Canada Markets closed

5Q: Jay Klein, emerging chewing gum mogul

Jay Klein, PÜR Gum

If you think Jay Klein and his healthy gum brand PÜR is staring down the century old Cosa Nostras of confectionary – the Cadburys and the Mars of the world – you’re grossly mistaken.

He doesn’t even really consider them competitors.

But if there’s any strategy the marketer-turned-CEO subscribes to, it’s death by a thousand tiny chews.

“Everyone want to make something happen instantly,” says Klein. “We respect the pioneers of the gum business but these are 100-plus year old institutional brands, they’re not made up of one entrepreneur, they’re made up of tens of thousands of people – (success) isn't something that can just happen overnight.”

Luckily, Klein’s a patient fellow.

Since 2010, he’s grown the brand – a healthier version of gum that’s sugar and aspartame free, vegan, gluten free and diabetic – from shelf space in health food shops to 25,000 stores including Petro Canada, Rexall and Loblaws. PÜR is now sold in 25 countries globally and cracked $10 million in sales last year.

Not bad for a pack of gum.

We sat down with Klein to chat about the gum market in Dubai, how he managed to carve out a niche in a corporation dominated industry and the art of handing out gum to strangers.

You've been busy lately – between pitching on Dragon’s Den a few weeks ago and winning the Ernst and Young Entrepreneur of the Year award. Now you’re off to Dubai tonight. Does the Gulf gum industry beckon?

We have a pretty good distribution network in Dubai. There's an international sweets and snacks show out there that we're going to be showing at for the first time.

Why Dubai? What makes it an emerging gum market?

Dubai is a country where the residents really care about what they’re putting in their bodies and they like the premium things. There's also a big vegan surge following so our gum meets those standards.

What about North America?

Globally the latest number is about US$20 billion. In North America, it's over US$6 billion dollars. So it’s pretty significant but our world is very niche in the grand scheme of things.

What does a pack go for?

The packs are really in line with what gum sells for, so if yours is $1.49 or $1.69 it’s likely the same. It’s really up to the retail margin and what distribution channel it's coming through.

We never wanted to come out with too aggressive of a pricing strategy. The challenge with the gum business is you have to do huge volume to cover overhead. The simple analogy is if I were to send somebody a gum sample, I’m sending less than a dollars worth of product but it’s going to cost me $15 to get it there. So how do I make that profitable? I have to sell a thousand packs of gum to offset that cost.

It just seems like such a small profit when you consider the logistic challenges. For me, products like gum exist in this weird and baffling little subset of the consumer marketplace.

You just summarized the first three years of our business.

Actually, let’s do that, let’s step back and summarize the first three years of your business. It started out as a little internal challenge, a homework assignment of sorts for you and your team at Drivertise International, the marketing firm you’d started fresh out of York University right?

We wanted to see how we communicated with people on the client side of the desk so we developed a fictitious gum product and we associated a brand to it. We had invested a lot of time and money into doing that and at some point the entrepreneurial mind clicked in and it was like wait a minute, why are we just throwing this away for a homework exercise? Let’s see if we can recoup our investment. My initial strategy was to try and sell one pack of gum to a stranger. That was the first goal I had in the gum business. What I didn’t realize was how much inventory you need to own just to have one sellable pack of gum.

What was the strategy?

When we started the brand we didn’t try to build the business off the major retailers because in those stores you really get lost in the shuffle and if you don’t have significant marketing support to really support you entrance into their stores then you’re finished. Instead we did something called “running for mayor” of the small stores. We weren’t looking to make huge profits, we were looking to educate the retailer, connect with the consumer. We went to the small one-off stores or chains and delivered our items.

How’d that work out?

For the first year of our business, it was impossible to pay bills or pay people. I mean, we did but there was the "you’re crazy for doing it" and it continued into year two as we grew and even if we did a million dollars or what we did back then when, you take away your cost of goods and your fixed overhead expenses and there’s just no money left. It's very much a business of economies of scale.

It’s not about getting listed in the store, it’s about turning in the store because if there starts to be no movement on your products then you’re stuck and ultimately they send it back to you.

Deliveries must have been a nightmare.

One of the keys to our puzzle was finding a logistics partner. We still maintain this rule that we'll ship you any quantity – if you want one we'll get it to you and if you want five we'll get it to you. We didn’t want to have a thousand dollar minimum. UPS created a platform for us where we could ship minimal quantities to people without us totally getting clobbered on rates.

It's almost like you're a little gum hobo riding the UPS rails.

There are certain partners that were amazing for us. You obviously need strong packaging suppliers and you need everything that you’re doing to work. We called ourselves the Bad News Bears and the Little Engine That Could because we were all there to have fun and work hard and do that but we needed to surround ourselves with partners that could get us there. I know nothing about logistics or supply chain and in that capacity UPS was a tremendous asset for us.

But you do know marketing, which is one of the things, that makes trying to launch a new gum a little puzzling to me. It's not just introducing a new healthy gum – you’re competing against these massive companies that have a monopoly at that convenience store counter and eclipsing brand recognition. You had to have known that going into it. 

That’s sort of where you jump and hope you can fly. We don’t look at ourselves as direct competition to the big guys. We really respect their position and they are marketing machines, all of them, they continue to do a great job.

We’re providing an alternative for customers looking to make substitutions and we're adding a new element for someone who doesn’t chew gum – we’ve created that option for them. We're looking to give the vegan consumer or the diabetic consumer that is looking to avoid aspartame a gum that they can feel safe chewing. The biggest challenge to all that is we need to make the gum taste good.

Seems like you're banking on people giving as much thought to gum as you've been giving to it.

If you give someone a piece of gum they say thank you. If I give someone a piece of gum they automatically sit on a board of gum critics internationally and they offer their most esteemed feedback. That’s why a lot of the sampling I still do today involves me running up and down aisles at the airport on the airplane and just offering people gum. They don’t know who I am but it’s not like their going anywhere for two hours.

Do they trust you or are you the crazy guy in the airport handing out gum to strangers?

Oh no they trust me, I'm a pretty trustworthy guy.

That sounds sketchy, somebody coming up to me on a plane and saying: “Hey, try this gum.”

You know it’s an interesting thing, now that our brand is much more recognizable, there’s a lot of “Oh, of course, I see that gum everywhere but I’ve never tried it.” We're in over 20,000 retail locations, people see it but even for $1.49 they don’t want to try it – for free they will.