The $600M Protein Bar Founder is Back Again | Peter Rahal Interview

RX Bar's path to $600M (0s)

• Peter Rahal, the founder of RXBAR, started the company in his mom's basement with $5,000 and sold it five years later for $600 million (8s).
• Rahal and his elementary school friend, Jared, each invested $5,000 to start the business (48s).
• The idea for RXBAR came from an article on Inc.com that Rahal read and forwarded to Jared, which discussed low-cost ways to start a company, including making a nutrition bar (1m18s).
• Rahal had a background in food, which helped with the supply chain side of the business, while Jared was more levelheaded and organized (1m50s).
• The two founders started making bars in Rahal's mom's basement and took advantage of the emerging CrossFit trend as a distribution channel (2m44s).
• At the time, the traditional food retail market was highly competitive, but the CrossFit market was relatively uncompetitive and growing rapidly (3m1s).
• Rahal and Jared saw an opportunity to build distribution in the CrossFit market and make their product at home (3m22s).
• They took a risk and started the business, figuring things out as they went along (3m29s).
• Rahal is now working on a new protein bar, called the David bar, and is looking for new opportunities and trends in the market (59s).
• The founders of RXBAR started with a small setup, using a 5-gallon bucket and later a 20-quart vertical mixer, to mix and package their products, but they had to figure out how to form the products and didn't know what they were doing at first (3m40s).
• They faced challenges and people making fun of them, but they learned not to care what others think and to surround themselves with supportive people (4m2s).
• Peter Rahal was doing CrossFit and saw it as a distribution channel, taking his products to the gym in Tupperware and gathering consumer insights from the gym owners and members (4m36s).
• He built relationships with gym owners and started selling his products at the gyms, thinking that if it worked at one gym, it could work at many others (5m0s).
• The first RXBARs were made to order, so they were always super fresh, which helped with customer adoption, and the initial customer base was paleo people who were familiar with Larabars (5m28s).
• Another entrepreneur, from FitAid, also used CrossFit as an initial distribution channel, giving gyms mini fridges stocked with his products, and eventually reached $20-30 million in sales per year (5m58s).
• RXBAR merchandised on top of FitAid's refrigerators and expanded to other distribution channels, but found that their brand didn't work as well in convenience stores and grocery stores with regular competition (6m24s).
• The founders tested their products in various markets, gathering data on convenience stores, grocery stores, and other places of distribution, but found that their velocities were much higher at CrossFit gyms, with sales of around 80 bars per week (6m55s).
• The initial plan for the protein bar business was to focus on distribution in every CrossFit gym in the country, as the local grocery store was only visited once or four times a week, and the goal was to meet customers where they shop. (7m3s)
• The strategy was to gain scale through early adopters in the market and then figure out how to expand to a broader audience once commercially produced and out of the kitchen. (7m22s)
• The founder of RXBAR, Peter Rahal, had previously run a company called The Hustle, which had 2 million subscribers and generated revenue through advertising, but the advertising business model was not very profitable. (7m43s)
• To explore alternative revenue streams, the HBOT team researched various ways to monetize a business and compiled their findings into a document called the Business Monetization Playbook, which is available for free in the episode description. (8m9s)

Branding to solve a problem (8m32s)

• The company's revenue grew rapidly, from $2 million to $7 million and eventually to $160 million, with the rebranding being a key factor in this growth (8m34s).
• The rebranding was done to address the issue of the old branding not working in the mass market, and it was timed with the company's expansion into new retailers (8m57s).
• The company used profitable sales to finance its growth, without relying on a big equity check, and instead used a line of credit personally guaranteed by the founder's parents for $400,000 (9m50s).
• The company started with an initial investment of $10,000, with each founder contributing $5,000, and was able to scale quickly due to its profitable sales model (10m15s).
• The rebranding was done by an agency called Scott Victor, but the founder emphasizes that the responsibility for the rebranding's success lies with the brand owner, who must articulate the problem to be solved and communicate it effectively to the agency (10m48s).
• The founder wrote a brief for the agency that outlined the problem of the old branding, including the issue of the name "RX" having different meanings in different cultures, and the need for a new design that would minimize the logo and name and emphasize the product's minimal ingredients (11m24s).
• The new design featured a small logo and name, and emphasized the product's minimal ingredients, allowing the company to make claims such as gluten-free, soy-free, and dairy-free (12m8s).
• The key factor that mattered when sampling a product was the communication of its value, specifically mentioning that it contained three egg whites, two dates, six elements, and four cashews, which created a lot of consumer surplus (12m28s).
• The product had 12 grams of protein, which was less than the market average of 20 grams, but leading with egg whites as the first ingredient created a hierarchy that associated the product with premium quality and value (12m43s).
• The product's branding and design brief emphasized the importance of communicating value and surplus, and avoiding being positioned as paleo, which was seen as a "death trap" and a "laziness trap" (13m28s).
• The designer played a crucial role in extracting and synthesizing the key factors from the brief, and was not just a designer, but also a brand strategist (13m36s).
• The importance of defining problems and bringing in an agency to help with design and branding was emphasized, and the value of having a clear brief and strategy was highlighted (13m47s).

David Protein (14m3s)

• The new protein bar brand, named "David," is introduced by the founder of RXBAR, featuring appealing branding and copywriting. (14m5s)
• The bar is positioned as having more protein per calorie compared to leading brands like Quest, with 26 or 27 grams of protein and roughly 150 calories. (14m25s)
• The product is marketed with the tagline that it has the protein of a meal but the calories of a snack, emphasizing its nutritional benefits. (14m31s)
• The website includes a graph comparing the protein density per calorie of David to other brands, even claiming it surpasses Cod in protein density. (15m19s)
• The company's mission is to improve health by providing protein, with future products potentially extending beyond food to include other health-related tools. (15m32s)
• The founder expresses a desire to innovate in the nutrition space, focusing on delivering fundamental health benefits in enjoyable ways. (15m55s)

Idea 1: Differentiated vasodilator (16m22s)

• The discussion highlights the importance of studying history in business to identify patterns and potential opportunities, using the example of the NO2 product that revolutionized the supplement industry in the early 2000s. (16m34s)
• There is a perceived opportunity to commercialize products focusing on the broader benefits of healthy blood flow, particularly for men, as the current market is heavily oriented towards bodybuilding. (17m34s)
• A comparison is made between current vasodilator products and the potential to reposition them to appeal to a different audience, similar to how other brands have differentiated themselves in saturated markets. (19m2s)
• The strategy of differentiation through design is discussed, emphasizing the importance of identifying competitive categories and introducing valuable novelty to stand out. (19m13s)
• The approach involves making a category appear competitive while finding ways to differentiate effectively, suggesting that perceived competition can be leveraged to introduce unique products. (19m46s)
• The protein bar market is an example of a market with a low barrier to entry, but it's actually less competitive than it seems, with only a few major players and a long tail of smaller brands (19m57s).
• To find opportunities in a perceived competitive market, one needs to be counter-consensus and look for something that seems one way but is actually another (20m40s).
• People often think the protein bar market is highly competitive, but when asked to explain, they can't provide details about the competitors or the market, and often aren't even consumers of the category themselves (20m56s).
• This lack of understanding and dissatisfaction with existing products can be an opportunity to bring new people to the category (21m29s).
• To research a new market, such as the Vasa dilator market, one should look at both the internet and cultural reputation, as well as the actual literature and scientific studies (21m58s).
• When researching the cultural reputation, one should look at the market landscape and determine if there's a stigma or reputation that can be overcome (22m39s).
• Defining the market and understanding the target audience is also crucial, such as defining the Vasa dilator market as bodybuilding-oriented (23m3s).
• Peter Rahal mentions that Peter Thiel talks about the best investments being ones that seem like bad investments but are actually good, and vice versa (20m28s).
• To find opportunities, one should ask questions and look for dissatisfaction with existing products, such as taste, texture, price, or other factors (21m2s).
• When evaluating a market, it's essential to study the market's reputation and the literature surrounding it, and then triangulate those findings to identify potential opportunities, especially in areas where there's a contrarian view (23m15s).
• The success of companies like Lucy, which offers nicotine gum, demonstrates how overcoming cultural stigma and leveraging science can lead to significant growth, even if it takes many years (23m47s).
• Peter Thiel's approach to consumer investing, which involves identifying areas where people disagree or have misconceptions, can be an effective way to make money in the business (24m24s).
• Examples of products that have benefited from this approach include kombucha, protein bars, collagen, and creatine, which were initially met with skepticism but have since gained popularity (24m33s).
• To identify potential opportunities, it's helpful to ask friends and gauge the cultural reputation of a product or idea, as this can provide insight into areas where people may be disagreeing or misunderstanding the benefits (25m10s).
• When evaluating investment opportunities, it's essential to look for areas that are on the fringes or where people disagree, and then apply a first-principles perspective to identify potential benefits (25m22s).
• However, it's also important to recognize that just because an idea can be justified, it doesn't mean it's a good investment, and having good judgment is crucial in making informed decisions (25m54s).
• Categories that may be less desirable for investment include those that are overly competitive or trendy, such as fast-following products, and it's often better to be the first to market with a unique or controversial idea (26m8s).
• To win big, it's essential to be willing to take risks and invest in areas that may be disagreeable or unpopular, rather than following the crowd (26m22s).
• The first company to dominate a new market category typically captures a significant portion of the profits and revenues, often around 75% of the profits and 50% of the revenues. (26m32s)
• Historical analysis is crucial in understanding consumer markets, as it shows that early leaders in new markets, such as kombucha and collagen, tend to secure the majority of the market share. (26m44s)
• Studying history involves reviewing past trends, financial statements, and personal experiences to understand the evolution of market categories and the introduction of new products. (27m5s)
• There is a lack of literature on the importance of historical context in the success of consumer brands, making it necessary for individuals to compile their own insights and experiences. (27m43s)

Idea 2: The coffee of sleep (27m53s)

• The concept of a "night occasion" is not well-defined, unlike the morning occasion, which has a clear set of rituals and products associated with it, such as coffee, waking up, sunlight, and morning supplements (27m53s).
• The sleep hygiene and sleep occasion are gaining importance, but there isn't a dominant product or brand that owns this space, similar to how coffee dominates the morning occasion (28m31s).
• There is a huge opportunity for a brand to become the "coffee of sleep" and own the night occasion, despite some obstacles (28m51s).
• The idea of occasion-based products and services is crucial, as seen in how champagne dominates celebration occasions and RX bar dominates the on-the-go occasion (29m9s).
• Sleep-related products and supplements, such as sleep packs, are available, but the real opportunity lies in creating a product that is the equivalent of coffee for sleep (29m48s).
• Some brands, like Moon Brew and Beam, are working on sleep-related beverages, with one containing melatonin and the other not, highlighting the controversy surrounding melatonin (30m4s).
• The use of melatonin is a topic of debate, with some considering it bad for you due to its exogenous hormone properties, while others see its antioxidant benefits (30m15s).
• A Chinese company, possibly ByteDance or the owner of WeChat, presented a philosophy of dominating every moment of the day with a product or app, highlighting the importance of identifying and filling gaps in the market (30m52s).
• This approach can create new opportunities, as seen in how Snapchat redefined the use of photos for messaging instead of memories, turning a seemingly crowded category into a wide-open opportunity (31m56s).
• Empathizing with consumers and understanding their needs is crucial for identifying gaps in the market and creating successful products (32m13s).

Idea 3: Continuous Testosterone meter (32m28s)

• The concept of a continuous testosterone monitor is discussed, highlighting the interest of American males in tracking their testosterone levels. The feasibility of such a device is questioned, but there is a belief that there is significant demand for it. (33m29s)
• The idea is compared to existing continuous glucose monitors, with a mention of an investment in a company called Levels, which provides such glucose monitoring technology. (34m45s)
• There is a discussion about the trend of overanalyzing health metrics, inspired by figures like Andrew Huberman and Brian Johnson. It is suggested that this trend may lead to a return to focusing on basic health fundamentals rather than excessive optimization. (35m31s)
• Brian Johnson, a tech billionaire, is noted for spending $2 million annually on his health, participating in the "Rejuvenation Olympics," which ranks individuals based on their blood work. A story is shared about a substitute teacher who leads a simple lifestyle and ranks higher than Johnson on this list, emphasizing the value of simplicity in health. (36m11s)
• Emotional regulation and stress management are highlighted as potentially more important than obsessing over health metrics, suggesting a balanced approach to health and wellness. (36m45s)

Idea 4: New religion (36m58s)

• The discussion explores the concept of creating a new form of religion or community that provides guidance on morality and ethics, suggesting that traditional religions lack innovation due to economic constraints and a lack of charismatic leaders. (36m58s)
• It is proposed that there is a need for innovation in religious practices, and the idea of someone taking on a leadership role similar to Jesus is mentioned as a potential opportunity. (37m41s)
• The concept of Shabbat is highlighted as an example of a meaningful ritual, emphasizing the value of disconnecting from technology and expressing love and appreciation for others. (38m1s)
• There is a debate about the financial aspects of religion, with some arguing that religious institutions, like mega-churches, are highly profitable, while others suggest that the true wealth lies with those who are discreet about their financial success. (38m22s)
• The idea of "unbundling" religion is discussed, suggesting that elements such as community, rituals, and philosophies could be separated and offered individually, similar to how other organizations like the NFL or SoulCycle provide community and rituals without religious doctrine. (39m17s)
• The potential for creating a new "bundle" of religious or philosophical practices is considered, drawing from various traditions such as Buddhism, Judaism, Islam, and Christianity to create a comprehensive approach to life. (40m1s)
• Peter Rahal has an academic point of view when it comes to operating a business, which is considered unique as many entrepreneurs tend to rely on their gut feeling rather than thorough analysis (40m22s).
• Despite being a self-described "terrible student," Rahal spends a lot of time studying and believes that this approach has been beneficial for him (40m50s).
• Rahal's approach to business involves carefully considering the inputs that will dictate the outputs, and he believes that being clear on this aspect is crucial for success (41m15s).
• In contrast, some successful entrepreneurs may appear to be less introspective and analytical, instead focusing on moving forward and charging ahead (41m51s).
• Rahal's approach resonates with those who think similarly, as it provides a framework for understanding why certain decisions or strategies were successful (41m40s).
• Rahal's method involves looking back and studying the past to identify patterns and frameworks that can be applied to future decisions (41m55s).

Why do this again? (42m3s)

• The discussion explores the motivations behind starting a new venture after achieving significant success, such as creating a $600 million protein bar company and acquiring a comfortable lifestyle. (42m3s)
• Entrepreneurs are categorized into two types: those who seek new challenges and variety, and those who prefer to refine and master their existing expertise. The latter group, referred to as "speedrunners," are driven by a desire to apply their mastery in the same field. (42m25s)
• There was an attempt to explore different industries, such as synthetic biology and biotech, which were found to be fascinating but ultimately too complex to master without a deep background. This led to a realization of personal limitations and a preference for working within familiar areas of expertise. (43m3s)
• After a period of self-reflection and the expiration of a non-compete agreement, a clear vision emerged for a new project in the same industry, leading to acceptance of being known primarily for expertise in protein bars. (44m1s)
• The decision to pursue this new venture is driven by the recognition of a significant opportunity to expand the market and enhance customer satisfaction. (44m42s)
• The individual is actively involved as the CEO, working hands-on in the office and manufacturing, despite having a young family and substantial financial security. (44m52s)

How to survive the first year after exiting (45m28s)

• The idle mind can be a "Devil's Playground," and having an idle mind for the past few years was considered "idle relative" to the current state, but still made an effort to stay busy (45m30s).
• The need to produce, make stuff, have stress, be challenged, and take risks is essential, and having responsibility makes for a better person (45m45s).
• Being a role model for the son is crucial, and it's necessary to be in an office, sacrificing, and working hard (45m52s).
• The past few years were unfulfilled, and being an investor was boring, despite having more freedom of time and responsibility (46m10s).
• A Reddit post by Jake, founder of Movement Watches, who sold his company for $100 million, expressed feeling lost and lonely despite having no financial worries (46m41s).
• Jake's post emphasized the importance of having purpose in life to be happy, whether it's raising a family or having a career, and that struggle and pain are necessary for growth (47m27s).
• The idea that one must work, not just for money, but for oneself, is essential, and struggle and pain can either be chosen or will find a person through depression and loneliness (47m42s).
• An article on Medium about Peter Rahal was mentioned, which he considered sensationalized and a misrepresentation (48m2s).
• The article's portrayal was predicted by Sean, and Peter Rahal believes it was a projection by the author (48m16s).
• Peter Rahal was featured in an article that portrayed him as an unhappy, young, rich guy who didn't know what he was doing in life, but he claims the article was inaccurate and that he is actually introverted and enjoys being alone (48m31s).
• The article mentioned that Peter bought a fully furnished house for $19 million in Miami, where he splits his time with Chicago, and that he chose Miami due to its lack of income taxes (48m52s).
• Peter owns a Ferrari and a Vespa, and has a housekeeper who keeps his seven-bedroom house spotless, although most of the rooms are usually empty (49m1s).
• Peter believes that the article's portrayal of him was a result of the author projecting her own feelings onto him, and that he never expressed unhappiness with his life (49m35s).
• Despite the inaccuracies, Peter thought the article was good and provided some cool insights into his background and business process (49m56s).
• Peter and another entrepreneur, Sam, have discussed the process of selling their companies and the relief that comes with it, which can be more significant than the initial excitement (50m6s).
• Peter recalls that after selling his company, he had to adjust to a new financial reality, going from a $75,000 per year salary to a much larger sum, which took him about a year to fully comprehend (51m1s).
• Peter advises others going through a similar experience to take their time to understand their new financial situation and to be aware of their own financial literacy (51m15s).
• Peter attributes his initial difficulty in adjusting to his new wealth to his low self-esteem, which stems from being dyslexic, and not feeling like he is special or great (51m33s).
• Miami can be a challenging place to live for young, newly rich, and single individuals due to the lack of discipline it demands, but it also offers opportunities to learn from high-network people. (51m59s)
• The city's focus on showcasing the outcome rather than the process of building wealth can be detrimental to wealth management, as it doesn't provide insight into the actual process of achieving success. (52m16s)
• When it comes to managing wealth, there are different options and approaches available, such as working with companies like Goldman, which can provide guidance but also come with fees. (52m36s)
• It's essential for individuals with newfound wealth to figure out how to manage their money immediately and consider their risk appetite when choosing an approach. (52m46s)
• Peter Rahal aims to help individuals with wealth management by providing guidance on how to think about their finances and avoid wasting time. (52m59s)

How big is David going to get? (53m3s)

• The protein bar market is estimated to be worth around $8 billion, and there is a significant opportunity to convert non-protein bar consumers into regular users, which could lead to substantial growth. (53m9s)
• Achieving a billion dollars in top-line sales is seen as a clear path to success, with the enterprise value depending on growth and other factors. (53m36s)
• There is a discussion about the importance of being genuine about one's ambitions and not shying away from wanting success and material gains. (54m0s)
• It is suggested that experiencing adversity can shape character, and many people are perceived as not having faced significant challenges. (54m48s)
• Despite having the means to live comfortably, there is an emphasis on engaging in physical exertion as a way to voluntarily introduce adversity into one's life. (55m47s)
• The priority hierarchy mentioned includes the company, family, and personal health, with health often being the first to be neglected. (56m1s)

Remote v in-office (56m18s)

• The company was initially started as a remote operation right after COVID, which is now seen as a mistake because it is considered irreversible. (56m35s)
• For a high-performing company that aims to win, having an in-office setup is deemed necessary, as it makes work more enjoyable and fosters friendships among colleagues. (56m42s)
• The social needs of the speaker are fulfilled through interactions with work colleagues, reducing the need for socializing outside of work. (56m55s)
• The speaker expresses appreciation for the friendships formed with colleagues, describing them as some of the best friendships. (57m9s)
• The speaker is recognized for being truthful, self-aware, and having a hardcore approach to work, which is considered rare and sometimes unpopular in the current climate. (57m35s)
• The speaker's approach is seen as empowering to others who also want to prioritize work and strive for success. (57m45s)