$500 Million. Wow.
San Francisco Bay
May 17, 2021
I was wondering. I had no idea it’s business was this big. That’s a lot of cookies!
Tate's Bake Shop, home to America's No. 1 chocolate chip cookie, recently sold to Mondolēz International for $500 million.
Its founder, Kathleen King, credits the success of the beloved brand to losing her first business.
Now retired, King talked to Business Insider about the hard work and perseverance it takes to be successful: "If I didn't have my epic failure I wouldn't have had my epic success; they go hand in hand."
"Taste of home."
That's how Kathleen King, the woman behind Tate's Bake Shop — home to America's No. 1 chocolate chip cookie, according to both Consumer Reportsand Rachel Ray — described the baked-goods company when I put her under the constraint of three words.
A staple in the Hamptons' East End and on many grocery store shelves, Tate's officially sold in June to Mondolēz International, the maker of Oreo and Chips Ahoy, for $500 million — a deal in which King completely passed her legacy into new hands, she told Business Insider.
King, now newly retired, founded Tate's in 2000, but her baking prowess dates back to her childhood days on North Sea Farms in Southampton, New York.
She set her sights on the oven at age 11, baking cookies to sell for a bargain at her father's farm stand — six for $0.59. With a lot of consumer love and little competition, she grew her business enough to spend her high school summers baking ten hours a day, seven days a week, she said.
"When I was [growing up on a farm], I felt like a child slave, but looking back it was really heavenly," King said, adding that her parents told her she could do or be anything if she worked for it.
"It's a tremendous amount of hard work, you start working at a really early age," she said. "In the big picture, it's wonderful — you develop work ethic, learn to apply common sense, and see how nature is entwined."
It's what helped King prepare for a business adventure that involved a lot of grit, she said.
"It's not easy. You learn when you fall down, you get up," she said of farm life. "There's nothing cushy or protective. Which is what made me survive my journey."
Quality is the most important thing
With $5,000, King rented her first bakery at 21, in 1980, and began wholesaling Kathleen's Cookies at farm stands. Three years later, she bought her first bakeshop — the home of Tate's today — with a $50,000 down payment and sold homemade cookies as Kathleen's Bake Shop.
In 1999, King brought on her bookkeeper and his brother to help expand her business. Having already established a relationship with the former, King made the move in good faith and under the agreement that the partners would help expand Kathleen's Bake Shop's national efforts while she would remain CEO and run the business side.
"As soon as I signed the contract, the partner I knew well turned into a different person," King said.
The partners purchased a factory in Virginia, which physically displaced King from the business end. But that was only the beginning — they churned out products of a lesser quality and stopped paying some of the bills, King said, which led to vendors seeking overdue payments.
"They were money hungry, couldn't reproduce any of my products, and when I put my foot down, they told me my pride was getting in the way of my job," King said. But her driving goal was always about the quality, not the money: "You do the right thing and the money comes."
After King started paying the vendors with cash she received from customers purchasing goods at the bakeshop, the partners accused her of stealing, she said. They soon fired her and locked her out of the very bakeshop she founded.
King took the partners to court, where they reached a compromise: They walked away with the rights to use the name Kathleen's Bake Shop and she walked away with the rights to her property — and a third of the company's debt, around $200,000.
With no money left, King said she remortgaged the bakeshop she had already paid off. Like her cookies, she had to start her business from scratch.
Success and failure go 'hand in hand'
Despite leaving a well-known brand behind, King's quality baking and supportive community quickly helped propel her new venture, Tate's Bake Shop, to success. She paid off the debt and by 2003, Tate's was guesstimated to be back at its $3 million annual revenue mark, she said.
King views losing Kathleen's Bake Shop to her former business partners as the only reason she is where she is today. "I had the gift of dying and coming back, learning what didn't work in that lifetime and what will work in this lifetime," she said.
When it comes to starting a small business, she says, count on it being four times harder than you dreamed — perseverance is key, and so is getting up, moving forward, and not staying attached to mistakes and failures. She said she learned the hard way that you can care, but getting too emotional will crush you.
"I put everything I had into Kathleen's Bake Shop and lost it," King said. "When I started Tate's, I said I'm not giving blood again; I'm not being emotional, I didn't have time or money. I had to be a business manager. I wasn't ruthless, I was fair and passionate, but when you get dragged down as low as I did, you become somewhat fearless. If I didn't have my epic failure I wouldn't have had my epic success; they go hand in hand."
When she started Tate's at age 40, King told herself that when she turned 55, she would retire because she had sacrificed her whole youth working.
"When I went into business, my goal was to buy an apartment and car and move out of the house. My goal was to be the No. 1 cookie," she said. "Then my goal was to sell, so I could retire."
She took the first step towards retirement when she brought on Riverside Company, who purchased a majority share in Tate's for $100 million in 2014, she said. The second time around, King wasn't going to make a single mistake. She hired a professional firm that specialized in selling companies to help her lay out what was rightfully hers and put Tate's out for bid.
King stayed on running product development and quality control while Riverside grew the brand at a faster pace and expanded products. "I didn't have to work really hard, I didn't have to do the day-to-day, and I was on the board," she said.
In June, Riverside sold Tate's for $500 million to Mondolēz International, who has increased cookie production from 1.5 million cookies a week to one million cookies a day. King is officially out of the business and finally retired — at least for now.
"I miss the people and the community, but I don't miss the day-to-day," she said. King, a big supporter of local non-profits, land preservation, and empowering young women, put most of what she received from the sale into a charitable fund she created.
She's ready to enjoy things she felt she missed out on in her youth by delving straight into business. "When I was younger, I was older than I am now," she said. "I would tell my twenty-something self don't take things too seriously; everything will be okay."
Her goal for the year is to clear her calendar, and then slowly put things back if she so chooses: "There's nothing more valuable than time, so I'm not willing to give it up." She has been spending time cycling, traveling, mentoring, and helping non-profits.
And of course, she still finds time to indulge in her favorite taste of home — Tate's chocolate chip cookies. The best way to eat them, according to King, is on their own. "Then again," she says, "everything in life goes with ice cream."
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