She Almost Threw Her Money at an MBA — But Founded This $220 Million Cult Yogurt Startup Instead
For this entrepreneur, learning the intricacies of the dairy business was the easy part. Getting her product out to the masses was the challenge of her career.
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Koel Thomae is the co-founder of Noosa, a yogurt company with $220 million in sales. Here's how she and her co-founders bootstrapped it from a Colorado favorite into a national brand. --As told to Kimberly Weisul
I grew up in Australia, and was back home in Queensland to introduce my now-husband to my family. We had been surfing, and on the way to my mum's beach apartment I bought some local yogurt. It was one of those stop-you-in-your-tracks moments. It was not like yogurt I had grown up with and certainly not like yogurts I'd had in the U.S. The texture was so velvety and creamy. It was infused with honey, so it had this lovely sweet-tart flavor profile.
Two years later, I was heading to Australia again. My boss at Izze, a beverage company, encouraged me to call the family that made the yogurt, because I was driving everyone crazy talking about it. I met the family at my mum's, with everyone crowding into the kitchen. Then we walked across the street to the local surf club. After a three-hour lunch, I walked out with a handshake agreement that they would license the recipe to me.
I knew from my experience at Izze how to go to market, and how get my foot in the door with retailers. But I knew nothing about dairy. I needed a great dairy partner. It's not something you can just Google.
In 2008, I was in a coffee shop in Boulder and spotted a flyer for a fourth-generation dairy farm that didn't treat cows with growth hormones. They were selling bottled milk to Whole Foods. That made me think they might have an entrepreneurial spirit. Rob Graves, the owner, invited me to the farm. He was building a new bottling plant, and agreed to add some extra space to make yogurt.
When Izze got acquired by Pepsi, I had more money than I'd ever had. I thought, I could go spend this on an MBA, or try this yogurt business. Between Rob, myself, and the family from Australia, our startup costs were about $400,000.
In 2010, we launched Noosa. I kept my day job for another two and a half years.
We never took angel investment, never had friends and family money in the business. We felt like we were in a good place with the initial investment. When we did bring on an investment partner, I had a very significant stake in the business. That was meaningful.
Because Rob was already selling bottled milk to Whole Foods, they became our first retail customer. Thanks to my Izze connections, I had been able to get samples to a buyer at King Soopers, a Kroger brand. In April, he told me one of my competitors was going out of business, and he had immediate space on his shelf. We were suddenly in 100 stores in Colorado and Utah.
Our tipping point came in 2012. At the outset, we had about $3 million in sales. Then we launched into Safeway in all of their Western stores. Midway through that year, Target tested us in 252 Super Targets. In three months they came back and said, we would love to expand into another 1,000 stores. We thought we were being bullish when we built our manufacturing line, but that was when we knew we should have built bigger.
By year three we had a line of credit for more than $1 million. And we were just getting by. It was like, "Okay, we've got that manufacturing line in now, turn it on and hope it runs, because we have to ship that product in one week." I knew we were putting our entire business at risk by operating that way.
Rob Graves, noosa yoghurt co-founder.
We were really lean. I was running sales and marketing with a great business development manager. But he was a contractor and also managing other brands. We had two people managing 17 sales brokers. During that time I decided I'd have a kid. Because that's good timing.
I realized I was not on a sustainable path. My husband and I have never lived beyond our means, and we were really kind of borderline poor for a long time. That wore me down to a point where I was like, you get only one shot on this planet, and I want it to be more balanced. And there was definitely a period of time when it was very unbalanced. That can leave a lingering scar tissue in your soul.
Going into 2014, the growth of the business wasn't slowing, and the demands of my child weren't slowing. We were seeing a lot of direct competition in whole-milk yogurt, and we were seeing people copy our packaging. We had $44 million in sales and I realized, this is actually kind of a real business. I don't know that we can continue like this without something imploding. I thought it was time to bring in an investment partner.
That's also when we had our first capacity constraint, when we were short-shipping retailers. They have very low tolerance for that, because their shelves are empty and they're not making money. While we were trying to convince [private equity firm] Advent that we were a great company, I was also calling every retailer personally to apologize, to tell them what our plan was, and to promise that it wouldn't happen again.
The investment from Advent let us build more capacity. We also professionalized the company. We hired a head of sales, a CEO, and a head of operations. Those positions hadn't existed before. It was Rob and myself and the COO wearing all the hats.
People ask me if I want to start another business. I don't know that I could go back and do it that hard again. I knock on wood that I won't have to.