Nicole Bernard Dawes: Late July Snacks Story

Three weeks after Nicole Bernard Dawes buried her father, a letter arrived that had nothing to do with grief and everything to do with fine print. Late July, the organic snack company she had built with him, carried a $3.5 million equipment loan tied to a facility deal with a strategic investor. Buried in that loan agreement was a clause common to many LLC loans: if a member of the company dies, the loan can be called into default. Her father, Steve Bernard, was a member. The bank gave her 30 or 60 days to cure a default that, as she put it, was simply not curable (46:43). This is the kind of detail that never shows up in a founder's origin story until it nearly ends one.

The company that clause threatened had deep roots. Steve Bernard started Cape Cod Potato Chips in a tiny Hyannis storefront in the early 1980s, after reading a Parade magazine article about tourists lining up for old-fashioned kettle-cooked chips in Hawaii (06:38). The chips tasted great, but almost nobody knew the shop existed, and the business nearly failed in its first year (07:43). Then a driver having a heart attack crashed his car through the glass front of the store. The wreck made the local paper, the insurance payout covered the winter, and by the next tourist season the brand had momentum it never had before (08:06). Bernard sold Cape Cod to Anheuser-Busch in 1985, bought it back for under $3 million in 1996 when the beer company divested its snack division (14:32), and sold it again in 1999 to a company called Lance for about $30 million (18:54).

Nicole Bernard Dawes grew up inside that factory, sorting chips before she could ride a bike. When her father sold Cape Cod the second time, she was starting her own career and decided she wanted to build something of her own. She landed on organic crackers almost by accident, standing in a health food store's cracker aisle while pregnant, noticing that the whole center of the store still looked frozen in the 1970s while the produce section had modernized around it (22:04). Late July launched at a 2003 trade show in Baltimore and left, in her words, a national brand (27:18). It was also one of the first companies to launch with the entire line carrying the brand-new USDA organic seal, created that same year under the Organic Food Production Act (23:40). Then, about two months later, the orders stopped. Retailers excited about the idea of organic had ordered ahead of their own customers' demand, and when that demand didn't materialize, sales simply disappeared (28:56).

What Dawes hadn't accounted for was velocity, the industry term for how fast a product actually moves off the shelf. Crackers, it turned out, are an occasional-use item, something you buy for guests or cheese, while a bag of chips tends to get opened and finished. She estimated that customers go through roughly ten bags of chips for every box of crackers sold (35:17). Her whole strategy had assumed crackers would sell like chips. They didn't. Her guiding philosophy, though, never wavered.

"I have built my entire career out of making organic and natural products, healthy, organic, natural products taste like conventional ones." — Nicole Bernard Dawes [36:15]

The debt that almost ended it

By 2008, Late July was doing about $8 million in sales, still without a true breakout product. The company had also launched a line of organic sandwich cookies, made with real dark chocolate and Madagascar vanilla, that Dawes loved but that cost too much to produce profitably (40:52). As the financial crisis hit, she and her husband decided the $2 million in cookie sales had to go (43:39). At almost the same moment, her father was diagnosed with terminal pancreatic cancer. He died in March 2009, at 61 (47:32). At his wake, a group of small individual investors tried to organize a shareholders meeting to ask whether the company could survive without him (45:33). Three weeks later came the loan default letter.

Dawes says the experience taught her a lesson she now repeats to every founder she meets.

"I tell everyone I talk to, like, if you get debt, get keyman insurance." — Nicole Bernard Dawes [47:10]

Keyman insurance is a policy that pays out if a critical member of a business dies, money that can be used to cover exactly the kind of debt trigger Dawes hit. She didn't have it. Instead, she talked the bank into more time, then used a trade show panel appearance to tell her company's story to whoever would listen. A writer named Meg Hirshberg happened to be in the audience, working on a piece for Inc. magazine, and called her husband, Gary Hirshberg, the founder of the yogurt company Stonyfield Farms, mid-conversation to say he had to meet Dawes (51:34). Gary Hirshberg became an investor and mentor. Around the same time, Dawes connected with RSF Finance, a San Francisco lender that funds mission-driven businesses, which agreed to take over the defaulted debt (52:32).

Betting the company on a snack aisle newcomer

With the company's future no longer measured in weeks, Dawes turned to the product that would define Late July's second act: organic tortilla chips. The choice wasn't random. Tortilla chips are naturally gluten-free and nut-free, which mattered because her younger son had just been diagnosed with a life-threatening peanut allergy the same week as her father's wake, while Late July's best-selling product at the time was a peanut butter cracker (49:16). Moving into chips also meant competing in a completely different, more crowded part of the grocery store, one where a rival salesperson was already telling buyers that Late July, under Dawes, was finished (58:06).

The turning point came in a single sales meeting at Stop & Shop, the New England grocery chain. Dawes, who had rarely handled sales herself, was so nervous she read her pitch word for word instead of listening to the buyer. At the end, out of options, she simply asked him to tell her right then whether the answer was yes. He said yes (63:06). That single account unlocked the distribution deal she needed, and within three years Late July grew from roughly $8 million in sales to $100 million, still run by a lean staff of about 27 people (68:29).

That growth attracted more attention from Snyder's-Lance, the company that had bought a 19% stake in Late July back in 2007 in exchange for manufacturing help (41:33). Dawes had liked working with a strategic investor rather than a venture capital firm precisely because strategic investors tend to have longer time horizons and less pressure for a quick exit (42:27). But she also learned, in hindsight, a harder truth.

"Whenever you take a strategic investment, whether or not you intend to sell them the business, you should expect that to be the outcome." — Nicole Bernard Dawes [42:49]

In 2014, Snyder's-Lance increased its stake to 80%, largely so early individual investors, including Dawes's widowed mother, could finally get a return (69:43). Four years later, Campbell's acquired Snyder's-Lance outright. Late July's contract had a clause letting Dawes buy the brand back if Snyder's-Lance was ever sold, but the deal was structured as a merger, not a sale, so the clause never applied (73:51). Fighting it would have meant years of costly litigation over a brand she still loved, so she let it go.

Dawes had already started planning her next company before the Campbell's deal closed: Nixie, an organic sparkling water and soda brand she self-funded, deliberately avoiding outside investors until she understood her own product velocity (81:03). Nixie launched just before the pandemic, a timing she expected to be disastrous but that turned out to level the playing field, since every competitor was struggling with the same disruptions at once (82:30). Looking back across three companies and one family's worth of near-collapses, Dawes draws a clean line between the parts of success she can credit to circumstance and the parts she can't.

"Once you go take that next step and, like, why didn't it fail, that's where the luck starts to fizzle out and the hard work picks up." — Nicole Bernard Dawes [88:48]

Her father's chip company and her own cracker-turned-tortilla-chip company now sit in the same corporate portfolio, a coincidence she still notices every time she walks a grocery aisle. It is not the outcome either of them planned for. It is the one that survived.