Shaking Up the Healthy Foods Category, Again

Life After the Inc. 500: Former WhiteWave CEO, Steve Demos, is back at it, taking his upstart Nextfoods to new levels of growth--this time with a touch more Yoda.

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Superhealthy Steve Demos, hiking in the Himalayas where he got his idea for NextFoods.

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When WhiteWave, the maker of Silk Soymilk, made the Inc. 500, its days of independence were already numbered. In 1998, CEO Steve Demos had agreed to sell the Boulder, Colorado-based business to its largest investor, Dean Foods, in five years. But in 2001, struggling Dean was acquired by Suiza Foods. WhiteWave wanted out.

The company sued for release from its contract and lost. "I went to the chairman, and I said, 'Look, you can get the company, but you will not get the management team, because they are extremely disillusioned,' " says Demos. Suiza, which had assumed the name Dean Foods, "said all prior agreements would be torn up, and we would be a new company run autonomously in their portfolio. That seemed really attractive."

"I know how to do the CEO thing, and now I want to let others have that learning experience."

Demos stayed on as CEO, maintaining double-digit growth for three years. He did such a grand job that his new bosses gave him two more businesses to run—producers of organic milk and creamer. "I agreed because I wanted to keep running Silk. But I was a misfit for the job, and soon both sides knew it," says Demos. "They asked me if I just wanted to be a figurehead. I looked at the Orville Redenbacher posters and decided not."

Demos left Dean Foods abruptly and spent two years traveling the world. During a three-week trek through the Himalayas, he was buying yogurt and kefir from some yak herdsmen when he started mulling the attractiveness of superhealthy foods to an increasingly long-lived population. In research mode back home, he discovered a patented probiotic juice in Sweden that did happy things to the digestive tract. He acquired the American and Canadian licenses and—with former WhiteWave colleague Todd Beckman—launched NextFoods in 2008. Demos put up $4 million. Maveron, an investment company founded by Starbucks's Howard Schultz, chucked in $16 million.

Demos says his juices, sold under the name GoodBelly, are doing better in the natural-foods channel than Silk was at this stage. But revenue last year was just $10 million—largely because of his own mistakes. Demos repurposed the Silk marketing strategy, not considering that where Silk's sole competition was the commodity milk market, probiotics already had several players, most notably the yogurt Activia. And Demos originally packaged GoodBelly in what looked like yogurt cups, undercutting its distinctiveness.

Another difference between the two companies is Demos's role. At NextFoods, he is chairman, staying clear of the day to day. "I know how to do the CEO thing, and now I want to let others have that learning experience," says Demos. "I'm Yoda."

Demos knows expectations for NextFoods are high—after all, he led WhiteWave to revenue of more than $300 million. He points out that his former company was around nearly 25 years before making the Inc. 500. But he has reason to be confident. "Silk had the lactose-intolerant as its market," he says. "Our market is people with stomachs."

Leigh Buchanan is an editor at large for Inc. magazine. A former editor at Harvard Business Review and founding editor of WebMaster magazine, she writes regular columns on leadership and workplace culture. @LeighEBuchanan