Case Study: DrSoy Nutrition (DrSoy)

Business Description: DrSoy Nutrition (DrSoy), an Irvine, CA-based, privately-held company was founded in 1999 by a highly esteemed and well-known physician, Dr. Ari Babaknia. The company focuses on addressing the health needs of consumers and educating them through the development, distribution and marketing of great tasting soy-based snacks and foods.

Theme: To date, the company’s accomplishments are largely due to the passion and resources of the founder, along with clever outsourcing. However, to reach the next level of success, DrSoy needs a strategy that leverages the help of strategically-based partners, in addition to effective execution.

Background: For the past six years, Dr. Babaknia’s main passion has been to grow DrSoy into a mainstream nutrition company, which provides a vehicle to get soy into the diet of Americans and to promote the benefits of soy. Also driving the company is the fact that penetration of soy in the U.S. is low, and that a key deterrent to bringing new customers into the category is taste. As such, the company is dedicated to developing and marketing a line of delicious soy-based foods, which contain proper amounts of soy protein and isoflavones, and appeal to mainstream consumers. From its inception, DrSoy has been a “lean” organization, compelling it to outsource formulation, manufacturing, marketing and distribution.


Situation Assessment: DrSoy has essentially been a self-funded operation seeking to compete in tasty, soy-based products. All of its target markets are crowded with competitors that typically have more resources from a financial and management perspective. The past year has been very significant for DrSoy, as it launched a new brand and formed a strategic partnership for sales, marketing and distribution with World Fine Foods. In addition, Dr. Babaknia published his second book discussing the benefits of soy and the company became profitable. From almost any evaluation, it would seem that DrSoy is on-track, but this is a critical point in its history, as it now has much of the necessary support and infrastructure to grow and become a significant, dominant brand. After launching his flagship bar brand—DrSoy—which focused on optimizing the level of soy and nutrients in the bar, Dr. Babaknia expanded to other SKUs and in early 2003 launched a new brand— Healthy Snacker®—which focused more on mainstream products for the entire family based on both taste and form. Additionally, it markets trail mix, soy nuts, soy protein cookies in family packs and single serve soy nuts, plus the company recently launched a new line of low-carb soy bars.


Opportunities: DrSoy, under Dr. Babaknia’s leadership, has created an organization, infrastructure and partnerships to support a much larger brand and he needs to continue to push for faster and bigger growth. DrSoy’s retail sales are hovering around $10 million, and its goal and action plan is designed to achieve $40 million in revenue by the end of 2008. At the foundation of this effort is an action plan, which requires finding capital to fund some of these efforts, but it will require a substantial amount of time and energy, in addition to the challenges of actually getting the capital. DrSoy has bold aspirations—it is attempting to create a new category in the soy market by combining health, taste and convenience in ways that other larger, better-capitalized companies have failed.


Lessons Learned: DrSoy entered the market in a similar fashion to other preceding bar companies—led by a strong vision, desire to make a difference, focused on the long-term, not sacrificing principles and lacking professional management and necessary capital. However, DrSoy also entered a much more mature market, which requires a different strategy. The DrSoy story helps illustrate some key issues in every small business: (1) Understand when professional management and resources are needed. The essence of DrSoy is intricately linked with its founder and his vision—his role is essential, but at the same time, there is a distinct need to continue building operational excellence. The future of DrSoy depends greatly on leveraging skills from new resources, which complement the existing team; (2) Access to more capital by itself is typically not the answer. DrSoy is effectively competing in “healthy confection,” where the competitors are very strong and capital is needed, but capital alone won’t ensure success. The company needs to continue to sell products that uniquely appeal to consumers and provide a connection that others can’t duplicate; (3) A strategic partner will provide many options. The DrSoy brand has much to offer to a larger player with wide distribution reach, as it is an established, meaningful brand with all the essential elements to appeal to a large consumer base. The brand is poised for growth and there exists a significant win-win opportunity for DrSoy to align with a large player who can help with lowering costs, increasing distribution and reach, providing sales and marketing support and offering access to capital.