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Despite big growth in snack sales, Clif Bar not for sale

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Gary Erickson co-founded Clif Bar 25 years ago. He plans to keep the business in his family — not sell it.
Gary Erickson co-founded Clif Bar 25 years ago. He plans to keep the business in his family — not sell it.Briana Marie Forgie / Briana Marie Forgie / Clif Bar

Clif Bar thinks life is sweeter on its own.

Even as large food manufacturers are snatching up popular natural and organic food brands, the Emeryville company is staying on its own course. In 2014, General Mills paid $820 million to acquire Annie’s Inc. in Berkeley. A year earlier Campbell Soup Co. acquired Plum Organics in Emeryville. The baby food maker was actually founded by an alumnus of Clif Bar.

None of this impresses Gary Erickson, who co-founded Clif Bar 25 years ago.

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“There is no amount of money” that would make him sell, Erickson said. “I don’t care if it was 10 times the value of the company. We would not be happy. It just doesn’t fit who we are.”

This is not a hypothetical situation. Erickson and co-owner Kit Crawford have shooed away plenty of suitors, including one offer of $120 million several years ago. Nowadays, Clif Bar executives don’t even bother to inform Erickson and Crawford of interest because they already know the answer.

“Our chief financial officer gets them and says, ‘Thank you but no thank you,’” Erickson said. “Clif Bar is not for sale.”

Make no mistake, Clif Bar, which makes mostly energy bars with organic ingredients, would command a good price should it hit the market, said Burt Flickinger, managing director of Strategic Resource Group consulting firm in New York. In fact, Flickinger thinks Clif Bar, despite its commitment to independence, will be a top acquisition target for years to come.

Here’s why. Clif Bar sits at the intersection of two rapidly growing categories in the food industry: snacks and natural/organic foods.

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“During the course of the last decade, consumers’ quest for convenience has intensified, driven by on-the-go lifestyles and supported by advances in technology,” according to a recent report by Information Resources Inc. in Chicago. “More recently, consumers’ focus on health and wellness has become more intense, driven by Boomers and their quest to live long and well.”

Food and beverages that make health and wellness claims are growing much more rapidly than the rest of the industry. For example, organic foods sales jumped 15.2 percent last year to $11 billion while energy products sales increased 8.2 percent to $6 billion, according to IRI data. Overall food and beverage sales have been growing in the low single digits.

Those kind of numbers still amaze Erickson and Crawford. When they attended the Natural Foods Expo in 1992, it was only a small hall featuring 100 companies, mostly mom-and-pop type outfits, Crawford said.

“They were focused on health but the food didn’t really taste good,” she said. “But we upped the ante on natural ingredients and taste, and we were fortunate enough to be a part of that wave.”

Despite being in business over two decades, it seems as if Clif Bar is only now beginning to hit its stride. Over the past decade, the company has generated a compound annual growth rate of 18 percent. Erickson would not disclose specific numbers, though various estimates have Clif Bar at $500 million to $1 billion in annual revenue.

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And Clif Bar has plenty of room to grow. About 98 percent of its sales still come from its core snack bars, and it has more sales than any other energy bar, according to the research firm Nielsen.

Of course, there’s no shortage of competition. Nut and fruit bars and other snacks perceived as healthy have proliferated on grocery store shelves. And with 22 grams of sugar per Chocolate Chip bar — a Snickers bar with equivalent calories has 27 grams — Clif Bar is not exactly riding the latest nutritional wave, in which sugar, rather than fat, is the bad guy.

Flickinger estimates that Clif Bar has only penetrated about 40 percent of distribution channels in the United States and a mere single digits overseas. And the company is also branching out to energy drinks and gels. In August, Clif Bar opened a $90 million, 300,000-square-foot baking facility in Twin Falls, Idaho.

Clif Bar has positioned itself well to be acquired, analysts say. Last year, food and beverage mergers and acquisitions totaled 259 deals, a 4 percent increase from 2015, according to Capstone Partners. Buyers, including several private equity firms, paid an average of 9 times operating profits in 2016 versus 8.4 percent the prior year.

In the better-for-you snacks category, stocks of such companies traded at a multiple of nearly 20 times operating earnings as of December, Capstone said. The firm expects the category to be a big driver of mergers and acquisitions in 2017.

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Not that Clif Bar is interested.

For one thing, Erickson and Crawford don’t buy the conventional argument that a larger company could provide Clif Bar with the necessary capital to innovate and expand faster.

“There’s always a price to pay when you have someone else run the show,” Crawford said.

Said Erickson: “It never works. Yeah, we’ve seen brands grow because of some extra distribution. But we feel like we are at a size we can compete with the big guys and we have great relationships with retailers.”

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But a sale would give Clif Bar employees, who own 20 percent of the company, a big payout, right?

“I don’t want to make other people rich here,” Erickson said. “I want to be fair. But giving people a larger exit would not be in my book. I’m not saying they don’t deserve it, but we provided enough opportunity here with what we have here.”

Erickson said he wants to keep Clif Bar in the family after he dies. The company has been working on a succession plan for the past 15 years.

In the meantime, the sign at Clif Bar headquarters will continue to say “Not for sale.”

Thomas Lee is a San Francisco Chronicle columnist. Email: tlee@sfchronicle.com Twitter: @ByTomLee

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Thomas Lee is a business columnist for the San Francisco Chronicle. He is the author of “Rebuilding Empires,” (Palgrave Macmillan/St. Martin’s Press), a book about the future of big box retail in the digital age. Lee has previously written for the Star Tribune (Minneapolis), St. Louis Post-Dispatch, Seattle Times and China Daily USA. He also served as bureau chief for two Internet news startups: MedCityNews.com and Xconomy.com.