RAISING the BAR
A behind-the-scenes manufacturer pushes healthy snacks into big time

By Dawn Wotapka
STAFF WRITER

May 5, 2003

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While laboring in his family's Wantagh aluminum awning business 20 years ago, Paul Schacher realized he could no longer suppress his passion for food.

Following the advice of his brother, Glenn, Schacher started baking rice cakes in his home oven. Soon, Glenn's Freeport health food company, Glenny's, decided to distribute Schacher's airy almond crunch and cinnamon-raisin rice cakes creations to natural food stores nationwide.

He soon turned his culinary concept into Sweet Productions.

Today, that Amityville-based company, while little known to consumers, is one of the largest producers of nutrition bars nationwide, experts say.

Last year, the private company's sales were $65million - about 20 times what they were four years ago - and profits increased 10-fold over the past three years, Schacher said. Industry experts say Sweet Productions is among the country's top five "private-label manufacturers" of nutrition bars that are sold by other companies under a variety of brand names. Last year, the company, housed in an unassuming white building off Route 109, was No. 74 on the Inc. 500 list of fastest growing private companies.

Overall, the nutrition-bar industry has been growing fast, too. According to the National Nutritional Foods Association, 2001 sales, the latest available, were $1.4 billion, a 21percent increase from the previous year, and sales should almost double by 2006. The Nutrition Business Journal estimates annual sales for diet, protein, nutrition and energy bars at $1.8billion and anticipates up to 25percent growth each year for the next five years, said Patrick Rea, a staff researcher with the trade publication.

"They [the bars] are here to stay," Rea said.

Experts note that while consumers are increasingly busy, they still want healthy, convenient food.

"Those things coming together have exploded the category," said Michelle Ferguson, director of consumer insight for Clif Bar, the nation's third largest nutrition bar company.

Still, Sweet Productions and other nutrition bar companies are reluctant to reveal many specifics about their secretive and competitive business.

"They're very much a behind-the- scenes company," said Paul Pruett, the chief operating officer of Boston-based ZonePerfect Nutrition Co., Sweet Productions' biggest client. "People in the industry know they exist. To the layman there's no real reason to know them."

Thousands of consumers in the New York area do eat Sweet Production bars, which are widely sold in health food and other retail stores. Sweet Productions makes 70 percent of Zone- Perfect's widely distributed bars, and other customers include Biochem Sports and Fitness in Hauppauge and a firm that sells to Wal-Mart Corp.

But because of confidentiality agreements, Schacher would not reveal other clients. And most brand-name companies won't discuss who produces their bars either.

"That's a good thing" that Schacher won't share such information, said Cindy Vallar, vice president and general manager of PowerBar, the nation's largest nutrition bar company. "The thing to remember about relationships with co-packers is they really are partners," said Vallar, adding that PowerBar does not use Sweet Productions products.

To brace for growing competition, Sweet Productions recently invested $5million in machinery to almost fully automate the production process, Schacher said. This equipment, including three 2,000-pound mixers and robots to package bars, will help the company's 450 employees produce 400 bars each minute. By the end of June, Sweet Productions expects to be able to make 200million bars annually, Schacher said, compared with 125million today.

When Schacher started out in the early 1980s, rice cakes were popular, but sensing a wane in demand, he quickly branched into nutrition bars, which, as he put it, were still a relatively tasteless treat for "health nuts."

As business grew, Schacher recruited two partners: college-era friends Ben Cohen and Joe Pizzo. Schacher and Cohen each own 50 percent of the company.

The trio attended chocolate- production classes and lectures together, some in Hershey, Pa. But the methods for making peanut butter cups and chocolate bars did not translate well to this burgeoning health-centered category, so they crafted their own methods to improve Schacher's natural bars.

In 1982, Schacher rented 1,500 square feet in a Copiague building and a year later relocated into a 10,000- square-foot building nearby. At the time, everything from mixing to packaging was done by hand, so he cobbled together several small loans from family members and purchased a $5,000 mixer.

"To us, that was the biggest investment," Schacher recalled. "It was like one of those scary moments. Would we be able to pay for it?"

The mixer helped him create more than 5,000 bars each week - a 500 percent increase. He repaid the loans within a year.

By the early 1990s, the entire health-bar industry started booming. PowerBar received nationwide publicity by sponsoring a Tour de France bicycle team and doling out free samples at athletic events - thrusting the bars into the hands of everyday athletes.

"PowerBar sort of paved the way in making that crossover from a small part of the population to a large part," Schacher said. "The bar became a medium for people to eat well."

The popularity grew, but the bars were still categorized as diet or athletic - and customers weren't buying them for the taste. So Schacher tapped his Hershey knowledge and began blending chocolate, rice, protein powder and other nutrients to create a better-tasting product.

In 1997, his work caught the attention of ZonePerfect, then an emerging nutrition-bar company. The two joined forces. Sweet Productions created flavors such as bestseller fudge graham and lemon yogurt, while ZonePerfect handled marketing. As ZonePerfect's sales grew nationwide and in Canada, Sweet Productions could barely keep up. So the cramped manufacturer added $3million in machinery.

That increased capacity helped ZonePerfect's revenue soar to $50million last year - an 81percent increase over 2001 - putting it in the top 10 sellers category, according to the Nutrition Business Journal. "We've grown together" with ZonePerfect, Pruett said. "It's been a very healthy and profitable relationship."

In 1998, Sweet Productions moved into its current 45,000-square-foot building in Amityville's New Horizons Business Park. Within a year, space was tight and Schacher rented a nearby warehouse. His spacious corner office remains unfinished. While a few family pictures line a windowsill, a stack of industry awards remains unhung. Boxes of bars clutter the room that smells strongly of his chocolate-and- graham cracker recipe.

Meanwhile, the company's work force swelled from 25 to 450 within the past few years. Apart from having to start a human resources department and a research and development team, the biggest challenge was quickly teaching the new hires to make the product properly. As the employees learned, they made mistakes.

"A lot of these protein bars are very sensitive to humidity and to temperature," Schacher said. "It becomes very scientific....We had to throw out thousands of bars."

In the past five years, companies such as Wal-Mart, Target and CVS began selling nutrition bars. In Target, ZonePerfect's January 2002 sales were 345percent higher than January 2001. 7-Eleven, the first convenience store to sell them in 1997, now offers 36 varieties, including two from ZonePerfect.

"The nutritional bar category is growing because many other convenience and gasoline stores have jumped on the bandwagon over the last 18 months," said 7-Eleven spokeswoman Margaret Chabris. "Nutritional bars are a very viable category for us."

Schacher thinks it will stay that way. "Bars have become a way of life now," he said.

Still, Sweet Productions is constantly developing new flavors to satisfy changing customer tastes, Schacher said. In the past two years, he's noticed that crispy rice-based bars outsold the extruded variety, which is chewy and dense. And his researchers began developing better-tasting rice bars, using such ingredients as peanut butter, yogurt, fruit and berries.

He plans to launch a new ZonePerfect line in the next year. Both he and ZonePerfect wouldn't say much about the product, except that it follows the current 30-percent-fat, 30-percent-protein and 40-percent-carbohydrate recipe.

Schacher also said he plans to launch three separate bar brands, each a low-carbohydrate and high- protein blend, in the next few months to lessen his reliance on ZonePerfect, with which he has no contract. "ZonePerfect Nutrition can walk away from Sweet Productions anytime," Pruett said. "Nothing precludes us from working with other manufacturers."

Schacher, 50, is now pitching his services to other industries, including nursing homes, pharmaceutical firms, hospitals and the U.S. Army. He has not ruled out creating his own bar line. And he's also experimenting with nutritious cookies.

Those are smart strategies, said Christine Dahm, PowerBar's marketing director. "It's a challenge of any company to stay on top of things. You're always striving for innovation. That is a constant challenge."