Now sold in more than 26,000 retail locations, Kodiak Cakes was recently acquired by private equity firm L. Catterton for an undisclosed sum.
Kodiak Cakes president Cameron Smith told FoodNavigator-USA, when he first joined the company 11 years ago, he remembers marveling at brands such as RXBAR which exploded onto the CPG scene and redefined their respective categories.
“The overall pancake category is $300m, the bar category is close to $10bn… There were times when we thought, ‘Man, why did we start with pancakes? That was probably the worst idea,” Smith told FoodNavigator-USA.
Today, the pancake mix category is over $500m, thanks in large part to emerging innovative brands such as Kodiak Cakes, which have made consumers excited about eating a hot stack of pancakes again, said Smith. Even though Kodiak Cakes was competing in a much smaller category, the opportunity to build and transform the sleepy pancake and waffle mix set proved to be a major success and larger opportunity from their perspective.
“We kind of snuck up on everyone and established a brand in a category that didn’t really matter to consumers. We took this category that retailers saw as a commodity, they didn’t care as much about it, and we were able to bring back growth — double-digit growth. And what happened was, buyers loved working with us because we made them look really good,” said Smith.
Retailers were able to draw more shoppers to forgotten sections of the center store, added Smith.
“It made consumers excited about a new breakfast offering, and it gave consumers a reason to talk about pancakes again.”
Far from an overnight success story
“Externally, people see us an overnight success story,” said Smith, which couldn’t be farther from the reality of the company’s actual journey to nationwide distribution and exponential revenue gains.
Even before Smith joined Kodiak Cakes, the company had already been through at least two phases. The first phase being when Clark’s brother ran the business and established the look and feel of the brand, including naming it Kodiak Cakes after Kodiak Island, Alaska.
Phase 2 began when Clark took over the business from his brother. With the help of his dad, and the two would attend food shows to build brand awareness and to hopefully catch the eye of retailers willing to take a chance on the niche brand. During its second phase, Clark struck one of his early distribution deals with Safeway which began carrying Kodiak Cakes at its stores.
Smith joined the company in 2010 at the start of what he calls ‘Phase 3.’
“When I joined we were doing about $800,000, and we were doing just pancake mixes, and we had a few baking mixes, a brownie mix and a cookie mix. The biggest thing top of mind for us then, was how do we get more awareness for the brand? We knew if we got into more hands and we got more people trying it, that could help grow the brand,” he said.
After a national TV appearance on Shark Tank in 2014 (in which they did not get a deal from one of the high-profile investors), the brand saw its sales numbers take off from just the exposure of the show.
“We saw big spikes in sales at Target. This was a good driver to trial, but then our belief held true that once people tried it, they would continue to buy it,” said Smith.
‘We would daydream about how cool it would be if the brand got to $20m in sales…’
Then came the brand’s next big “unlock” moment: the addition of protein powder to its pancake and waffle mixes. The idea to start adding protein (in the form of whey protein powder) to its mixes came from Joel who would add a scoop of protein powder to his pancake mix at home, according to Smith.
“Through phase 1 and phase 2 we never added protein to our pancakes, but we saw an opportunity in the category to innovate. There wasn’t a whole grain player and there wasn’t an added protein player to balance both of those to have a great tasting product,” Smith said.
This seemingly simple tweak to its core recipe really kicked the business into high gear with revenue surpassing several million dollars, added Smith.
“Early on, when it was just Joe and me, we would daydream about how cool it would be if the brand got to $20m in sales. I also thought at the time, the white space opportunities would be a lot less once we reached that goal,” Smith recounted.
“And it’s interesting because today, I feel the exact opposite – and we’ve passed $200m in sales.”
Clark and Smith’s eye for identifying white space opportunities within otherwise sleepy categories continued with its launch into frozen waffles, oatmeal, and granola bars.
“When we extended into waffles, a lot of our consumer base were millennials, specifically millennial parents, who had a connection to frozen waffles from childhood. But, there was always this mom or dad guilt to buying frozen waffles,” he said.
Solving this pain point for parents by providing a whole grain alternative with added protein they can give to their children has helped Kodiak solidify its presence in the frozen waffle set.
“Those little victories do a lot for parents in your emotional rollercoaster of the day,” he said.
“It’s also given us a stronger reason today to believe we can go into categories that we otherwise wouldn’t have because the brand is established and our consumers want us to go there, and our consumers get excited when we do go there.”
Under the ownership of L. Catterton, whose investments include, Cholula, The Honest Company, Kettle Chips, Home Chef, and Plum Organics, Smith said the company is going full steam ahead into its fourth phase of growth, which includes increased marketing, an area the company hasn’t invested in until recently with the launch of a YouTube video created in partnership Utah-based creative agency, The Harmon Brothers.
“We’ve seen a lot of good returns in marketing activations, and it’s really about going hard at that ground that we’ve won and continuing to expand on it,” said Smith.
“Our vision is to become the most loved, next generation food brand.”