OWNER'S MANUAL

How to Turn a Commodity into a Unique Business

Here's how one founder turned popcorn--yes, popcorn--into a multi-million dollar company.
Doc Popcorn founders

Courtesy of company

Rob and Renee Israel, founders of Doc Popcorn, at their first location in 2003.

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How can you take a commodity product in an extremely competitive industry and turn it into a multi-million dollar business?

Here's another in my series in which I pick a topic and connect with someone a lot smarter than me. (Check out some previous installments at the end of this article.)

This time I talked to Rob Israel, co-founder (with his wife Renee) of Doc Popcorn, a popcorn chain with over 70 units in 30 states.

Fast food, fast snack, whatever you want to call it--that's an extremely competitive industry. So why popcorn?

Popcorn is a $1.7 billion industry with over 17 billion quarts consumed every year. It's a hugely popular snack.

If you think about the 1950s, hamburgers were everywhere, yet Ray Kroc still launched McDonald's: simple, efficient, affordable, smile-creation model, fantastic business based on a commodity. The same is true with coffee: Starbucks has done remarkable things with what was previously considered a commodity.

The food commodity dynamic has taken place in almost every area.

True, but those examples are based on doing something different with a commodity, either with the product itself or the business model.

Yes, and we took the same approach: commodity done differently.

Freshly served popcorn tends to come in two basic formats: the artificial stuff in theaters that's heavily salted, and on the other side the indulgent candy-coated stuff that's tasty and indulgent... but after a few kernels, you're done.

We thought there was a way to be natural and be indulgent. We decided to do popcorn like it's never been done before, in an environment as beautiful as your kitchen, using great spices and wonderful ingredients. Our goal is to set a new standard in a commodity product.

From what I understand, though, your first steps were a little, um, hesitant.

After a lot of development and emptying a few office buildings--turns out putting cheese in a popcorn popper creates an awful lot of smoke--we opened our first location in Broomfield, CO.

The first day we're all excited, my family is helping out, my dad is there, we start popping at 7 a.m. I'm popping our cinammon flavor, the aroma is fantastic... and nobody shows up. I'm looking at my dad thinking, "Oh no..."

At 10 a.m. someone bought a bottle of water. At 11 a.m. we sold two bags. By 1 p.m. people were lined up.

No one wants popcorn at 8 a.m. The first four hours of my business life were absolutely miserable. That's how naive we were--excited, sure, but also really green.

You're pretty open about the early mistakes you made.

Why not? Trying things is the only way to learn.

A lot of people fall into the ready, aim, aim, aim, syndrome and never shoot. I'm a shoot, shoot, shoot, figure it out later kind of guy. Fortunately, Renee pulls me back when I need it.

Take our branding. Early on we used a stock white bag with a window and a label. We hung up signs and created basic branding to test the product. Once we got feedback, we decided to go with a black bag.

The problem was, black is trendy but black is not "fun."

Renee finally said, "The three key qualities of our product are high quality, all natural, and fun. Yellow and green best conveys those qualities."

It took us five years to get our branding right. That's okay. Try and learn, then try and learn some more.

The product lends itself to a variety of different sales and distribution models, which is both an advantage and a challenge.

Absolutely. We can be in high-traffic venues, we can do e-commerce, we could distribute to places like Whole Foods. It was tough to decide which path to pursue first. We've done it all, but we decided franchising was best for us: One, we like to coach entrepreneurs, and two, it gets our concept out much more quickly than growing organically.

Franchising also makes sense because our franchisees don't require a lot of space or capital: You can be successful with as little as 100 square feet.

Every growing business is in a race for space. We're working to be in prime locations before the eventual competition--because every successful business will eventually attract competition--starts trying to bite at our heels.

Let's go back to making a commodity different. You have nine flavors. I've tried them and they're all very good, but in a retail environment, there has to be more.

Customers love our popcorn when they taste it, so the key is to get them to try it for the first time. We do that by bringing popcorn to places no one has seen it before, in a clean, bright, attractive environment, served by smiling professionals--and don't forget the aroma of fresh popcorn is an incredible attraction and advertisement.

That approach has allowed us to transform a commodity into something special, both in terms of flavor and the overall experience.

And, really, isn't that what every successful business does?

More in this series:

Last updated: Nov 29, 2012

JEFF HADEN | Columnist

Jeff Haden learned much of what he knows about business and technology as he worked his way up in the manufacturing industry. Everything else he picks up from ghostwriting books for some of the smartest leaders he knows in business.

The opinions expressed here by Inc.com columnists are their own, not those of Inc.com.



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