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Podcast Summary: How I Built This with Guy Raz - Episode: Lily’s Sweets: Cynthia Tice
Episode Overview In this episode of *How I Built This*, Guy Raz interviews Cynthia Tice, the founder of Lily's Sweets, a brand known for its sugar-free chocolate products. Starting her entrepreneurial journey at nearly 60, Cynthia shares her experiences from the early struggles of creating a new product to the eventual success of selling her company to Hershey's for $425 million.
Key Themes and Takeaways
- Late Blooming Entrepreneur
- Cynthia's Late Start: Cynthia began her entrepreneurial journey at 60, challenging the notion that startups are best pursued in youth.
- Motivation: Driven by her desire for a healthy, indulgent chocolate option that was sugar-free, she recognized a gap in the market.
- The Challenge of Creation
- Initial Failures: Cynthia faced significant challenges in developing the right chocolate formula using stevia, with early recipes resulting in unpalatable products.
- Pivot to Chocolate: After abandoning a failed beverage project, she decided to tackle the chocolate market, leveraging her knowledge of the health food industry.
- Market Insight and Strategy
- Understanding Market Trends: Cynthia observed a growing consumer awareness of sugar’s negative health impacts, predicting that people would pay more for healthier treats.
- Successful Launch: Despite skepticism from traditional retailers, Lily's Sweets was eventually launched in Whole Foods in March 2012 after a successful pitch.
- Growth and Scaling
- Rapid Growth: The brand achieved substantial growth, with annual sales doubling in the initial years, ultimately reaching over $100 million in revenue within a few years.
- Challenges of Scaling: As the business grew, Cynthia faced challenges in managing a growing company and sought to bring in professional investors and managers.
- Legal and Professional Struggles
- Partnership Dynamics: Cynthia had to navigate complex interpersonal relationships with co-founders and eventually faced a lawsuit from a former partner.
- Acquisition and Transition: After securing investment from VMG Partners and hiring a new CEO, the brand continued to thrive, leading to its acquisition by Hershey's.
Important Moments
- Personal Journey: Cynthia's background in natural foods and her family’s entrepreneurial spirit influenced her decision to create Lily's.
- Emotional Impact of Legal Battles: The stress of a lawsuit affected both her personal life and business operations, illustrating the emotional toll of entrepreneurial challenges.
- Successful Exit: The acquisition by Hershey's marked a significant milestone, validating Cynthia's vision and hard work over the years.
Conclusion Cynthia Tice’s story is a testament to the idea that age should not deter ambition. Her journey reflects resilience, adaptability, and the importance of market understanding. Through dedication and strategic choices, she built Lily's Sweets into a successful brand poised for continued growth under Hershey's ownership.
Additional Notes
- Sustainability: The brand's commitment to charitable endeavors, initially inspired by a personal story, reflects a growing trend of social responsibility in entrepreneurship.
- Future of the Brand: Even after the acquisition, Cynthia remains an advocate for her product, highlighting the enduring bond between a founder and their creation.
*This episode exemplifies the potential for innovation and success at any age, offering valuable insights for aspiring entrepreneurs and seasoned business leaders alike.*
Written by AI. May contain mistakes. Listen to the episode to check what was said.
Transcript
Automatic transcript. May contain errors.0:00Wondery Plus subscribers can listen to How I Built This Early and AdFree right now. Join Wondery Plus in the Wondery app or on Apple Podcast. AI companies have unique business models, each with distinct billing needs. Stripe is the go-to choice for AI leaders, from early-stage startups to scaled enterprises. Whether it's OpenAI offering tiered plans based on user needs, or Cursor implementing flexible billing structures for code access, redefining the future requires sophisticated business models. With Stripe Billing, you can support any business model from credit-based to sales-negotiated contracts and easily align your monetization strategy with customer value.
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2:27Go to Shopify.com slash built. Shopify.com slash built. Hey, really quick before we start the show, we have an announcement about a really exciting new thing we're launching, a newsletter. And like our show, the newsletter is designed to be interesting, informative, inspiring, and most importantly, fun. It's 100 % free. And to sign up, just visit GuyRaz.com. That's G-U-Y-R-A-Z dot com.
3:11If I had to identify my greatest skill, it's probably self-awareness. And I knew what I was good at, but I also knew what I wasn't good at. Which is? Building a team. Yeah, it's hard. And also to, you know, provide information to people so that they can do their jobs, you know, to delegate and train. Yeah, you're not a delegator. You want to do it yourself. It's not only that. I just don't have the time to train you. Like my kids would call me up and go, Mom, how do we do this? And I'm like, you know what? I don't have time for this. I figured it out. You should too.
3:53Welcome to How I Built This, a show about innovators, entrepreneurs, idealists, and the stories behind the movements they built. I'm Guy Raz, and on the show today, how Cynthia Tice started her first brand at an age when many people are planning to retire and grew Lily's Sweets into a$400 million business.
4:24Over the past decade, we've learned a lot more about how sugar impacts our bodies. Sugar, along with refined carbohydrates, is connected to chronic inflammation, which in turn is connected to conditions like type 2 diabetes and heart disease. And this growing awareness of sugar and its downsides has led to an explosion of new products that use sugar alternatives. Many of these alternatives, like stevia or erythritol or allulose, have only become popular in the past 10 to 15 years. And what they offer is satisfying sweetness without the inflammation, without having any impact on your glucose levels.
5:06And so if you go to Whole Foods or Sprouts or even Costco, you'll now see a lot of snacks and treats that have less than a single gram of sugar per serving. And none of these products are marketed towards diabetics. They're targeting consumers who want to eat a bit of junk food, but without the sugar or even carbs. And one of the categories that's seen explosive growth is chocolate. Since 2017, low or no sugar chocolate sales have more than doubled. In 2024, Americans alone will eat around$350 million worth of low or no-sugar chocolate. And one of the brands that was way ahead of the curve was Lily's.
5:54It was launched back in 2011 by a food consultant named Cynthia Tice. At the time, Cynthia was helping small grocery stores source natural and organic products. and she knew that Stevia had just gotten approved for use in food by the FDA. She also figured that if used in the right way, you could make a pretty good chocolate bar using Stevia, a bar that didn't taste all that different from one that was packed with sugar. Now, at the time, Cynthia was nearing age 60. She never thought about starting a brand herself. But when Lily's chocolate bars hit the shelves of Whole Foods, They were an instant hit.
6:36Now, for the first few years, the business was mainly run by just four people, two of them Cynthia's kids. Barely 10 years after its launch, Lily's was acquired by Hershey's for more than$400 million. It was an unlikely turn of events for Cynthia, who never imagined she'd build a multi-million dollar brand, let alone in the latter half of her professional life. Cynthia Tice grew up in the 1950s and 60s in and around Philadelphia and went to Temple University. She came from an entrepreneurial family. Her dad and uncle ran a small chain of clothing stores in the area. And although Cynthia's younger brother went into the family business, Cynthia was not encouraged to do the same.
7:25You know, my dad and my uncle were very old school, and they were also quite concerned about the women kind of getting in and getting involved and causing problems, to be perfectly frank. You know, they felt that it would be just best for the men to run the business. And if the woman wanted to do something else, I mean, they could do something else. No one did. You know, I was the first woman in my family to be college educated. And I was also the first woman in my family to not get married when I was 20 years old. So then it became, once I graduated college, it was like, what am I going to do next?
8:04So at that point, I was living in Center City, Philadelphia after college. And I started to be a waitress. And it drove my father crazy. Why did it drive him crazy? Because he was like, I did not send you to four years of college for you to become a waitress. It's a great job, though. You get tips. I mean, right? I thought it was fine. And, you know, my last year of college was an interesting year because that was when I really got into natural foods. This is in 1974, where natural foods was, I think, I mean, it was still very hippie-ish. It was really California, right? There's probably pockets of it in like Vermont and other places.
8:50You're in Philadelphia. Yes. So the way that I got into natural foods was that I didn't feel well. I was like sick to my stomach all the time. And one day I'm sitting in the cafeteria at Temple University, and I'm eating lunch, complaining, as I always did, that I didn't feel good. and some random guy next to me, and I never knew who it was. I don't ever remember seeing him again, but he literally turned around and said to me, well, no wonder you don't feel well. Look at what you're eating. And what were you eating? I probably was eating some fast food item and coffee, but I do remember how striking that comment was to me.
9:36It literally was like somebody slapped me across the face. And I began to research diet. And I changed my diet radically. I stopped eating processed food. I just started to eat whole grains and fruits and vegetables. and, you know, like I just started to feel better. And I was so excited about feeling better, I became like a zealot. And I used to go home for family dinners in Brown Baggett. You know, by this point, around 75, there weren't a lot, there wasn't a lot of stuff going on in Philly, but there was some stuff. You know, there was a natural food store called a scene. There was bread and circus that existed in, you know, in Boston.
10:33Yeah, there was Mrs. Gooch's in California. California, where I grew up. We used to go there. My mom would buy us carob chocolate, which I hated. Oh, it was disgusting. That was so awful. But, you know, yeah, Mrs. Gooch's. And this was in the mid 70s, I think. Obviously, there were supermarkets in America. There were a lot of supermarkets, but the supermarket revolution was still unfolding. Like there were still small grocery stores that people shopped at, right? Yes. Probably a lot more than today, a lot more independent grocery stores. a lot more. But what ended up happening was during the time where I was trying to figure out what I wanted to do next, you know, and my dad was going crazy because I was a waitress.
11:18He came to me and he said, Well, you know, if if you wanted to open a store, why don't we open a store for you? What kind of store do you want to have? And I was like, Oh, okay, yeah, let's open a store for me. I want to have a natural food store. So that was in 1977. And he literally lent me 10 grand, which I never paid him back, but it was technically a loan. And he helped me find a location, which at that point was on South Street in Philadelphia. And it was really small. It was a 400 square foot store. But I had a friend who owned a natural food store and we decided that we were going to join forces and open a bigger store together.
12:03And that was in 1980. And so, okay, so you had this, I mean, you had this opportunity to open the store because you came from a family of entrepreneurs. They had a men's clothing shop. So how much guidance did, did you get from your dad about, you know, running a business? Because, you know, I think as you would have admitted at the time, you were just a couple of years out of school, no experience in retail, maybe, you know, watching your family, your dad, you know, and uncles. But did he give you some pointers? No, he I remember that when I got my first bank statement, I was like, Oh, my God, what do I do with this?
12:42I did not know how to balance a checkbook. And I'm like, Dad, I really need some help. And he's like, well, I'm really, really busy. Take it to the bank and tell them to help you with it. So I walk in to the bank with an envelope full of checks, you know, and I, I like lay everything down, you know, in front of the teller. And I'm like, my dad told me that you would help me balance this. Yeah. I don't think so. So then we hired, Then we hired a bookkeeper, which was really useful. Was it, you know, in those early days, a profitable business? I mean, you still had to pay rent and you had to buy inventory.
13:21And so, like, you had to manage a business and it had to be sustainable. It was almost never truly profitable. But back in those days, I was single. I really didn't care about money. I truly didn't. I lived in a really small, not good apartment in a bad part of town. And I just really didn't care. I was on a mission, but the profitability was really bad. And, you know, we would barely, barely, barely make it. And that continued for, you know, really for years, really until I sold it. I mean, it was always like hand to mouth. Were you happy? I was thrilled. I was thrillingly happy. I just felt like I was doing something that I loved, that I could support myself with, that was good for other people and the planet.
14:17It was so fulfilling. And I just, you know, I loved it. In the 80s, natural foods was for like kind of fringy people, right? In that sense that it wasn't like today where it's just mainstream. But I think in 1989, something happened that began to turn the tide. And I remember this. And this was the alar scare, right? Because at the time, apples were coated with this substance. It was called alar. And there was some connection between alar and cancer. And this was like a big deal. It was all over the news. And all of a sudden, I guess people started getting interested in, wait a minute, I don't want that on my food.
14:58Yes. Was that a turning point for natural foods? Yes. I mean, there were sort of several, but that was really a big one, primarily because mothers and others really got behind it. And Meryl Streep really. Meryl Streep, of all people, was like big vocal about this. Very vocal. what we saw was people that had never before come into a natural food store came in for the very first time because apples when you think about it apple and apple juice and applesauce is like one of children's first foods right so you know it like apples became became very very scarce organic apples were like so hard to find and you know but once people came in it was a giant opportunity for us because, you know, my personal mission was to always make natural products more enticing, you know, was to really like seduce people into eating more naturally.
16:03All right. So there's this kind of turning point and at least an awareness from consumers. It starts to grow. And really in the 90s, you start to see more and more people going into these stores. And so did you start to see any kind of shift in your store in the 90s at all? I saw there become more and more competition. And there was a big increase of, you know, larger format natural stores that were targeting transitional shoppers. So shoppers that would normally shop in grocery stores that were now going into these larger format natural food stores that had a lot of expertise in merchandising and were willing to be more open to ingredients that small stores like mine were not necessarily comfortable with.
16:58Yeah. But I imagine you probably had loyal customers. You had people who really shopped at your store because that was their local and they'd been going there since 1980. We did. We did. But by that point, I had been married for 10 years. By the late 90s. Yeah. And my children were 10 and 7. And I started to really get burnout. I was tired. I was tired of retailing. I had been doing it for over 20 years at that point. And I began to think that I didn't, that I wanted to try to do something else. Yeah. Yeah, I get it. And so what kinds of things were you thinking about? Like, what did you want to do next?
17:45So, you know, it was right at this time, actually, that the shift that you were talking about before was really in focus. You started to see consumers, especially affluent consumers, looking for organic products. Correct. And I had this light bulb moment when I went to a seminar that was developed by FMI. What's FMI? Food Marketing Institute, which was the big industry organization for supermarkets. And presenting at the event was Whole Foods Market. So we're sitting there and there's, you know, there's all these various topics. And by the way, most of the people in the audience are from the big supermarket chains.
18:27Oh, they're all from supermarkets. It's like Acme is there and Wegmans is there and, you know, probably Safeway was there. But they invite the Whole Foods person to sort of explain what they're doing. Yes. So these are, okay, I got you. So, you know, Whole Foods gets up and they're presenting their strategic vision and, you know, they get done and somebody in one of the supermarket retailers in the audience raises his hand and he goes, I just want to understand how you think you're going to, you know, like how you think your audience is big enough. Like if you get every customer from the natural products industries to come into your stores, that's still not going to be enough.
19:07It's tiny. Who are they? It's nothing. These people are not. Yeah, okay. And this woman, she goes, well, rest assured, we're not after their customers. We're after yours. The Whole Foods lady says this to them. The Whole Foods rep says, we're after, actually, we're after your customers, Safeway. Yeah, wow. And it was just a shock, shocking moment. They were like, wait, what? It was a shocking moment. And then the light bulb moment for me came about because, you know, a bunch of other speakers get up after that. And these supermarket retailers are now like, they're worried. You know, they're like, uh-oh.
19:46And some other guy in the audience raises his hand and he stands up and he goes, because they had talked about the importance of educating the consumer. Like their premise was, you know, what they were advocating was in order to score these sales of like these higher priced items like natural and organic and supplements and, you know, stuff without additives, you had to educate your consumer on the benefits. Yeah. So this guy raises his hand and he goes, what do you mean educate consumers? How am I going to do that? So just putting two and two together, you're thinking, wait a minute, I know this industry.
20:28I can help these conventional grocers make the transition to when they're going to have to serve these customers. Yes. Which I think is exactly what you end up doing for a pretty long time, right? Like I think that the next decade or so working for like local grocery chains and advising them on health food. Yeah. You know, I was making more money than I had ever made before. It was more fun. I was seeing my kids more. I was basically working out of my home because I would sort of generate all this information with my own computer. And I had like a shelf in my office that I was like putting products on to measure them.
21:10So it was great. Okay, so you're doing this consulting at this point. And I imagine while you're doing consulting, a lot of people occasionally are saying to you, you know, Cynthia, you know so much about this industry. Why don't you start your own brand? Like people probably said that to you from time to time. They did. I had people who were saying to me, start a brand, start a brand. And I began to think, yeah, you know, maybe I could do this. I believed that I had the expertise at that point. Like I, you know, I really understood what it took to create a brand. I really understood all of the expenses involved with launching in supermarket.
21:51I, at that point, had been working with other brands. So I began to have relationships across the country with some key retailers like Whole Foods and Wegmans. And, you know, so I had relationships where I actually knew buyers. and I knew I knew what it took, but that was what was so daunting to me. It was like, oh my God, it's a lot of work and a lot of money, and I was very nervous about it, but I was piqued. My interest was piqued. And tell me, I know at the time you met, you were introduced to a woman named Elizabeth Fisher, And the two of you started working on your very first product together, which was a beverage, natural sugar-free soda.
22:39But I guess you guys kind of hit a wall pretty soon after. Why? What happened? So we developed a product, and this was right at the end of 2007. and right at the end of 2007, Coke and Pepsi announced that they were coming into the diet beverage segment with a naturally sweetened diet beverage. And that spooked you guys? We dropped the project. You dropped the project thinking there's no way we can compete with them. Correct. So we decide to pivot to chocolate. To chocolate? Yes. And so tell me why chocolate? Well, chocolate is my favorite food. But for me, especially as I got older, when I passed that 50 year mark, I really, really was trying to avoid sugar.
23:29And I really, really wanted to eat more than a small square or two. And I was seeing that there were brands that were beginning to pop into existence that were utilizing other sugar alternatives, notably Maltitol. As their primary sweetener. But the problem with maltitol was that maltitol is a sugar alcohol that is intensively, digestively upsetting. Now, people who were desperate to have their favorite food, like a candy, and didn't want to eat sugar would tolerate those digestive upsets. And in fact, I was one of them. Yeah. But what ended up happening was I had discovered stevia as a sweetener.
24:22Right. And stevia, just to be clear, is this natural sweetener that had just at that time been approved by the FDA for use in food. And yeah. And in fact, it's what Coke and Pepsi had or just rolling out in their diet drinks, which I guess is why you guys decided to pivot to chocolate in the first place. Yes. So in 2008, Coke and Pepsi were experiencing this enormous downturn of diet beverages. And it was really due to the fact that there was enormous consumer distrust of artificial sweeteners. Of aspartame. Yes. And Coke and Pepsi were looking for the holy grail of natural sweeteners because they were trying to rescue those sales.
25:12They saw in stevia the holy grail. Yeah. Because stevia basically comes from the stevia leaf. And it's like, I don't know, 20 times sweeter than sugar, but it doesn't have the same. It's not sugar. It doesn't spike your glucose, right? Yes. There's no impact on blood sugar level with stevia. But more importantly, it didn't have any known connections to cancer risk. Right. And so when you and your partner decide, let's go into chocolate, what did you do? Did you like buy stevia powder like Truvia and start mixing it with, you know, unsweetened chocolate wafers and melting it in your kitchen and pouring it into molds?
25:55Yeah, we did try putting some stevia into chocolate. And I knew this chocolatier and I contacted him and he was trying to formulate with it. but everything that we got back was really not acceptable it was horribly bitter undertones and stevia especially when you're using enough to really sweeten something has you know has terrible aftertaste and you know has like this almost like a licorice flavor and it just it was terrible it was the worst chocolate I had ever tasted in my life
26:37why don't we come back in just a moment how in the space of two years Cynthia goes from the worst chocolate ever to a national rollout in Whole Foods stay with us I'm Guy Raz and you're listening to How I Built This
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Read the full transcript
30:05Hey, welcome back to How I Built This. I'm Guy Raz. So it's around 2010, and Cynthia and her partner Elizabeth are experimenting with stevia to make a delicious, sugar-free chocolate. Problem is, their first attempts taste really awful. And then something else starts to go sour. During that time, we experienced a falling out. You and your partner? Yes. And this is not uncommon, a story we've heard on High Built this many times. Yeah, we had different views and different expectations for each other. And we had a series of small arguments that culminated in a large argument where we decided not to work together anymore.
30:56And was the, just to kind of dig in a little bit deeper, because I think it's important with co-founders, was the difference of vision around product or branding or design or all of those? We hadn't gotten that far yet because we hadn't developed a product to work with. Yeah. It was truly personality. Right. Yeah. And so it just didn't work out. And I think you guys decide to go your own separate ways and that's it. More or less. Yes. Okay. But meantime, so you, from what I understand, I mean, you had developed this prototype of this chocolate that was not marketable. It was too bitter. Had you given up on the idea?
31:42Did you think this is just not going to work? Or did you think there was still a possibility to figure something out? So I didn't work on it anymore. and then I discovered that someone had developed what I was looking to develop. They had developed a stevia sweetened chocolate? Yes. Was it a chocolate bar they were selling or was it like a wholesaler? It was ingredients. So it wasn't somebody who was making chocolate bars. It was somebody making chocolate wafers for restaurants or whatever, whoever wanted to use it. Yeah, I was like, oh my God, somebody did. So I requested a sample. that came to my house in wafers.
32:23That are designed to be melted, presumably. Correct. And I tasted it and I'm like, oh my God, these guys are really onto something. And so what they had done was something that I never thought of doing, which they had used other sweeteners to mitigate the bitterness and the intensity of stevia. And so namely, they were using erythritol and some fibers like dextrin. And so they were able to kind of balance the sweetness with the bitterness out. Yes. All right. So you try their recipe and then what? You contact them and say, hey, this is great. I'd love to see if we can work together. Yeah. And so I asked them to do some modifications, which they did.
33:11And are they also able to make chocolate bars or is that going to be a different place? That's a different place. Okay. First, you wanted to just get the raw ingredients. Right. And this stuff melted like sugar sweetened chocolate. Yeah. This was like the first thing that I had ever tried that was like, oh, my God, this is good. Because it was basically what? Cocoa butter and cacao? It was cocoa butter and cacao and dextrin and erythritol. And the cocoa butter gives it that like creamy, rich viscosity. Yeah. And that mouthfeel. And then you could melt down and add milk powder to make milk chocolate.
33:51Or you could just do dark chocolate if you want to keep it dark or salt. Yeah, you could put inclusions in it. Yeah. Okay. So you saw that this had potential to be the raw material for a sugar-free chocolate bar? Yeah. Okay. But again, even now, sugar-free is still a little radical. Like when I say to people, I try not to eat sugar, they're like, really? Really? And but there's a lot more awareness around ketosis, keto diets and, you know, and how sugar can cause inflammation. Because when you eat like this is a time we're talking about 2011 where paleo diets really start to get traction. Paleo doesn't allow refined sugar, but it does allow coconut sugar and honey and some other things.
34:35Right. So, again, like there wasn't quite the awareness yet in 2011 around sugar-free. Right now there's a bunch of sugar-free candy and chocolates that are remarkable in how good they taste. But why did you see an opportunity there? How did you know that it wasn't just going to be this weird candy thing? So I really, really wanted chocolate like this. And I believed that there were more people like me. Yeah. And I didn't want to compromise in taste, but I also didn't want to be particularly moderate. Like, I didn't want to eat one little square of chocolate at a time in order to avoid sugar. And I just believed that there were going to be other people like me again.
35:23Yeah. So, all right. It's now around 2011. You have this idea. And I guess you start to look for someone to sort of go in on it with you, right? Like a partner. And I read that the person you connected with was a former colleague from your consulting career, a guy named Chuck Ginnardi. Yeah. We had remained friends since we stopped doing consulting together. And he said to me, I've owned a little store in Seattle, and I hate it, and my wife and I are getting ready to move. We've adopted a child, and I'm looking for something to do. Do you have anything that we could do? Wow. He just, what great timing.
36:08Yes. And I, so actually he brought a few projects to me and none of them panned out, you know, and, and finally I'm like, you know, well, I do actually have this other idea that I've been like sitting on. So I told him about Stevia chocolate and he was like, let's do it. But I also told him that I was terrified to do it because I knew everything that would, went into producing a brand. And right away, you knew you wanted to work with him because you just, you guys, unlike your previous partner, your personalities were better matched, you and Chuck? We were better matched. We had been friends for a long time.
36:53And so Chuck says to me, let's do it. Let's do it. It's really exciting. Let's do it. I have the money. I have the money to do it. How much money did you think you needed to get it off the ground? So originally, I believe he invested$125 ,000. I didn't have that much. I didn't have money to invest. My dad invested$25 ,000. And we split the company 50-50 because I felt like that was fair. Yeah. I mean, it's great. I mean, he puts in all the money, but it's your idea. The money ended up, which I didn't 100 % understand this in the beginning because I just was so green at the financials of business.
37:44I was completely green. Yeah. And honestly, if I have advice to founders, it would be to fully investigate that better than I did because it turned out that the money was a loan, which I didn't truly, truly understand at the time. Yeah. So, you know, initially Chuck came in with a small amount of money and we developed the packaging and, you know, we had the recipe for the chocolate. And you had a manufacturer that could make the bars, make them into bars? Yes. I found a manufacturer that could make the bars here on the East Coast. And, you know, then I started to do the work that I was really good at, which was price architecture and, you know, a sales strategy.
38:31And we developed samples and I decided that I wanted to take this product first to Whole Foods. All right. Before we get there, did you have a name for it at that point? Yes. So when we started to really put together the packaging and stuff like that, so Chuck has a niece, and she's 21 and doing really well. Today she's 21. Yes. Okay. Or maybe 21 or maybe even 22. Okay. But back then she was seven years old, and she had been diagnosed with brain cancer. Oh, wow. Yeah. And so she goes for treatment at Children's Hospital of Philadelphia. And she has surgery and she has chemotherapy and she has radiation.
39:21I mean, she really just goes through it. And she's in the hospital for a really long time. And she finally gets out of the hospital. And she says to her mother, Mommy, I want to raise money. And her mother says, What do you mean? And she said, well, in the hospital, she's like, the kids get really sad because they're not able to eat together because there's not enough wheelchairs to wheel all of the children into the dining room in order to eat at the same time. So I want to do a fundraiser to buy a wheelchair for the hospital. So the family throws a fundraiser and I'm invited to it because I'm friends with Chuck and friends with the family.
40:03And they raise the money. So as we're conceiving of what to call this brand, we knew that we wanted to have a charitable component to it. And we decided to call it Lily's in honor of Lily. After this girl. And to name nonprofits that support children with brain cancer or other serious illnesses as the recipients of our charitable donations. Wow. And Lily is healthy and a grown-up today. Yeah. Yeah. It's interesting because I didn't know that story. There's nothing on the packaging that tells that story, I think, right? Yeah. There originally was. Right. Like when we first launched on the back, it said, Lily, one brave girl.
40:51And it told information about her. I think the reason why I point this out is that a lot of brands really push their social mission. And I'm not convinced that that sells product. I think what sells a product is a good product. I couldn't agree more. The social mission is important for culture. It's important for motivation, for the team, and eventually can really be important for the brand. But it's interesting because I did not know that about Lily's that it had this component because it wasn't really something that you push front and center. Right. And exactly for that reason. I mean, we had large discussions that we did not want to be Alex's lemonade.
41:32We wanted to be a delicious chocolate bar that had a charitable give back. And so the two of you are kind of developing this, and Chuck puts in the bulk of the money, this loan, to get you off the ground. And what was Chuck's role going to be? Were you going to be the CEO? Was he going to be the CEO? Were you going to be co-CEOs? Did you even talk about that? Um, so actually Chuck was the CEO, but that was honestly because I was so green at business that I didn't know that the CEO was higher than the president. You were the president. He was a CEO. I was the president and he was the CEO. Okay.
42:12But, you know, Chuck deferred to me a lot about business strategy because the truth was I had more experience than he did, you know, with, you know, with doing this. And it was, you know, also my idea and I had found the recipe. So, you know, honestly, I was kind of bringing a lot to the table at that point. But we worked really well together and he is, you know, he's still honestly one of my best friends. So we put together the packaging and we found the Coman and the pricing and did all of that. And then we took it to Whole Foods for their category review, their candy category review, in August of 2011.
43:00And I knew that I was presenting to the grocery buyers. But I had a relationship with the, I believe he was the vice president at that point of merchandising, a guy named Earl Schweitzer. You knew him from just your consulting work? I knew him from my consulting work. And he was their boss. So I was like on the plane with our prototypes. And I emailed him. And I just said, you know, I want you to know that we're coming in. And I really hope that you can come to this meeting. It would be so great to see you. I would just love it. What did you bring? Did you bring a packaged chocolate or was it not yet packaged?
43:44No, we bought, we developed four SKUs. Okay. You know, my belief is that when you have an innovation, the innovation should stand on its own and you shouldn't innovate with flavors outside of the innovation itself. So I picked original or plain, almond, crispy rice. And at that point, I did sort of veer a little bit because coconut, there was a giant halo around coconut at that particular time. So we chose coconut as our fourth item. And we take them to the meeting and we go walking in the door and the two buyers are there. And we sit down in front of them. and they're kind of, you know, I'm like, this is the next best thing to, you know, whatever the best thing in the world is.
44:32And this is 2011 when, again, sugar-free was still diabetic candy. Yeah. So we're sitting down in front of them and in walks Earl Schweitzer. Yeah. And he sits down and they're sort of, they're tasting it and they're like, eh, okay. And somehow I have the wherewithal to look at Earl and say, well, what do you think? And he says, I think it's good. He said, I think it's good. He's like, it's not green and blacks, you know, but it's a good solid chocolate that will appeal to special diet customers, which is one of our focuses. And the whole meeting changes, you know, the whole, you know, everything changes.
45:18And do they make any decisions at that meeting? No, they don't make any decisions. They just say, okay, thank you very much. And then we go home. You and Chuck. Chuck and I go home and we wait. And in the meantime, you know, so up until that point, just to kind of give you a sense, we've probably spent 50 grand in developing the packaging and getting the samples produced in everything that that took. So it hadn't been an enormous layout of cash at that point. And I had decided that if Whole Foods didn't say yes, we weren't going to move forward. Like Chuck didn't know that. You were not going to just try another retailer?
46:06You felt like Whole Foods are bust? No, I was like, you know, this is so risky. You know, I don't know that I'm going to, you know, I don't think that I'm going to push for it if Whole Foods doesn't say yes. But in November of that year, I get an email from Earl and it says, congratulations, you've been chosen as a national brand for Whole Foods and your launch is going to be March of 2012. Wow. Yeah. Okay. Pause for a moment. I'm sure you were super excited about that. I was. How many chocolate bars did you have to, how many orders did you have to fulfill? A national release? Yeah. That's like tens of thousands of chocolate bars.
46:52It was a lot. Did you have the cash to finance that? So that's when Chuck was able to loan the business money. But again, like, you know, me being green, I was just super unclear about that. So he did, and we were very diligent at producing what we needed. We've met all the deadlines. We never had an out-of-stock. I knew how to do this part. I knew how to execute this launch. It was seamless. So that co-manufacturer, you were able to finance that run and get it in time for January of 2012? Yes, exactly. I mean, you were 59 at this moment. Yeah. 59 years old, first-time brand builder. Well, it actually gets more interesting because it was a loan when we got to signing our operating agreement papers.
47:53You and Chuck? Yeah, which were not signed until after we had procured the launch at Whole Foods. Wow. We decided that we would not take salaries until Chuck's money was paid back. Right. So that meant that I had to work another job. Like I had to continue to do my consulting career. Consulting work in that first year. In subsequent years. In subsequent years. Wow. While you're trying to build lilies. Yeah. Okay. Okay, so you've got this launch at Whole Foods. And where were they going to put the chocolate bars? Just with every other chocolate bar? Yep. And was it going to be the first sugar-free chocolate bar or Stevia Sweetened chocolate bar?
48:37It was the first Stevia Sweetened chocolate bar because, remember, there were some maltitol chocolates at Whole Foods. But they were not performing well, and they were regional rather than national. Wow. Again, in 2012, when you launched this, because I think it's March of 2012, I'm thinking, I go back to the story you told about that meeting of grocers in Philadelphia in 2000, where they're like, who's going to buy your stuff, Whole Foods? And they're like, actually, we're going after your customers. Yeah. But now I'm saying to you, who is going to buy Lily's Chocolates in 2012? Who are these customers?
49:16Because it's got to be a tiny percentage of consumers at that point. Well, that is exactly what they thought, and they were okay with it. Did you think that? No. I thought, this is delicious chocolate that has no sugar. There's no reason not to buy it. I mean, why not have less sugar and less calories if you can still have the same delicious taste? I'm with you. I'm just saying there's going to be a lot of skepticism around that. Well, there was, but I knew what to do, which was I demoed it like crazy. So I hired demo teams all over the country. And I did frequent promotions. So I did like six promotions a year.
49:58So basically half of the time it was on sale. And, you know, it's pretty well known that promotional activity stimulates consumer trial. So consumers were trying it because, you know, there was a sale sign in front of it. That meant you were losing a lot of money that first year. I wasn't, actually. I wasn't. You weren't. No, I wasn't because we didn't have infrastructure that commanded expense. So we had no employees. It was me and Chuck. We were not drawing a salary. We had no physical structure. The co-manufacturer was packaging it and shipping it for you? Correct. I had no understanding that brands frequently have a pathway to profitability.
50:46Like that was not in my vocabulary back in those days. You thought you had to be profitable from day one. I did. Which I think most people should think, but they don't. Yeah. Yeah. So we lost money the first year. We lost a little bit of money, not a lot. And every year subsequently we were profitable. But the business is still a small business. The business is a small business that is kicking butt. I mean, it's growing. I don't think there was ever a year that we grew less than 40%. Wow. And most years we were doubling. And in that, by 2014, let's say, do you remember, was your revenue over a million dollars?
51:26Oh, yeah. It was almost a million dollars the first year. So you were going, you were like, maybe by 2014, you were what, five, six, seven million dollars? I think we were probably at the five million. Okay. So in that first year, you're sampling it like crazy, just giving it to people. and that was enough to stimulate, I mean, that was, and the promotions was enough to stimulate sales? Yes. Yes. And how did you get the people to come back when it was more expensive to buy it again? I don't know, but interestingly enough, when we analyzed the effectiveness of our promotions later on, you know, when I had a new team involved and we were capable of doing those, that type of analysis, it was determined that price was not really as important to Lily's as to other brands.
52:16And I believe primarily because our attributes were what people were really looking for. You know, this low sugar attribute, especially in a great tasting product, you know, was really innovative and disruptive and desirable. So Cynthia, you get into Whole Foods, right? Right. And you're sampling it. And clearly people are responding to this. They're like, wow, this tastes really good. And it's there's no sugar. And then you start to add other product, other product lines. I think chocolate chips. Yes. And maybe a milk chocolate. But I know that pretty soon into this, like 2014, Chuck stepped down as CEO.
52:57Did he also did you guys also dissolve your partnership at that point? So Lily's was an LLC and we bought him out of a number of his shares. You raise money from professional investors or from friends and family? No, from friends, yeah. Because you needed more cash or because Chuck wanted out or what? He wanted out. He wanted to enjoy his family and he really wanted his loans repaid. So we paid back his loans. he retained some ownership and he actually found his replacement, a wonderful woman named Laura Fraga. And we continued to run the company virtually. My two kids came in and joined. And we were, from that point forward, a team of four.
53:48Your kids joined you. They were now adults. They were young adults, very young. So it was you and your kids and Lauren, and you raised some money from, do you mind telling me how much you raised total from friends and family to just at that point? I think it was$350 ,000. Okay, so still not, you're not talking about millions of dollars. Yeah, it wasn't. And the cash flow alone was enough to sustain it? It was not only enough to sustain it. It was enough to sustain it in the midst of a law battle that cost a lot of money. All right. So now we get to 2015. Because 2015, your old partner who you started the soda beverage that never got off the ground, and then you looked into chocolate and you guys went separate ways.
54:40She comes back and she sues you. And she claims, and I've read the law, the case, and she claims that this was developed together, that you had developed this business together and that she was entitled to some ownership. Yes. And so now you've got a lawsuit on your hands. So first of all, stressful. Super stressful. Yeah. And now you know that this is just going to consume a part of your life for some time. Yeah. It was one of the hardest and saddest events of my life. When we come back in just a moment, Cynthia emerges from a two-year legal battle only to face another challenge, scaling a brand that only employs four people.
55:28Stay with us. I'm Guy Raz, and you're listening to How I Built This.
55:51Hey, welcome back to How I Built This. I'm Guy Raz. So it's 2015, and Lily Sweets is now a solid, small business and growing steadily. But Cynthia has a problem. Her former partner is suing her, claiming she's entitled to a stake in the brand. So how did you deal with running the business and also dealing with the lawsuit? I don't know. I just did it. You know, I had to do it. So I did it. You know, I, I, I was really busy. You know, I think the fact that I was so busy working and the company was doing so well, was, you know, really kind of counterbalanced the heartbreak and stress of the lawsuit.
56:31it. But there was a lot of nights that I didn't sleep. That was where the stress sort of came in. But I was stressing about other things as well, like, where are my chocolate chips going to be able to get produced? Yeah. Did your lawyers feel like you had an open and shut case? Did they tell you that? Did they make you feel that way or didn't they not say that? They did not make me feel that it was an open and shut case. They believed in me and they believed, they really believed in me and they believed that I was not guilty of lack of fiduciary responsibility, which is what the case said. But, you know, they didn't, they never said this is a guarantee.
57:14I'm curious, you know, we've had, we did insomnia cookies a short time ago and in that story, the co-founder split early, early in the business. And then many, many years later, when a part of it was sold, the original co-founder sued, and they got all the way up to the day of the trial, and they decided to settle, and it just went away. Was there ever any moment where you thought, let's just do that, let's just find some settlement and move on? No, because it was the very early days, and at a certain point, her attorney offered a settlement some that I would never have been able to, like, I couldn't have come up with it.
57:57Yeah. So you had to fight it. I had to. Yeah. But in the end, you triumphed. You won. Yeah. Yep. Did it feel like a massive weight was lifted in 2017 when that happened? It did feel like a massive weight was lifted. It did. It did. It's really hard because, you know, humans are, we're emotional, all of us. and you know especially when you're friends with somebody at some point in your life we've all had these situations where those friendships unravel but you do remember good times and uh and so it's hard it sucks it it does yeah yeah so once that passed right were you now i mean now 2017 if you're growing every year like gangbusters you've got to be thinking all right To get to really to the next level, we've got to get outside investors in, like professional investors in.
58:58So I was not really thinking that exactly. What I was thinking was, oh, my God, this surpassed my wildest dreams. Because at that point, I was in my 60s. I love this. Yeah. You're in your 60s. You're your first time founder. Yes. Of a brand. And it's like by 2017, what? You got to be doing$25,$30 million in revenue. I was doing 20. We were at 20. And you had four employees. But our run rate by 2018, when we partnered with our equity partners, VMG, our run rate was 40. So beginning in 2017, once the lawsuit was finalized, you know, I really started to focus on, okay, what's the next step? Because probably, like, if I had to identify my greatest skill, it's probably self-awareness.
59:59And I knew what I was good at, but I also knew what I wasn't good at. Which is? Building a team. Yeah, it's hard. And also to provide information to people so that they can do their jobs, to delegate and train. Yeah. You're not a delegator. You want to do it yourself. It's not only that. I just don't have the time to train you. My kids would call me up and go, Mom, how do we do this? And I'm like, you know what? I don't have time for this. I figured it out. You should too. That's my delegation. Not good. By the way, I totally understand that impulse. And it is a certain, I mean, part of it is there's a certain type of person who's good at it.
1:00:40And part of it is training. People can learn how to do that. Yeah. Yeah. But you'd been a solo practitioner as a consultant for most of your career. For my whole career. Yeah. So you were used to working by yourself in your home office or whatever. Yeah. It was just you. Yes. And so, you know, the other thing that I understood was, you know, I said to my kids, Do you really want to like get involved in a bigger way? And they were like, no, mom, this is your dream. We don't want this. So, you know, I saw no succession plan for Lily's, even if I continued to try to grow it and build a team. I spent like the whole 2017 doing due diligence and contacting different investors and different bankers and, you know, different founders and just, you know, really, really to try to figure out what my options would be.
1:01:37I ended up talking to a founder and she advised me to contact VMG. She's like, just give Wayne a call. Here's Wayne's email address. Just email Wayne. So tell me about the equity partners, VMG, the Velocity Made Good. They're based in San Francisco. And they, I should say, do a lot of CPG investing. They do a lot of innovative CPG. And the reason that I was so interested in speaking to them was that they tout themselves as very founder friendly. And that was really important to me. So I emailed Wayne and we started talking. and like in January of 2018, they sent me a letter of intent and it basically was like, we are super interested in you.
1:02:32You know, we'd like to, we'd like to make an offer. They made an offer and it was like, it was like one of those magic things of like the figure that I was envisioning is what they offered. So we started to do the, you know, the whole diligence process which was equally as stressful as the lawsuit, I have to say. It is so hard. And it was a tremendous amount of work. VMG was thankfully very patient and very nice. Because there were times where I was like, oh, it was so much information. And for people who've never been through the process, they sort of ask you to declare anything that you ever think could ever be a problem in the future forever.
1:03:17But they did it and they made an investment in, it was a majority investment? They made a majority investment. They hired a woman, Jane Miller, to be the CEO. Her background is big CPG and her real expertise was building a team and managing a team and scaling. Within a month, she had found a space as an office in Boulder, Colorado. And they wanted to move it to Boulder because Boulder is such a food center, I think. And that's where she lived. And she lived there. Okay. Yeah. Yeah. And then she proceeded to hire 40 people. Wow. And you became at that point more like a brand ambassador? Yeah. I mean, that's like another topic, which I actually think is a big topic.
1:04:10and it's something that's like near and dear to my heart is like the topic of how do you utilize a founder in, you know, after an acquisition. Yeah. Because what did you want to do? You did not want to do operations. You didn't want to run a staff. Well, I didn't want to do operations and I did not want to rack reports, but I did want a job and I was not effective at communicating that. So initially when, you know, when Jane and I started together, you know, there was this big misunderstanding of like she thought I wanted no role. And I was like, what do you mean I want no role? I want a role.
1:04:47We had to work through that. And it was pretty painful. It was more painful than sending my kids to college. Really? Painful because, I mean, I understand. I think I understand this. But you got a big check, right, at that point. I got a nice size check. And probably more money easily than you've ever seen in your life. And you were never rich. Never rich, yeah. And so here you are, you know, almost going to hit 60. And wow, you get a nice check. They're thinking, see ya. And you're thinking, no, no, this is my baby. I came up with everything, a logo and the formulation. And I, you know, like I've been doing this now since 2012.
1:05:26Right. I wanted to work in some capacity. Yeah. And I really, really encourage any founder to spend some time developing your own thoughts and communicating that effectively to your next set of partners. You know, the old paradigm is that you have to sort of wipe out the old team. But that's an old paradigm. It doesn't have to be the new paradigm. And, you know, as soon as Jane and I understood that, we created a new paradigm and our relationship was really successful and we're really, really, really good friends. So what were you able to do? You didn't move to Boulder. You stayed in Philly. No, we stayed in Philly, but we talked about it.
1:06:09And, you know, she gave me jobs that were very, you know, like I became sort of like the head of our charitable committee, which was an ongoing, you know, an ongoing thing that we did. So we gave, you know, we continued to give money to nonprofits. And that was really amazing. So you felt like, and I think this makes a lot of sense, that there were things that you didn't want to do, right? And so they take it over essentially and start to manage and run the business. And did it mean that your life slowed down a little bit or a lot? So it wasn't that I didn't want to do it as much as I knew that I wasn't capable of it.
1:06:51I mean, Lily's was a category disruptor, and it was growing beyond, you know, we hit the marketplace at the right time when there was this growing awareness of sugar, and that was the lucky part. And Lily's grew at a speed that no one really, including myself, ever imagined. $110 million in sales just 18 months after that investment. Yes. It's massive. I mean, once you hit$100 million in sales and you're still privately owned, that's when the big boys start to like circle and say, wait, what's this brand? This is interesting. Which is exactly what happened. Exactly. And, you know, we had a successful exit at the right time.
1:07:36June 2021, the acquisition was announced. Yes. It was acquired by Hershey's. Yes. $425 million acquisition. Yes. You still had shares. Yes. You still had some ownership, so you got another bite at the apple, as they say, which is pretty amazing. Yes. And that was really it. That was sort of when, I mean, when you were, I think, out-out, right? I was, and I was really ready at that point. I was, you know, really ready. And I was so pleased and honored that Hershey's acquired Lily's. It was very synchronistic for me because Hershey's has this commitment to female leadership. And I, you know, by then I had enough experience with bigger businesses that I knew that there was no fit for me at a, you know, at a massive, you know, enterprise like Hershey's.
1:08:30So, you know, I was I was really, you know, I was ready to end that journey. And now, of course, it's a it's a part of Hershey's portfolio company. And so Lily's are everywhere. I mean, they're not just at Whole Foods or Walmart and Targets. And obviously, there's direct-to-consumer sales. Yeah. Jane and her team did a fantastic job of getting it everywhere. And certainly, Hershey's is continuing that. Cynthia, I mean, when you were 58, you launched this business, right? And you are a very young 70. Yeah. But God, can you imagine when you're 58 thinking, man, I'm going to – if somebody said to you, Cynthia, you're going to make a ton of money.
1:09:12First of all, it wasn't on your radar at all, right? It wasn't on my radar at all. It's sometimes even hard for me to believe it, if that makes sense. Honestly, I would say, don't ever think it's too late if you have passion for what you're doing and you love it and you understand how much work it's going to be. One of the things that was painful with the new team of Lily's was that I felt out of place with younger, you know, with, you know, everybody on the staff was like 40 and below. I was like, but, but the truth is your experience brings you a depth of wisdom and don't underestimate that power.
1:09:54I do not think that I would have been as able to successfully launch lilies the way I did without having had the breadth of experience that comes from years of practicing your craft. Yeah. When you think about what happened in your life and in the story, and again, I just I love that it was a late breaking development in your life. How much of what happened do you attribute to all of the experience you brought in the hard work and how much do you think had to do with the luck and the timing of it all? I mean, I think 50-50. I think my experience was instrumental, but I think there was a big aspect of luck with regards to timing that I didn't really understand at the time.
1:10:48I took advantage of it, but I didn't, you know, I did not know that there would be this much interest in curbing sugar. So that was the giant luck factor. And it was giant. That's Cynthia Tice, co-founder of Lily's Sweets. By the way, although she no longer works at the company, she is still a pretty committed booster. I eat a bar of Lily's a day. A day. I mean, it's amazing. You can now have like a hot fudge sundae that's sugar-free. I mean, you could have like a sugar-free chocolate fountain at a wedding. Yes, you can. We've had sugar-free chocolate fountains at parties. Have you? Really? Absolutely.
1:11:37It's delicious. No reason not to eat it. I have dipped my finger in a chocolate fountain when no one was looking. Yeah, it's fun. Hey, thanks so much for listening to the show this week. Please make sure to click the follow button on your podcast app so you never miss a new episode of the show. And if you're interested in insights, ideas, and lessons from some of the world's greatest entrepreneurs, sign up for my newsletter at GuyRoz.com. This episode was produced by Sam Paulson with music composed by Ramteen Arablui. It was edited by Neva Grant with research assistance from Catherine Seifer. Our engineers were Robert Rodriguez and Kweisi Lee.
1:12:17Our production staff also includes Alex Chung, Carla Estevez, Devin Schwartz, Chris Messini, Carrie Thompson, John Isabella, and Elaine Coates. I'm Guy Raz, and you've been listening to How I Built This.
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From the publisher
When it comes to launching a multi-million dollar brand, Cynthia Tice was a late bloomer. Nearly 60 and looking for a healthy way to satisfy her love of chocolate, she set out to make an indulgent, sugar-free version, sweetened with stevia. After some disastrous early recipes, Lily’s Sweets launched nationally in Whole Foods, with just four employees. Cynthia correctly predicted that a growing number of shoppers would willingly pay for healthier treats, and just ten years after launch, Lily’s Sweets caught the eye of Hershey’s, which acquired it for $425 million.
This episode was produced by Sam Paulson with music composed by Ramtin Arablouei. It was edited by Neva Grant, with research by Katherine Sypher. Our engineers were Robert Rodriguez and Kwesi Lee.
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