Bowing to his father's wishes, for three years Kenny Kramm sold exclusively to independent pharmacies, touting his product as a sling to wield against Goliath. "We actually turned down the chains -- it was stupid, stupid, really stupid," he says. "I didn't want to upset my father and I didn't want to be screamed at by our independent customers for selling out. But the independents were going out of business, and I didn't want the company to die because I made a bad decision."
So in 1999 Kramm, whose confidence had been growing along with his company's sales, decided to target the behemoths with or without his father's blessing. To make it easier on his father he began with a local chain -- Giant, now owned by Royal Ahold -- dragging Harold along to meetings with their new customer. "My father had watched Giant grow, which made it easier to get used to the idea," says Kramm. "And when he saw that we sold 150 sets in one hour, it started to make sense to him."
Standing beside his son, Harold Kramm -- still dapper at 73 -- shrugs gently. "At least the independents had a few years to get it established," he says.
The son's strategy is paying off: FlavorX has grown at a five-year rate of 786%, landing on the Inc. 500 list in 2002; it's been profitable every year but one. "Kenny has made this thing into something so much bigger than I had ever imagined it could be," says Harold Kramm. "He is a very talented boy."
FlavorX moved out of the Center Pharmacy building in 1998, but it didn't go very far: The company's headquarters are just five miles away from the family business. The two places are even closer in spirit, displaying on their walls some of the same snapshots, mottoes, and posters, including one proclaiming 14-year-old Sarah's anointment as Miss Teen USA for Maryland. Kramm's office is a gallery of portrait-sized family photos and homemade artworks. ("Hadley does a lot of handprints," says the CEO.) On his desk rests a memo pad emblazoned with childish drawings of one girl in a wheelchair and another clutching a shopping bag. "From the Dad of Sarah and Hadley" reads the legend across the top.
Today the dad of Sarah and Hadley is conferring with the uncle of Sarah and Hadley -- a.k.a. Woody Neiss, the company's chief financial officer and Shelley Kramm's youngest brother. Neiss, who four years ago left a well-paying job at PeopleSoft to enlist in the family mission, has just returned from a three-day trip to Australia, where he accepted the Thomas Alva Edison Award for Innovation from the Young Entrepreneurs Organization. The trophy -- a century-old phonograph, one of the originals peddled by Edison's company -- is fragile and bulky and clocks in at 60 pounds. Neiss carted it home on the plane himself so he could present it to FlavorX's 40 employees at the Monday-morning staff meeting. "I couldn't wait," he says gleefully.
"All of my decisions, at that time and since, were influenced by Hadley's situation. That made me much more aggressive."
What makes the FlaxorX model innovative is not the idea of flavoring medicine -- a practice that has been applied, unsystematically, by other pharmacists in the past -- but the idea of choice. Children are able to select from a menu of 42 flavors. The options include such appealing flavorings as strawberry cream, root beer, and chocolate silk pie; pharmacists pipette in the recommended amount. "Choosing their own flavors makes the process fun, and once the child has made the choice, he's invested in it and is much more likely to take the whole prescription," says Kramm. "He'll take it even if tastes crappy because he doesn't want to admit to his mother he was wrong."
Stores pay on average $800 to $1,000 each to join the program, which gets them the 556-page formulary, in-store marketing materials, and a rack of small glass vials filled with plummy-purple grape and pearly peaches 'n' cream. Refills cost about $10 a bottle. "We're like Gillette," says Neiss. "We make our money off the reorders."
The company has been expanding its line: In 1999 it introduced flavorings for veterinary medications (Kramm tastes all those too), and it's developing pour-on flavors for special-diet dog and cat food. In the human realm FlavorX recently launched PediaPop -- a lickable, flavored electrolyte replenisher for kids with diarrhea. Far more ambitiously, Kramm and Neiss are talking with a small drug company about creating a branded line of over-the-counter medicines that would apply the Baskin Robbins methodology to off-patent medicines. "We would label it FlavorX acetaminophen, for example, and with each bottle there would be different flavor packets you could buy," says Neiss, an animated guy who is caf to Kramm's decaf. "You could just pick a packet off the rack and add it yourself."
"It would be silly to sell when we're at this high-growth stage. Right now the grand scheme is to go public in two to four years."
FlavorX runs lean, generally developing new products with deeper-pocketed pharmaceutical companies. The company also outsources manufacturing and deploys a young, chiefly part-time sales force to talk up the brand among doctors, who in turn urge pharmacies to buy the systems.
Only one area is impervious to economies: testing, on which the company has spent more than $1 million. Beyond ensuring safety, testing is an important barrier to entry that protects Kramm's company from competitors who might want to copy its model. "Each flavor has to be tested with each medication, and there are more than 400 medications, so it's a huge hurdle for any start-up," says Kramm.
The company's brand equity and proprietary formulas, as well as the scientific validation meant to intimidate would-be competitors, make FlavorX an attractive acquisition target. "I get calls once a month or so from someone asking if we're interested in selling," says Neiss. "But we're building so much value in the company that it would be silly to sell when we're at this high-growth stage. Right now, the grand scheme is to go public. Hopefully in two to four years. Hopefully."
