November 1, 2012

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Kodiak Cakes Creates Winning Distribution Recipe

John Coon

November 1, 2012

Patience has paid off for Joel Clark.

Clark shepherded Kodiak Cakes from a one-man operation to a thriving nationwide company. The latest step forward comes in the form of a major distribution agreement with Target.

Kodiak Cakes, a Salt Lake-based company, struck a deal with the national retailer to distribute its signature pancake and waffle mixes to 1,600 stores. Target agreed to the deal following a successful one-year trial of the product in 30 stores located in Southern California and Denver.

“It’s helping us to become a national brand now,” Clark says. “We’re trying to evolve into a mainstream brand.”

Kodiak Cakes will reap immediate benefits from its distribution deal with Target. Clark says company revenue will increase by 30 percent as a direct result of selling products in Target stores nationwide. This will allow Kodiak Cakes to increase its local workforce. The company hired two new employees immediately after closing the deal earlier this year and expects to hire more employees in early 2013.

Starting from Scratch
For Clark, building a working relationship with Target marks a satisfying payoff to more than a decade’s worth of groundwork. He spent 15 years building the Kodiak Cakes brand and positioning the company to appeal to major retailers like Target.

Clark’s older brother, Jon, founded Kodiak Cakes in 1995 and landed a distribution deal with a small Seattle-area grocery store chain before turning the company over to him two years later. When Clark took over the company in 1997, he was a 23-year-old college student.  He worked on growing the company in his spare time while finishing his bachelor’s degree at the University of Utah.

In the beginning, Clark operated the entire company out of the basement of his parents’ house.

“It was really tiny,” Clark says. “It was basically nothing. It [produced] $27,000 in revenue. I just did it on the side for quite a few years before I could go full time with it.”

Kodiak Cakes offered a snapshot of its future potential when Clark landed local distribution deals with Smith’s and Associated Foods within three years of taking over. He continued to expand the company’s distribution base and strengthened its brand, even while balancing a full load of graduate school classes at the University of Utah.

Another major step forward occurred in 2004 when Clark struck a deal with Safeway to distribute Kodiak Cakes mixes to 1,200 stores nationwide. This deal convinced Clark to quit his day job and focus his whole attention on running the company. His father, Richard, came out of retirement to help him build Kodiak Cakes.

Securing a distribution deal with Safeway also opened the door to similar deals with smaller regional grocery store chains. The company built a thriving distribution network throughout the Intermountain West and Southern California. Those efforts laid the groundwork for Target to come calling.

Reaping the Rewards
When Target tested the Kodiak Cakes brand in 30 stores, the test took place in those regions where the company already had a proven track record.

“We had worked hard to build a base of distribution in those markets, which is something you want to do,” Clark says. “You want to build a base in an area. It’s tough to go everywhere all at once.”

Even after making initial contact at a food show, Kodiak Cakes spent two years building a relationship with Target before convincing the retail giant to give its product a trial run. At one point, a buyer representing Target even told Clark the store was no longer interested in his company’s product. Clark never gave up and simply approached Target again when a new buyer replaced the previous one.

Today, Kodiak Cakes’ pancakes have been picked up by Target to be sold in 1,600 stores. But Clark has no plans to rest on his laurels—he plans to continue expanding until Kodiak Cakes is a household name. 

Feast or Famine
All of that work put into sealing the deal with Target taught Clark some very important lessons as a small business owner:
Slow growth is not always a bad thing.
Taking baby steps gave Kodiak Cakes time to do everything from building a supply chain to boosting cash flow without obtaining tons of outside capital to get it done. Taking it slow and building in increments allowed Kodiak Cakes to better position itself in the marketplace to seize the opportunity with Target when it finally arrived. “We were finally at a point where we had enough of a track record and enough history where they would listen to us,” Clark says.

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