ease up. Balance Bar, the number two player, was acquired by the major food company Kraft, and Gatorade declared new plans to launch an energy bar. In early 2000, PowerBar announced that it was being acquired by Nestlé USA, the U.S. subsidiary of Swiss food giant Nestlé S.A. The Glendale, California-based Nestlé USA dwarfed PowerBar, with $8 billion in annual sales and 19,500 employees. Nestlé USA was estimated to have paid $375 million for the small Berkeley company. By 2001, PowerBar was said to have about 40 percent of the energy bar market. This was a pivotal time for PowerBar and for the energy bar market as a whole, as the rapidly growing category sorted itself out into a battle between large and experienced food makers.