Two decades ago, Tom Knibbs, 58, left the corporate world to make spice mixes in a green Tupperware bowl in his basement. His partner, Jim Dygas, 51, thought he was just dabbling at business. Then Chicago-based Urban Accents got its spice blends into Crate & Barrel, and other retailers followed, including Whole Foods, Macy’s and Safeway. Today, Knibbs, a former packaging salesman, is CEO and Dygas, previously a marketing guy, is chief creative officer, and Urban Accents has revenues of roughly $15 million. While the core of the business remains dry-blended spice mixes – it makes more than 150 of them – with spice industry competition tougher than it used to be, Urban Accents recently moved into sauces as well, with pumpkin simmer sauces and do-it-yourself pizza sauces, priced at $5.99 to $7.99 a jar. In an interview that has been edited and condensed, Knibbs and Dygas spoke about lining up big-name retailers, their biggest unexpected disaster, and how the spice business has changed since Whole Foods came along.
Amy Feldman: How did you start the business?
Tom Knibbs: For a couple of years, I made spice blends and we gave our home-made gifts to our friends for the holidays. Jim said, ‘Why don’t you see if there’s an opportunity to sell these to a retail market?’ I spent six months putting together a business plan and talking to suppliers. Jim has a great design sense. We had a square bottle with a brushed aluminum cap. The retail space was all plastic bottles with red caps, 1950s packaging that hadn’t been changed. We said, ‘let’s do it.’ We were literally blending spices in a big Tupperware bowl in the basement.
Feldman: Didn’t you need approvals to do that?
Knibbs: Back then it was like the Wild West. There were not a lot of food-safety rules and regulations. I don’t know if you could start a company like we did then today. We were doing this and selling it to small stores and were not on anybody’s radar. I reached out to Crate & Barrel and said, ‘Who’s the buyer?’ They said, ‘Oh, that’s Nicole, let me get you to her.’ We sent her the product, and she called back the next day and said, ‘This is great, who are you?’ Within a couple of days she had given us an order for $10,000 to make spices for a pizza set. That got us out of the basement. I subleased space, and we became quote-unquote official.
Feldman: What year was that?
Knibbs: That was 1996-97. We’re celebrating our 20th year anniversary this year. Now we have a 30,000 square foot facility. We are SQF certified, safe quality food certified, by the Safe Quality Food Institute. I don’t want people to think we’re still in my basement with the green Tupperware bowl.
Feldman: How did you grow from there?
Knibbs: The first few years were fits and starts. We would exhibit at the Specialty Food Show, which is held in San Francisco and New York. Everybody from Target to Sur La Table to Kroger walks that looking for new products. Retailers shop other retailers, so when you are in one chain it opens doors.
Dygas: One of the big differences from the beginning is that we saw ourselves as more than a spice company. We turned down a lot of opportunities to sell oregano. We are known for our ability to meld flavors into different products. We had jalapeno lemonade and sriracha popcorn seasoning.
Feldman: What’s your best-selling product?
Knibbs: Our veggie roasters, which we launched three years ago. There are four in the line. You sprinkle them on vegetables and pop them in the oven or on the grill.
Dygas: The number one item is the balsamic and roasted onions veggie roaster for brussel sprouts. The idea is to bring a balsamic flavor profile into powdered form and make it easy. The package has beautiful photography on it. Our customers want to be told, ‘This is fantastic on brussel sprouts.’
Feldman: So it’s for cooks who don’t like to experiment?
Knibbs: Everybody is looking for a great flavor combo that’s easy to use.
Feldman: What were some of the twists and turns along the way?
Knibbs: I’ll tell you the most infamous one, and then we can talk about the recession of 2008 and 2009. We launched a line of snack mixes with our spices as flavorings. One was called Tsunami Mix. The tagline was ‘it’s a tsunami of flavor.’ We launched in 2003, and in 2004 Marshall Field’s brought them into 30 stores. Marshall Field’s on State Street in downtown Chicago had a display that looked gorgeous. 2004 is when the tsunami hit Indonesia and Southeast Asia. All of a sudden I got phone calls. ‘You people are so insensitive.’ ‘You’re taking advantage of this disaster.’ ‘I hope money is going to tsunami relief.’ We were sitting there, around Christmas, and I was like, ‘Omigod, you’ve got to be kidding me.’ I called our buyer—she was on vacation—and she was like ‘all right, I’m calling all the stores, and taking all the displays down.’ I laugh now, but at the time it was a severe financial hurt and we felt bad.
Feldman: How much did you lose?
Knibbs: More than $50,000 and under $100,000. For a company our size it was a big hit. But you just had to take it off the market. It was not a question.
Feldman: And the recession?
Dygas: We had just moved to our current space, which is 30,000 square feet, and within a three month period the phones just stopped ringing.
Knibbs: It was the perfect storm. We had increased our overhead by almost 50% based on projected growth when it hit us. 2008 was a good year. By 2010 we had lost 40% of our business. It was a very soul-searching time. I don’t want to get emotional here. We had layoffs.
Dygas: We weren’t a big company, but even laying off a couple of people was hard for us. Tom and I have done this on our own from the beginning. We had debt. At one point, Tom brought the keys in, threw them on the table, and said, ‘Maybe we should pack it in.’
Feldman: What did you do?
Dygas: We culled the line a little bit. What we took away from it is that we will never be an overemployed company. We will always run a little lean so that we are prepared for bad times and for products that don’t take off.
Feldman: What about financing?
Knibbs: This was financed through a 401(k) that I had. I was so lucky to have five people that I used to work with in the packaging industry who gave me $5,000 each. So that was $25,000. We have always been self-financed and we put the profits back into the company to fund our own growth.
Dygas: We had a former business associate join us in tough times who put in some capital to get us over the hump. We paid back the loan very quickly, but the associate retained 15% of the company for the investment. We restructured our debt through Obama’s small business stimulus program. I think it saved our company. Our banking relationships became less strangling because of that.
Feldman: How much debt did you have, and how did the refinancing go?
Knibbs: We had some $400,000 in debt. We were able to refinance into an SBA loan for $500,000. The program waived all the fees that you have to pay for an SBA loan. The interest rate on our line of credit and term debt was above 8% and our SBA loan came in around 3.5%. That was in 2010, and we were able to pay off our SBA loan last year.
Feldman: What’s your debt situation like today?
Knibbs: Our business is seasonal, so we have a line of credit that we draw against heavily this time of year, but we pay it off when the holiday is over. It’s money for working capital. We have a very small term debt.
Feldman: Where’s the factory?
Knibbs: We’re on the North Side, the Ravenswood Industrial Corridor. We’re Urban Accents, not Suburban Accents, so we will always be in the city.
Feldman: How much of the company do you own?
Knibbs: We own 80%. The people who put in money early are still here.
Feldman: So often we write about guys who take outside money.
Knibbs: I read your article about the guy from Whitepages. It’s scary. We’re doing well, and we have this vision of where we want to go with the company. It would terrify me if I had financial people who had a say.
Feldman: What’s next from here?
Knibbs: More new product development, and strengthening our sales. We talked about the specialty channel, Sur La Table and Crate & Barrel. We also sell to specialty grocery stores like Fresh Thyme and Whole Foods. We see our key growth coming from traditional grocery like Safeway and Kroger.
Feldman: Why is that?
Knibbs: Traditional groceries are looking for more unique flavor combinations. Go back 15 years, and only the specialty companies were interested in it. Then Whole Foods came along. Now our local Jewel is interested.
Dygas: This is an important year for us because we launched our first sauces. We introduced three pumpkin simmer sauces for fall, pumpkin tagine, pumpkin mole and pumpkin curry. And we have some creative pizza sauces for DIY pizzas.
Feldman: Who do you consider the competition?
Dygas: I do not feel like we compete with McCormick. Our competition is flavors and cooking solutions. More and more our competition is from retailers’ own labels. It’s not extremely difficult to create your own version of a steak rub. That is why we are aiming more for creative products to build the brand.
Knibbs: I don’t think you’ll find other people with a pumpkin mole sauce that you can pour on a chicken and have a fabulous meal.
Feldman: Where did you meet?
Knibbs: We are not only business partners. We are life partners. We met in 1983 in Tampa, Florida.
Dygas: We’d like to say we met in a spice store in Paris rather than in a bar in Tampa.
Feldman: How has it been to start a company with your life partner?
Dygas: I thought this was a hobby, and I thought he would get a real job one day, so the first few years I didn’t take it too seriously. I left the marketing agency in 2001. The parent company of the agency went bankrupt, and I had to lay off 100 people. It was devastating. Deciding to focus on Urban Accents was an easy decision.
Knibbs: Jim is the creative genius behind it all. I’m more of the business and numbers and all that. We have very strong views, and we’re typically on opposite sides of situations. If we were two accountants trying to do this, we would never have made it.