Weight Watchers made Erin Baker's business almost overnight, then nearly destroyed it even faster.
"I thought: there are some 45 million Americans not eating breakfast
on a regular basis or some crazy statistic like that. So I spent a day
reverse engineering an oatmeal cookie." -Erin Baker
In 1994, Erin Baker, the founder and owner of Erin Baker's Wholesome Baked Goods, began making healthy breakfast cookies. Oatmeal. Fruit purees instead of butter. Expeller pressed canola oil, the lowest saturated fat oil there is. Egg whites instead of yolks.
"One day I caught a call from a woman asking for the nutritionals—we were selling them naked in a jar at Quality Food Centers [owned by the Kroeger group]," remembers Baker (and yes, that is her real last name). The woman figured out the cookies were only two Weight Watchers points—very low—and word quickly spread.
How quickly? In a year (1999), Baker's then six-year-old-business went from two employees to 100. (At the time, employees were hand-scooping the cookies, so Baker says it would probably equate to about 50 employees now that she has machines.) "I couldn't make them fast enough," says Baker, now 42. "It was awesome. But it was very stressful. You're at a much greater risk for losing control of quality."
Then, Weight Watchers suddenly changed its points system, and at the same time, the Atkins diet—a.k.a. low carbing it—was the craze. In a period of eight months, the Bellingham, Washington-based company lost about 60 percent of its distribution. "It was pretty scary," says Baker. "It was my first big lesson: 'Hello, this can all go away.'"
Baker had to lean up. She cut spending, conducted layoffs, and lowered her own salary. She thinks what saved her is that she'd never borrowed money, and she'd saved "as much money as I possibly could every month," she says. "I've never been a huge risk taker with money," she says. "Owning your own business is risk enough."
Saving was something she'd been doing since the age of seven, when she first started baking and selling cookies (though not these particular ones). "It didn't occur to me not to go into business for myself," says Baker, who grew up the child of entrepreneurs. "When I graduated I didn't think: I need to get a job. I thought: 'How can I make money?'"
The answer came to her at age 23: She could put a bowl of oatmeal in a convenient, ready-to-eat form. (Oatmeal was the only breakfast she liked, but she rarely bothered to eat it.) "I thought: There are some 45 million Americans not eating breakfast on a regular basis or some crazy statistic like that. So I spent a day reverse engineering an oatmeal cookie," she says. She chose a cookie because she wanted something sturdy.
She started with just a mixer in a 4-H kitchen and within six months was selling 20 dozen a week, enough to quit her other two jobs. (At the time she started her company, she also was waiting tables in a pizzeria and running a bed and breakfast.)
Sales grew steadily. But after six years of selling 100 to 200 dozen per week, grossing some $150,000 a year, a local bank still refused her a loan to buy her first piece of commercial equipment.
So she sold her Jeep Wrangler and bought the oven herself—along with a $175 Ford Econoline she used as a delivery van. "There was a hole in the floor but the brakes were good," she says with a laugh. "I wouldn't let anyone else drive it." The experience soured her on borrowing money. She vowed not to need to, and so far, she hasn't.
Her cookies today—the company churns out some 40,000 a day—are all based on her 17-year-old recipe, which she's refused to change. "People kept saying 'Make it high protein, put soy powder in it, whatever.' But I'm not going to make it higher protein if I have to add anything but simple, plain, wholesome natural ingredients," she says.
The company also sells granola and brownie bites, which rang up nearly $10 million in sales in 2010. She says she's projecting a 30 percent increase in sales for 2011.
How did the bakery recover from the loss of Weight Watchers followers (it was never affiliated with the diet) and the onset of Atkins? Two words: New products. Baker introduced granola, mini breakfast cookies, and organic brownie bites. She says they moved away from the diet crowd—"we realized they were fickle"—and market towards "healthy and wholesome." They started going to marathons, half-marathons, and triathlons. (Triathlete magazine recently featured the company's high-protein granola.)
"It's been very successful for us," Baker says. "It's not as explosive a success as the diet industry, but I'm happy to say that these are the types of customers you have for life, rather than just the life of a fad diet."
The growth has come alongside new dramas: A fight with Kellogg over her attempt to trademark the breakfast cookie name. (Baker sank more than $100,000—most of her savings—into the fight, and eventually gave up.) "The fact that everyone is coming out with breakfast cookies just confirms that it's a good idea," she says.) Then there was last year's peanut recall: 36 hours that cost the company some $200,000.
"Every year it's something," says Baker. "But you just have to believe there's a solution to everything that comes along. And if you don't have the answer, today you just need to go home and have a glass of wine, and know that tomorrow [you will]."
Inc. contributing editor COURTNEY RUBIN was for five years a London-based staff writer for People magazine. Rubin, a former senior writer for Washingtonian magazine, has written for the New York Times magazine, Time, Marie Claire, and other publications. She is the author of The Weight-Loss Diaries.