A 50 year old immigrant monk bootstrapped a biz from nothing to over $1 BILLION in sales with 30%+ profit margins. It took only 8 years. The crazy part? It doesn’t even have 200 employees. Buckle up for this one 👇🏽👇🏽👇🏽
1) Manoj Bhargava was born in Lucknow, India in 1953. In 1967, his family moved to the US so his dad could get his PhD at Wharton. His family went from Indian affluence to living in an $80 per month West Philly apt. At age 17, he started his first business.
2) He bought a $400 truck and cleaned out debris in rough Philly neighborhoods. Despite the danger and rough work, he made $600 that summer. After turning his first profit, he was hooked. In 1972, he got into a little college called Princeton. A year later, he dropped out.
3) His parents were livid. To make matters worse, it was the “stagflation” economy, so he couldn’t find work! So 2 years later, with few options, he moved back to India to pursue a spiritual quest with the Hanslok Ashram. For 12 years, he focused on one thing: Meditation
4) Eventually, his parents called from America asking for his help. His parents owned a struggling plastics business. After turning their company around, he spent a decade and a half buying struggling businesses in plastics and chemicals. And then turning them around.
Says Bhargava: “Chemicals are really simple, you mix a couple things together and sell it for more than the materials cost” This would be very important later.
5) In 2003, Bhargava was 2 years into “retirement.” At a natural products trade show, he drank an “energy drink” that was 16 ounces and claimed to boost productivity. True to form, it worked on him! He noted the ingredients. Mmm… this reminded him of something, Chemicals!
6) He realized quickly that 16 oz was too big: a) he didn’t want to compete with Red Bull & Coke and b) tired does not equal thirst. What if you could have the energy without the liquid? He figured out how to mix the ingredients into a 2.5oz shot and “5-hour energy” was born!
7) Getting the product into stores was HARD. But Bhargava came up with a few genius strategies. He targeted truckers (who better than truckers? They need the energy but don’t want liquid). To get them to market: he focused on Mom/Pop Convenience stores.
The beauty of the small bottle was it could sit next to the register like gum and lighters. It was an impulse buy. To further drive sales, 5-hour paid a 50% retail margin to the stores. For a $3 bottle, they gave the store $1.50 per bottle. The floodgates opened.
8) Next up, his head of sales lined up GNC, then Walgreens and then the King: Wal-Mart which still generates 15% of their sales. Lots of competitors popped up: 6-hour energy, 8-hour energy. Bhargava played tough, suing them out of existence.
Today, checkout scan data reports 5-hour energy has 90% of the energy shot market. To what does Bhargava attribute this? The product: “It’s not the little bottle. It’s not the placement. It’s the product. You can con people one time, but nobody pays $3 twice.”
Sidebar Fun fact: in 2009, while I was an Associate at Goldman Sachs, I cold called Bhargava so we could invest. He was polite but candid: “I have Microsoft like margins, why do I need money from Goldman?”
9) By 2012, 5-hour energy was doing over $1BN in sales and it continues to grow steadily and profitably. Bhargava (68 today) still owns over 90% of the company.
Claiming to be the richest Indian-American at a net worth of $4BN, Bhargava has started his own separate VC and PE funds. He has also aggressively taken up philanthropy notably signing the “Giving Pledge” to donate 99% of his fortune.
10) I love this story because it’s a great reminder that: age doesn’t matter, lots of employees aren’t impt, tech isn’t needed and you can start with a dime. What you DO need: a great product, creative/smart distribution and a ton of tenacity. Some luck never hurts either.
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