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In Balance

Joey Herrick loves dogs. He has seven and five of them sleep in his bed. He’s also a visionary and marketing wiz. Twenty four years ago — as a drummer on a television show — he met comedian Phyllis Diller. He liked her chili so much he turned it into a small company and called it Philli Dilli Chili. It didn’t seem to lead to much. But it got him hooked on being a businessman and an entrepreneur. When he met actor Dick Van Patten on the John Davidson show in 1988, he decided to start a pet food company. With a flair for marketing, he put Van Patten’s name on the label and called the company Dick Van Patten’s Natural Balance Pet Foods. Today Natural Balance grosses “way over $200 million” and is aiming to top $1 billion, Herrick said. It just expanded into a new distribution plant in Pacoima, more than doubling its size. It employs about 500 people. Key to that growth has been two strategic moves — the company’s proactive and sensitive response to a devestating 2007 pet food recall and hiring Tillman the surfing bulldog to be the company’s mascot. What motivates Herrick? Making a splash, certainly. He’s a drummer who almost succeeded in a $1.2 billion bid to buy the Dodgers with former team stars Steve Garvey and Orel Hershiser. Fun, too. After 24 years, having fun is still the biggest reason he goes into work every day, he said. But he’s also motivated by doing what’s right. When pet owners called him from vet offices around the country in 2007, he didn’t hesitate to pull out his personal credit card to pay the bills. “That wasn’t a business decision,” he said. “It was a moral decision.” Question: I understand you were once a drummer. How did you get into the pet food business? Answer: I was playing drums on TV shows. John Davidson had a talk show in the ‘80s. Dick Van Patten was a guest on the show and that’s how I met him. So I said to him, ‘How would you like to start a pet food company?’ I knew he loved animals. He said, ‘I’d love to do that.’ So that’s how we started. Q: Seems risky. Why would Dick want to do that? A: He liked me. And I said to Dick. ‘We could give money to animal charities. And we’ll have the best food on the market. We will elevate pet food nutrition. It will be fun.’ I thought we would do it for a few years, and then sell it, like we did with the chili. Q: The chili? A: Yes. So in the 80s, I really wanted to create my own TV show. So I created a pilot. Phyllis Diller was in it. Skipper from “Gilligan’s Island”– Alan Hale Jr. — was in it. Well, the pilot didn’t go. But Phyllis Diller made chili on the set one day and I said ‘Phyllis, this is the greatest chili I ever had. You should put it in a can.’ And she said, ‘I don’t have time for that, you do it.’ So I did. I contacted a manufacturers in Denver and it was interesting…I wanted to try chicken chili because we’re healthy in L.A. So they made it and it was horrible. They said, ‘We tried to tell you, chicken and chili don’t mix.’ I said, ‘Do me a favor. Do it one more time and use pinto beans. Well they did it and it was great. We were the first chicken chili on the market. It was called Phyllis Diller’s Chicken Chili and later became Philli Dilli Chili. Truly, it was the best chili in a can. Q: What happened to it? A: Morehouse Foods, the mustard company, wanted to buy it. So I sold it to them. Morehouse eventually decided it was not its core business. They asked me if I wanted to buy it back but by then I was in the pet food industry and they eventually dropped it. Q: So you were going to sell the pet food business like you sold the chili business? A: Yes, but as I got into it, it took longer and longer. I was still a drummer at the time and in the music business, guys will call you once, then twice, but if they have to call you a third time…well, you never get a third call. So I said to my wife, ‘We need to make this pet food business work.’ And we liked dogs and it was fun so we decided to put all our energy into it. My wife, Lynda — she was a model on the show “Sale of the Century”— she started driving up to Fresno to do demos. She got us our first 60 stores. And I was selling the stuff from the back of my car. Q: So you had some struggles? A: Yes, because we put all the money back into it. Our first year we did $160,000 (in sales) and it was not profitable. The second year, $365,000; the third year, $440,000. Every year it went up, and our attitude was, just keep putting the money back in. Finally we go to $1 million. Q: When was that? A: About 14 years ago. By then we were into it since 1988. So I started going out to venture capitalists to raise money to take it to the next level. I put a business plan together. But they just laughed at me. They didn’t see the vision. And I went to private investors, and they didn’t see the vision either. And finally, through a mutual friend, I was introduced to Dr. Greg Kay, one of the top heart surgeons in town. He and his father had the Kay Medical Group and I met him and his wife Susan, who is a plastic surgeon. Well, they were already using the product and they believed in what I wanted to do. And they gave us our first real chunk of money. Q: How much? A: They invested $1 million and they put in more later. I took that money and just kept growing. Q: So how big are you now? A: We’re big. We have 500 employees. We’re way over $200 million and growing. Q: Is that growth pretty recent? A: The big growth came in the last four years. We’re growing 25 percent a year now. And it hasn’t stopped. But I gotta tell you…we were with a small bank in Granada Hills. We were at $16 million; we were not very profitable. And the bank told me, ‘Listen, you’re $16 million. Stop growing.’ I said, ‘I can’t stop growing.’ That’s the wrong attitude. We finally got another bank. We’re with Community Bank in Pasadena. They are a business bank. They understand what we’re doing. Today we’re profitable. Today, we have a huge credit line. Q: Are more competitors entering the natural pet food segment? A: Yes, but I don’t worry about what others are doing. We do what’s right for us and what’s morally correct. And we find that works. Q: Natural Balance outsources most of its manufacturing and was affected by the 2007 pet recall. What exactly happened? A: Some of the (Chinese) suppliers added melamine to the rice protein and the wheat gluten. It jacks up the protein. It’s a trick they used. Q: How was the company affected? A: We were going along just perfectly and then that hit. The entire industry was in the dark as to why. That was the worst time of my business life. But I looked at it like a moral issue. I had a customer at the vet (with a sick dog) and I said, ‘Here is my credit card. Do what you need to do.’ That was not a business decision. It was a moral decision. By doing that, we ended up growing 26 percent that year, and through word of mouth, it got out that Natural Balance was the only one standing up doing the right thing. Q: But you couldn’t do that for every pet owner? A: We did it for everyone who had a legitimate claim. It wasn’t that many dogs because we did a recall within 24 hours. So not that much food got out. I’m a very hands-on manager and we’re not that big. So we were able to move much faster than the big guys. It took them three months to do the recall. We did it in 24 hours. Q: Did you have insurance to cover the cost? A: That’s interesting and the experience taught me some things about how insurance works. I had a lady with a sick cat and the (vet) bill was $800 and I assured her we would pay it. So she sent the bill in and I turned it over to insurance. A few weeks later, she called back and said, ‘I just got a check for $55. I thought I was getting $800.’ So I called the insurance company. They said, ‘Yes we sent $55.’ And they explained that she got the cat from rescue for $55… (Insurers handle pet claims in much the same way they would an auto accident.) If you get into a car accident, and the car was only worth $500 but the repairs cost $700, they would only pay $500. Q: So what happened? A: I made a decision to pay it. And by doing what was morally correct it turned out to be the correct business decision, too. Q: Was that when you decided to invest in the lab? A: The CEO of Petco, Jim Myers said to me, ‘Joey, we have 900 store managers saying we don’t know what’s safe. We gotta come up with something.’ And I said, ‘I’ll come up something. And that was this lab. Q: How much has the company invested in this lab? A: Originally, it was $800,000; but when we moved over (to the new building) we made it bigger and added new tests. It’s now about $1.4 million. Every pet food company and every human food company should be doing this. People don’t realize that 45 percent of all apple juice comes from China. I hope they are testing it. Q: How do you detect something like melamine? A: After 2007 we put in this machine—it looks for melamine and cyanuric acid. We didn’t do it for marketing. We did it because we wanted our product to be safe. But it turned into a big marketing thing for us. We are still the only ones who do this. I do it because I like to sleep at night. Is it costly? Yes. Would I not do it? No. Q: What is the company’s biggest challenge now? A: Commodities. Pricing has gone way up. Our country does not make a lot of stuff and we allowed that to happen. It’s all farmed out. Q: Is Natural Balance importing many of its ingredients? A: Yes, and we’re getting hit with price increases on everything. We send wheat to China then we have to buy it back and the price gets jacked up. Even potatoes are a problem. The price went up 28 percent because our country is turning corn into ethanol so farmers have stopped planting potatoes. Q: Do you pass on the price increases? A: We haven’t yet. Our economy is not in good shape so my philosophy is hold back. We don’t have to make as much money for now. Q: How much longer can the company take the hit? A: We’re looking into ways we can control the pricing. We have people overseas. In some cases we are buying the whole production process. Q: I understand Natural Balance also sells food to the zoos? A: I love that piece of the business. Years ago, Dr. Mark Edwards, the head nutritionist at the San Diego Zoo, called me to talk about elevating zoo nutrition for their lions and tigers. At the time, they used to feed the lions fresh horse meat. Dr. Edwards wanted to stop that for a lot of reasons. It was becoming politically incorrect to use horse meat. So we went to work on a product for them. Q: How much business is that? A: Oh it’s very small – less than 5 percent. What’s important about it is the promotion. Our name is all over the zoo. Plus we get to tell our customers, ‘If the San Diego Zoo trusts us to feed their ‘cats,’ you can trust us to feed yours.’ It’s a prestigious piece of business. Q: Talk about how you got involved with the Rose Parade. A: I grew up around here, but I never went to the Rose Parade. But I’m a huge Dodgers fan and I have season tickets and they asked me five years ago if I’d like to buy some tickets for the VIP section. I said OK and I bought 80 tickets. I thought it would be a good PR move and that would be the end of it. But around March 2009, I saw Tillman (the bulldog) on this TV show ‘America’s Greatest Dog.” And while I driving on the 118 Freeway down around Balboa — it’s where I get most of my ideas — maybe it has something to do with the power plant there — I got this idea to put up a float with Tillman. Everyone said ‘Why would you want to do that? It’s a waste of money.’ And I said, ‘That’s why I started my own company.’ Q: So you can call your own shots? A: Yeah. So I called the float chairman and there were two spots left. No one would have predicted the success we had. Our first float — skating bulldogs — got two billion media impressions. The second one in 2010 made the Guinness Book of World Records for the longest float. It was snowboarding bulldogs and we had four billion media impressions. In 2011 they said, ‘How are you going to top this?’ We did, with surfing bulldogs. That one had five billion impressions. Q: So the idea to put a bulldog on a skateboard and then a surfboard came from the TV show? A: I called Tillman’s owner Ron Davis and I said, ‘I want to put Tillman on the float with your dog skating.’ I don’t think he believed me. Now he doesn’t doubt anything I say. It was such a big hit I wound up signing him. I wanted him full-time with Natural Balance. Q: Is Tillman the Natural Balance dog? A: He’s the Natural Balance dog. I got him his own bus and he travels the country like a star. Then we got the idea for a reality show which is on Animal Planet now. We started Feb. 28 with 10 episodes. One thing led to another. I’m always looking for new things. When something comes up, we jump on it. Q: And you don’t take no for an answer? A: Not when it makes sense. You know why? Because when I did the sitcom pilot, I hired big people and I was a drummer and …the networks called and I let them talk me out of my own ideas. I decided right then and there if I’m going to fail at something I will fail because I was wrong. Not because I didn’t have enough strength to tell someone ‘I disagree with you. I’m doing it anyway.’ I’ve done that ever since, and thank God, I’ve been more right than wrong. Q: What are you doing for the float next year? A: It’s gonna be amazing. I can’t talk about it yet. But it’s our most spectacular float ever. Q: Where would you like the company to be in a few years? A: I see us being an $800 million to $1 billion company. But I don’t ever want to get so big we can’t handle it correctly. Q: And you. What’s in the future for you? A: I love to come to work every day. We have fun doing what we’re doing. I’m thankful we got big enough to do things we love, like this TV show, which is great because that’s how I got into this whole thing in the first place. And now everyone wants to buy us. Q: Is that right? A: We’re the largest independent pet food company left. Everyone else has been bought out. Q: So people are circling? A: All the time. Q: You’re not interested? A: No. I’m 58 and bald. Who’s gonna hire me?

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