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Inside Clif Bar’s Rocky Road To Its Sale—And The Unknown Status Of A $580 Million Employee Payout

By News Creatives Authors , in Billionaires , at January 1, 1970

Snack giant Mondelez announced last week it will acquire energy bar maker Clif Bar in a deal worth at least $2.9 billion. The sale of the Emeryville, California-based company, founded by entrepreneur and sports fanatic Gary Erickson back in 1992, marks a landmark moment that will make not only its majority owners rich, but also some of its employees.

Forbes previously estimated that Erickson, aged 64, and his wife Kit Crawford, 63, who own at least 80% of the business they ran as co-CEOs for many years, would walk away with $1.53 billion (after taxes), bringing their collective net worth to $1.6 billion. The remaining 20% was set aside for Clif Bar’s employees when the company introduced an employee stock ownership plan (ESOP) in 2010 as a retirement benefit. That ownership stake should set employees up for a $580 million (pre-tax) payday.

But which employees, and how much they get, appears to be a bone of contention. According to a half dozen longtime employees, most of whom had either been laid off or quit during the past two years following a restructuring at the company, many were upset by the news. The timing meant that many who had been forced out or left in 2021—including some of its longest-serving employees—had lost out on hundreds of thousands of dollars.

Despite plenty of warning signs, including a new CEO and consulting firm being hired in 2020 and subsequent layoffs, these former employees say they were surprised by the deal and that they expected the company to remain family-owned for the foreseeable future. After all, Erickson had famously turned down a $120 million offer from Quaker Oats back in 2000. Plus the owners had reassured staff it was not for sale in late 2020.

“I do think they shouldn’t have been pumping out this narrative of we’re always going to be family-owned,” said Jeanine Swanson, a former regional marketing manager at Clif Bar who was one of six former employees interviewed by Forbes. Swanson worked at the company for almost 10 years before leaving voluntarily during the layoffs; she got no severance but will get to cash in her ESOP shares, at their 2021 share price (not the value at the time of the deal). Because she signed a non-disclosure agreement, she won’t say how much she got, but it’s likely less than she would have received had she stayed.

“They should have been more transparent to those of us who built that company and worked so hard for so long to support what we thought was that mission,” she added.

Clif Bar declined to respond to specific questions from Forbes about the sale and the expected payout to its workers, citing the “privacy of our employees.” It described the acquisition as an investment in the company’s future growth and longevity. “Mondelez is the right partner at the right time, as our two companies share a similar ethos of leading with a purpose and a commitment to making a positive impact on the world,” said spokesperson Sandy Pfaff in a statement.

Former employees say it was back in 2018 that problems began at Clif Bar. Up until that point, the company had enjoyed envious growth. Sales grew from $700,000 during the first year in business in 1992 to more than $40 million in 1999, Erickson wrote in his 2004 book, Raising the Bar: Integrity and Passion in Life and Business: The Story of Clif Bar Inc. By 2017, Clif Bar had hit the much-anticipated milestone of $1 billion in annual sales, according to one former senior employee with knowledge of its financials.

But it was as the company crossed this threshold that momentum began to slow. After growing an average of 17% every year for the prior decade, Clif Bar’s revenue growth dropped to roughly 5% by 2017 and early 2018, the former senior employee said. “For a 27-year-old company who had been running in the high double digits [of] growth, it was incredible,” that employee highlighted. But as soon as sales dipped, Erickson and Crawford returned to the helm of Clif Bar (the couple had served as co-CEOs during its earlier years). Then-CEO Kevin Cleary, who had led the company through a high-growth period since 2013, left in October 2018. He now runs the consultancy Big Rock Growth Advisors. (Cleary did not reply to a request for comment.)

That’s when things began to veer off course, according to employees who worked at the company through this period. When Erickson returned, he began to clash with the existing management over how certain parts of the business were being run. He wanted to steer the company’s marketing, at one point funneling more than $20 million into a single television campaign that “absolutely flopped,” the former senior employee said. “People were just fed up and not trusting Gary and frustrated that he was getting in and telling them how to do their marketing jobs or innovation jobs.”

That former senior employee said their boss also became distracted with Clif Bar’s competitor, Kind bar, founded in 2004 by Daniel Lubetzky. This escalated into the so-called “Bar Wars” which included Erickson taking out a full-page advertisement against Kind in The New York Times, attacking the company on social media and even setting up secretive Kind bar “task forces” that would closely monitor their competitor’s product development, marketing and philanthropy. “He was convinced we had a mole at the company who was leaking secrets to Kind. He constantly wanted to get into lawsuits with Kind… It was sucking up so much time and energy,” the former senior employee said, noting that at this point employees started to leave in droves. Clif Bar typically had an employee turnover rate of about 3%-5% a year, according to that employee. In 2019, it was in the low double digits, they said.

“There were a lot of growing pains happening within the organization,” said another long-time employee of the company. “It felt like maybe Kit and Gary were too out of touch with the business and someone needed to step in and get more involved. It felt like workwise we weren’t capable of reaching our full potential. That was a huge point of frustration regularly.”

When the owners stepped down in mid 2020 to make room for a new CEO, former Tyson Foods group president Sally Grimes, it felt to many like a positive step (Erickson and Crawford both have seats on Clif Bar’s board of directors). But the entire energy bar industry was facing a looming challenge. The coronavirus pandemic caused a shift in snacking habits that stunted some of the key purchasing channels for energy bar makers, according Morningstar analyst Erin Lash.

“Because of the mobility restrictions, sales through more impulse-type channels—fitness facilities, convenience stores—slowed, and [that] did have an impact as it relates to the protein bar area of the industry,” said Lash. “The fact that individuals weren’t packing lunches for school or work also had an impact on the snacking industry as well.”

Grimes announced in September 2020 that big cuts would follow. Then, five months later, on the morning of February 22, 2021, Clif Bar’s employees were instructed to join a company-wide meeting where they were told for the first time that 125 people would be laid off–nearly one-third of the staff at headquarters. If they received a calendar invitation to a video meeting later that day, it meant they would be losing their jobs. “Many of those people had been at the company for 10 years or longer, some as long as 17 years,” said the former senior manager. “None had been underperformers.”

While these types of mass firings have become somewhat common during the pandemic, employees impacted by Clif Bar’s layoffs say the handling felt out of character for a company that for many years received recognition for its workplace culture. Clif Bar offered generous benefits like multi-week sabbaticals, an on-site childcare center, paid volunteering–and of course the ESOP program. In 2012, the company gave each of its employees bicycles with their names and start dates engraved on the side. Erickson and Crawford had hosted annual bike rides and barbecues for employees.

As for the layoffs, “The way it happened was so weird and cold and rude,” said one ex-employee who had been at the company for over two years when they ware let go, calling it “the best job I ever had” up until that point. After the call on which they were told they’d been laid off, there was no opportunity for questions, this employee said. “Then when I went back to my email it had been turned off.”

Multiple women were fired while pregnant or on maternity leave and offered no additional accommodation beyond Clif Bar’s standard severance package: regular pay through April 2021 and then two weeks of pay for every year at the company. It had previously provided employees with up to six months of paid maternity leave.

One woman told Forbes she was in the hospital, having just given birth, when she was summoned into a meeting to be fired. She had been on maternity leave for two weeks prior but was told she would have no more leave when she received her severance package. This employee consulted an attorney and ultimately negotiated with Clif Bar to honor most of the pre-agreed maternity leave, but said the entire experience left her with more than a bad taste in her mouth.

“For a company like Clif Bar that really touts it being an employee-first company and really having these strong values—being all about the way we treat each other—to not have any consideration given for my situation was just shocking and disappointing,” said the employee, adding: “I had to come home from the hospital and instead of having a nice family moment, I had to go and be in a room by myself and talk to HR.”

Another former employee who was pregnant when she was fired, said she was interviewing for jobs while late into her pregnancy after she tried unsuccessfully to appeal to human resources for the paid maternity leave she previously would’ve received. “I was in a position where I was interviewing for jobs, but I was halfway through my pregnancy,” said the employee. “It set me up so that at those companies [that might hire me] I would not be eligible for maternity leave.”

By January 2022, the former senior employee said they had counted more than 50 additional departures on top of the 125 layoffs–meaning nearly half of the 400 employees who had been working at Clif Bar headquarters when Grimes took over in 2020 were no longer there. “Everything kind of fell apart with that restructure,” said one long-time employee. “Everyone saw that it was cutthroat and that it wasn’t the family environment … I don’t think it was a good thing for really anybody.”

Clif Bar spokesperson Pfaff did not comment on specific incidents but said the layoffs were made with the goal of doubling the size of its business and “its positive impact on the world.” “This required assessment of skillsets throughout the organization and culminated in the difficult decision in Feb. 2021,” explained Pfaff. The company went on to hire 50 new employees “in areas such as innovation, data and analytics,” she said.

Aside from a shift in atmosphere, the turmoil at Clif Bar had another key consequence for its employees. The company re-purchased the vested shares of those who were laid off or left in the following months, according to interviews with former employees and documents viewed Forbes. Eligible employees were given the option to cash out immediately at the company’s 2020 share price, or wait three years to get their ESOP balance at the 2021 share price. Others left the company before their shares could vest.

Either way these employees missed out on the boost in the value of Clif Bar shares following the sale to Mondelez. “It’s frustrating because in my mind we helped build this and we did build the future value towards it,” noted one employee. “The sale will not positively impact us,” said another. “It’s a bummer to miss out on that.”

Mary Josephs, the founder of the boutique investment firm Verit Advisors, helped Clif Bar set up its ESOP back in the spring of 2010. (Josephs is also a contributor for Forbes). She said the owners wanted it to be a reward for employees who had stuck with them through the tough early years. “They got through [those early years] because of the loyalty and dedication and culture of the team that was with them, and they just thought it would be such a great part of the Clif culture for their employees to have retirement security,” she said.

According to Josephs, Clif Bar’s ESOP was set up so that employees would be given shares annually equivalent to about 10% of their salary. Most employees–aside from union employees and part-time workers–could qualify with the shares vesting after three years of employment. The shares are stored in a retirement account, though can be sold earlier with a penalty. Josephs said that at the time the ESOP was set up, there were fewer than 200 employees at Clif Bar and the owners “bent over backwards to include as many as they could,” including through “look-back vesting,” which gave employees credit for the years they had already been at Clif Bar.

But the former manager at Clif Bar said there was a key change made to the ESOP at the time of the 2021 layoffs that ended up limiting the number of shares that would go to employees. Instead of redistributing the shares repurchased from people who exited during this period to its remaining employees, Clif Bar chose to “retire” them out of the employees’ pool, according to the employee. So the amount of Clif Bar that its employees own is likely less than 20%. The company would not confirm employees’ current ownership or how those shares were reallocated.

Though understandably miffed by the missed money, employees said they were also regretful over how the company seemed to have changed over the years. “We’d been to [Kit and Gary’s] house … they worked alongside of us on volunteer days,” said one long-time employee. “It felt like we were really immersed with them, so just the disillusionment of them walking away from everything, it felt like none of it was real.”

Former employee Swanson emphasized that Clif Bar’s mission-driven culture was one of its key appeals; the company uses mostly organic ingredients and has focused on investing in and promoting sustainability. She worries about what will happen when Clif Bar is absorbed into Mondelez, and whether it will maintain those values.

“Kit and Gary at the helm did so much for the food system and the world. They were talking about organics before anyone was talking about organics,” Swanson said. “Now I don’t know if my dollar will make a change in the food system for the better.”

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