How IQBAR Accidentally Rode The Keto Wave Into Costco

Will Nitze designed IQBAR’s formulas for brain health: low net carb, low sugar, low glycemic. It was a total accident that the rest of America then got obsessed with the same profile for weight loss, making his one of just three keto-compliant bars on Amazon at the time. That lucky overlap was the first of several step-change moments that took the 15-person brand onto the shelves of Costco, Sam’s Club, Walmart, and Target, with over 100% compound annual growth across its first 8 years.

A Brain Food Brand Born From His Own Bad Habits

Dave Knox: Let’s start with the founding story. What led you to launch IQBAR?

Will Nitze: It was a confluence of so many things, but the long and short of it is, I was obsessed with the brain. I studied psychology and neuroscience in college, and then had failings in my own brain right out of school. I was working long hours, had a terrible diet, and was getting headaches and mental fog on a daily basis. I quickly learned that my bad diet was the root of most of those issues.

My fascination with the brain evolved into a fascination with the intersection of nutrition and cognition: how what we eat impacts how well our brain operates today, and if you eat a bad diet for 30 or 40 years, what’s going to happen to your brain down the line. I went down that rabbit hole to the point where I wanted to launch a brain food company. It didn’t hurt that I was not passionate about my day job, and that I always wanted to be an entrepreneur.

Knox: The nutrition bar aisle is one of the most competitive in grocery, yet independent brands are driving nearly all the category growth while the legacy brands decline. What did you see the big players were missing?

Nitze: What I saw at that point, because I started the company in 2018, is different from how I’d answer why emerging brands are taking so much share today. Originally, I saw there was no brain-related functional bar product. That was the thesis. As it turned out, that was important, but it was far less important than speed.

I’m not the first to say this is why startups win, but it really is true. As dietary trends shift, startups like ours are just plain faster. A lot faster. 10x faster, in terms of shifting branding, shifting call-out hierarchy, even shifting formulations to address changes. Keto was an example, paleo before that, and now we’re going through a GLP-1 upheaval: how people consume food, portion sizes have to get smaller, fiber is way more important. We just move faster.

Startups Win On Speed, Not On Headcount

Knox: IQBAR runs with roughly 15 people. Your wife is the CMO, and you use agencies for a lot of your marketing. Compare that to legacy brands that have 15 people on their marketing team alone. How do you think about that structure?

Nitze: The misconception is that more people means you can do more things. It actually means you move dramatically slower, because more people means more meetings, which means more sign-off, which means you make decisions a lot slower.

Our model is you have a benevolent dictator in every division of the company. I guess I’m the ultimate benevolent dictator, but I don’t actually meddle in other people’s work at all. Everyone is the CEO of their department. There’s really just one decision maker, so what’s critical is you have the right decision maker. You hire well, and that core set of W-2s is excellent. If they are, it allows you to move incredibly fast.

Really, what those people’s jobs become is dictating to a series of third parties in addition to doing their own work. Everyone is in the business and working in the business, but most of the day is dictating to spokes that go out to third parties around each of those benevolent dictators: agencies, sales brokers, lawyers, whatever.

There Is No Egregious Fundraising, Ever

Knox: Looking back, how did you think in 2018 about starting the business and funding it?

Nitze: You definitely need money. There’s this misconception on X and social media that bootstrapping is the coolest thing you could possibly do. It is incredibly cool and impressive when people do it, but I’m not a proponent. I don’t even know how it’s possible in categories like ours, where you need to be manufacturing things at decent scale right from the get-go using real premium inputs, and you don’t have economies of scale.

You just need money. Even if you didn’t need money, you’d be silly not to raise some, because it would allow you to move 10 times faster. We knew we needed half a million dollars-ish at the outset to do a variety of things: run our first production run, start testing ads, hire one to two people, file for trademarks. There are so many ticky-tacky things that cost 5 or 10 grand, and I didn’t have that money.

All told, we’ve raised a little under $10 million across the 8 years of our existence, and we needed every penny of it. There is no egregious fundraising, ever. We were super lean throughout that whole thing. That is what it takes to scale a business in a category like this, even in a capital-efficient environment with a small team and low overhead.

A lot of people don’t understand the extreme cash flow burden if you’re growing fast. Even as we’ve gotten profitable, you’re dealing with cash flow issues, because you’re pouring all of your profit, and then some, into new inventory. Every production run is bigger than the last. This is why profitable brands need 10, 20, 30, 40 million dollar lines of credit just to make their next run.

Knox: You’ve grown from D2C to the shelves of Sam’s Club and thousands of retail doors. How did the working capital need change, and did it actually get worse as you grew into traditional retail?

Nitze: Payment terms are important. Amazon pays you every 2 weeks, whereas Walmart, Costco, or Sam’s Club pays you every 30 days. Others pay you every 60 days, and some people don’t pay you at all. Shorter payment terms are better, so D2C and Amazon pay you quicker. That’s a big difference.

Retail is not a monolith. It’s an amalgamation of many actors that are quite different as trade partners. So it’s important to comment on specific retailers versus retail writ large. Honestly, a lot of it is pick the right retailers, and not in a vacuum. Pick the right retailer for you. For some brands, Dollar General might be right; for others, Whole Foods.

For us, our biggest retail partners are generally mass retailers: Walmart, Target, Costco, Sam’s Club, BJ’s. Part of that is we go direct with them. For most of grocery, there’s a distributor in the middle. Anyone who pays attention to food and bev knows founders complain about working with distributors. You get a ton of chargebacks, you get paid late, it’s a challenging dynamic. Big accounts you go direct with are where you’re shipping to their distribution centers and getting paid directly from the retailer. Bigger POs, bigger payouts. More challenging cash flow-wise, but most of our business today is retail, so it is absolutely required to build a scaled business.

The Shelf Is The New Billboard

Knox: How has your marketing dollar had to shift as you moved from D2C to mass retail?

Nitze: There’s no direct response marketing, because in many ways you’re paying $0 to acquire customers. That allows you to get skinnier on margin and hit really aggressive price points. Things like price point actually become marketing. And packaging gets way more important, because now your packaging is a billboard in real life versus 15 thumbnails and 5 UGC videos. You have one billboard. You want that billboard to get bigger, which means a bigger brand block, which means more SKUs.

People pitch you on things like geofencing and digital ads. None of that has worked great for us. What’s worked really well is in-store marketing. The holy grail. There are humans in the store you’re in. If you can impact those folks, that’s the best.

Another huge lever we’ve drawn on is retailer media via Target.com, Sam’s.com, Costco.com. We take what we do well in direct response on Amazon and D2C, and apply that over to the ad infrastructure on the retailer.coms. Something like 3 out of every $10 we move with Target originates digitally. It’s a meaningful chunk. But most of our success is nailing price point on-shelf and nailing branding. The less we spend on marketing and still convert that consumer, the better.

Knox: You didn’t do what most bar brands do and just launch more flavors. You expanded into hydration and coffee, each solving a different problem at a different moment of the day. How did you extend the brand without diluting it?

Nitze: A key distinction is our hydration and coffee are online only, and that’s very intentional. I do believe in the mantra of focus, focus, focus. If I could build a brand that was one SKU and take it to the moon, I would, to be clear.

The reason we diversify is that in food and bev, the consumer wants and needs variety and novelty. And there are only so many bars someone will buy from you. If I want to increase lifetime value, a very good way is to service other moments throughout their day in a coherent way. Bars are satiate; if I can also hit hydrate and caffeinate, I’ve increased the basket size, and I’ve also retained them. They might churn on bars, keep consuming hydration, and circle back to bars.

There’s a long checklist for what a new category needs to satisfy: long shelf life, low shipping weight, low cubic inches per price point ratio, big growing category we can build at least an 8-figure business in, non-cannibalizing, coherent with the brand. If it satisfies all those things, we’ll consider it. The broader goal is to build a platform. There’s a ceiling for a bar company in the marketplace. You don’t see bar companies get above a certain revenue. But if you build a platform, you ratchet that ceiling up 2X or 3X.

Knox: Are you seeing consumers treat it as a regimen, where they have two or more products a day, or is it more of an alternation between them?

Nitze: I would like them to consume any of our products daily. That is the goal. Of course you want them to consume multiple, but so long as we hook any consumer into any daily practice, that’s a win.

This is why supplements are such good businesses. They’re so habitual, you don’t think twice about it. Bars are not like that, but they’re semi-habitual. Someone gets into a routine where they eat a bar brand for breakfast every day, but not literally every day like a supplement. Hydration is a step more habitual, which is why Element and Liquid IV are such massive businesses. Coffee is the most habitual of all. When you lock into a coffee, you just crush that coffee daily. It’s all on a spectrum of habitualness.

This is why a platform is useful. You could have one ultra-habitual supplement, or you could have a platform of 3, 4, or 5 semi-habitual categories. You just need to hook in via one of them to get daily consumption.

Knox: You recently launched PB&J Protein Bites. How did that strategy come together, and does it follow the retail playbook of the bars or the online playbook of hydration and coffee?

Nitze: That was a really cool launch because it wasn’t our idea. Everything else has been our idea to date, but Bites was consummated because a major retail partner of ours was really interested in building out their bites portfolio. Bites sounds obvious, but there’s been bites for years and the moment we’re in is super conducive to smaller portion sizes. GLP-1s, for one. And it’s always better if you can span kid-friendliness all the way up through adult. We’re just in a moment where smaller portion sizes is better.

We sat down with the retail partner, brainstormed, and came up with the SKU. Then we spent 3 to 4 months trying to build it, and it was very hard. It’s a complicated product: a bar dough coated with a fruit coating. We had to find a whole new manufacturer because our current one couldn’t do it. It was a journey.

It actually violated some of our prior laundry list items, like don’t go into temperature-sensitive categories. Well, this is temperature-sensitive, which is why it’s going to be mostly a retail item. The biggest consideration for us was making sure it’s incremental. It’s more or less a mini bar, so the first fear is, someone’s just going to eat this instead of a bar. How do you create a food item that competes with your main food item but is totally incremental?

We do that through a few things. Flavor profile: PB&J is a totally new, nostalgic, kid-friendly but also adult-friendly profile we don’t touch on. Form factor: a totally different experience. Portion size. We’ve actually run basic incrementality tests. What happens when we have two pallets in Sam’s Club, one bars and one bites? What happens to bar sales? Not only is it not cannibalizing, it’s actually complementary. It adds to bar sales and gives us a bigger brand block. The primary fear was cannibalization, and I think we did a good job avoiding that.

Knox: You now have a platform brand with 4 distinct product categories. What was the specific moment in IQBAR’s history where the trajectory fundamentally changed?

Nitze: I call them chunky moments, or step-change moments if you will. There are 3 or 4 just violent growth eras in the business that totally changed everything.

The first was keto. We were keto-compliant from almost day one, not because we tried to be, but because low net carb, low sugar, low-glycemic products are just better for your brain, so we designed our products around that. Then the rest of the country got obsessed with that profile for weight loss. We totally lucked into keto compliance. A zillion people a day were searching keto snacks on Amazon, and we just happened to be one of 3 bars in America that were compliant. That was the first really violent growth period, and it was wild to live through.

Another step change was the club channel, and Costco specifically. It moves so fast and the numbers are so big that it changes everything. You have so much foot traffic looking at a pallet. It’s hard to overstate how much bigger a billboard a pallet is versus 2 or 3 SKUs on a shelf. You have thousands of people per day per location staring at this giant rectangular prism with your branding all over it, and a bunch of them are grabbing it and putting it in their cart. In terms of household penetration and brand recognition, that was another mega moment.

We did a deal with Chef Thomas Keller that was a fun partnership and another awesome PR moment that got our name out there.

Honestly, most of the growth is in between these mega moments. It’s just steady compounding and linear growth in between the step-change growth. Put more simply, it’s just time. Be in market longer, and survive longer. We’ve been doing it for 8 years. The longer you survive in the market, the more people see you.

Pick A North Star That Fires You Up

Knox: You’ve talked about the definition of a wealthy life being freedom. As IQBAR scales toward becoming a major CPG platform, how do you think about what success looks like, and what personally keeps you in the game?

Nitze: Your first North Star, in my opinion, should be scale. Your second should be, how do I turn that scale into profitability? Once you get there, you’ve achieved freedom. You’re not beholden to fundraising markets and begging for money. That is a massive psychological shift, because you can actually start being strategic about your business versus managing to the next fundraise.

Once you get through those first few North Stars, you have to pick your own. It’s less clear what it should be, and a lot of it is personal. Why did you start this business? What do you want to do with it? It gets a bit arbitrary. You could say, I want to take this to $100 million in sales, or $500 million. There’s no right answer. It could be not even revenue-wise. It could be, I want to build this type of team, or do these types of brand partnerships. Whatever gets you jazzed up about working really hard in year 8.

I work harder now, or at least as hard as I did in year one. That’s because I’ve been able to pick new North Stars that fire me up. The Bites launch is an example. Can we create a new subcategory and scale it really fast? Can we take on an objectively more challenging manufacturing task than our core product and pull it off? It’s not obvious we could. We did, and that totally fired me up for a 6-month period.

I’m a more operationally focused person, so product development and ops fires me up the most. For someone else, it might be a deal with Kim Kardashian. The partnership side is my new North Star. It’s objective for Steps 1 and 2, and then it gets subjective about what keeps you fired up.

Knox: With Protein Bites out the door, what comes next for IQBAR?

Nitze: Global domination. No. We have so much more green pasture ahead of us. There are effectively infinite humans, and all of them eat 3 times a day and drink probably 20 times a day. When you look at it from a blue ocean strategy mindset, we feel we can pull any human into our categories. The TAM is infinite, and our household penetration is 3 or 4%. We’re barely scraping the surface.

That’s the beauty of a platform lens. It allows you to think infinitely, but you should also be incredibly focused. Do more of the same. Our compound annual growth rate was over 100% across the first 8 years. We’re always seeking the next double, and we actually don’t know where it’s going to come from, which is kind of exciting. Each year we sit down and say, how can we double again? We don’t know the answer going in, but we always find a way. Do more of the same, serve more consumers, and ultimately try to own the brain and body nutrition space. That’s the ultimate goal.