Be Careful Justin!

Nut-Butter Firm’s Founder Adjusts to Growth

Justin Gold hires a new CEO, rethinks products to help with expansion of his Boulder, Colo., company

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Justin Gold used to struggle to find healthy snacks that would provide him with protein and energy on the trails. In 2002, the avid mountain biker and vegetarian began grinding almonds and peanuts using a food processor at home.

He experimented with different formulas, adding bananas, chocolate syrup or spicy Sriracha sauce to the blends. He stored the nut pastes in his cupboard and to discourage his roommates from swiping his snack, he wrote “Justin’s” on the containers.

Today, the 37-year-old founder holds a controlling stake in Justin’s LLC, of Boulder, Colo., a 40 employee-company that brings in more than $50 million in annual revenue through sales of peanut-, almond- and other nut-based snacks, including jars of honey-almond butter that retail for more than $10.

After taking two loans from Whole Foods Market Inc., —including $25,000 in 2007, followed by $100,000 in 2010, —which Mr. Gold says the company has paid off—Justin’s purchased new equipment and expanded production to make new products such as nut-butter squeeze packs as well as chocolate-covered peanut-butter cups.

Several factories turned him down because his initial batches were too small, or because of concerns about nut particles spreading to the nut-free products the factories process, a potential threat to people with severe nut allergies.

Minority investor San Francisco-based VMG Partners, suggested Mr. Gold seek a new chief executive to help the company expand, he said. Mr. Gold hired his longtime mentor,Peter Burns, a former Hain Celestial Group Inc. executive, as a co-chief executive and president. Mr. Burns started working at the company in early 2014.

The company has expanded its distribution to Wal-Mart Stores Inc., Target Corp., andAmazon.com Inc., as well as some Starbucks Corp. cafes.

Today, the business is grappling with a surge in almond prices from drought-stricken California, the source of some 80% of the world’s almonds, which he said forced his business to raise wholesale prices about 15%.

Mr. Gold, who is co-CEO, recently spoke to The Wall Street Journal about the evolution of his idea into a viable business—and some of its current challenges. Edited excerpts:

WSJ: How did you come up with the idea for selling nut spreads?

Mr. Gold: I wanted to be an environmental lawyer [but] the practice of law isn’t as exciting as I thought. I wound up in Boulder waiting tables.

I didn’t even have a lemonade stand when I was a kid. I’m vegetarian and very active so I moved here so I could mountain bike, ski and run.

I was eating a lot of almond butter. I’d buy a jar and it was runny and soupy. There were only two types: crunchy and creamy. So I planned on getting a food processor and making my own nut butter. [I thought:] this would be a really fun business.

When you’re a small company with very finicky ingredients, nobody wants to help you—your volumes are too small. It’s like no man’s land when you first get started.

I went to the library and wrote a business plan. I raised $25,000 from my family. I bought this industrial-sized food processor. It was the size of a small car. It was $6,000.

Meanwhile, I would have peanuts FedExed to my house in boxes [from New Mexico.] I’d get a few hundred pounds at a time.

WSJ: In 2010 you added peanut-butter cups to your product line. Was the business strategy behind that move?

Mr. Gold: I had a gut feeling that it would be a great idea. Nobody makes a peanut-butter cup except [Hershey]. I found a chocolatier who had a piece of equipment [to make them]. Once we turned that machine on, we haven’t turned it off. My goal isn’t to compete with Hershey. My goal is to sell where [it] can’t go.

WSJ: Why did you decide to bring on the private-equity firm VMG Partners in 2013?

Mr. Gold: I was at a crossroads. I hit a personal and professional ceiling. Rather than give up or sell the company I wanted to find the right partner.

WSJ: You have given up some control of the business recently. Was it difficult to hand the reins over?

Mr. Gold: Honestly, it was a relief because once you hit a certain scale and you have 30 people working for you, your decisions impact your future and you want to make sure you are making the best decisions possible.

Having someone who has experience making those decisions, it’s just a weight off my shoulders.

I’m smart enough to know I’m not the smartest person in the room but I’ve surrounded myself with some of the smartest people in the industry. Everything rolls up to Peter.

It was extremely overwhelming and extremely stressful and I really feel like I have a partner in the business with Peter Burns here.

My role has evolved. People are really important to me. I focus on culture, sustainability, philanthropy and innovation. And on top of all that, I’m the founder, so people really want to meet me. I’m going to sales meetings, trade shows, marketing events.

My name will always be on the jar, and I’ll always want to be involved, especially in vision and direction. Whatever the company needs me to be, is what I’ll be.

WSJ: Are you affected by the California drought?

Mr. Gold: That’s a serious concern of ours. It’s something that really impacts us and our cost for the almonds—over the past two years—has doubled. We have raised our prices.

WSJ: Will you add more new products?

Mr. Gold: I’ve shrunk the line more than I’ve grown the line. [We’ve gotten rid of] a cinnamon peanut butter. It was gut-wrenching but it was the right thing to do. We had to be focused and disciplined.

Write to Leslie Josephs at leslie.josephs@wsj.com

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