Nicole Bernard Dawes says Late July would have failed if its organic tortilla chips flopped after a $3.5 million loan default

Late July didn’t become a snack-aisle success because crackers finally caught fire. Nicole Bernard Dawes says the brand’s organic tortilla chips were a Hail Mary, the product that had to work after her father died, a $3.5 million loan got called, and the company was preparing to cut $2 million in cookie sales.

That is the good stuff in this How I Built This episode: not the inspirational wall decal version of entrepreneurship, but the grocery-store version, where your beautiful organic sandwich cookies can be made with real Madagascar vanilla and still quietly bleed you dry. A founder’s dream, it turns out, can have terrible margins.

Dawes had every reason to know snacks. Her father, Steve Bernard, founded Cape Cod Potato Chips, the kettle chip brand that made crunch feel artisanal before every bag in America had a weathered font and a fake farm story. She launched Late July in 2003 as an organic cracker company, right as the USDA Organic seal was becoming the new supermarket halo. At Natural Products Expo in Baltimore, she says, Late July left with national orders. Then reality arrived with a little retail baseball bat.

The problem was not that the crackers were bad. It was worse. They were good, but they were crackers. People do not inhale crackers like they inhale chips, unless they are trapped at a party beside a sweating cube of cheddar. Dawes says she had built her model with potato-chip instincts, and crackers just did not move that way.

The snack company with no snack velocity

By 2008, Late July was doing about $8 million in sales, but the company did not have what food people call a hero product. The cookies, about $2 million of that revenue, were emotionally loaded and financially ugly. Dawes had launched organic mini sandwich cookies with the Jane Goodall Institute, complete with endangered animals and a package image tied to her dad and sons. Sweet, meaningful, doomed. The ingredients were too expensive, and the recession was beginning to squeeze every fantasy out of the aisle.

Then her father was diagnosed with pancreatic cancer. He died in March 2009. At the wake, some individual investors apparently chose the least human possible setting to wonder aloud whether Dawes could run the company without him.

But they had tried to organize this shareholders meeting at my dad’s wake. And I remember just thinking, like, it was a very stunning moment.

Then came the bank letter. Late July had taken on a large equipment loan tied to manufacturing. Because the company was an LLC and her father was a member, the loan agreement had a death-of-a-member clause. The bank used it.

So we had this large equipment loan. And at the time, you know, interest rates were so low that most banks were like kind of upside down in some of these. And we had a death of a member clause in our loan agreement, and we were an LLC, and my dad was a member. So they used his death to put our loan in default.

Guy Raz, doing the math in real time, sounds properly horrified. Dawes says the loan was $3.5 million, with something like 30 or 60 days to fix it. This is where founder folklore usually inserts a montage: someone believes, someone writes a check, Coldplay happens. The actual version is more useful. Dawes talked the bank into giving her more time, met Meg Hirshberg at a trade show, got connected to Gary Hirshberg of Stonyfield, and found a new mission-driven lender in RSF Finance.

The Hail Mary had corn dust on it

The financing kept Late July alive. It did not solve the business. The company was still a slow-moving cracker brand about to drop unprofitable cookies. Dawes needed a product that could live in the chip aisle, not the wholesome penalty box. Tortilla chips hit the brief: organic, gluten-free, nut-free, more inclusive after her son’s life-threatening peanut allergy, and closer to the grab-and-demolish behavior that makes snacks a real business instead of a pantry museum.

And, you know, the tortilla chips just hit all of the marks that we wanted. And it was one of those things that if it didn’t work, the company for sure would have failed because we were discontinuing $2 million. We, you know, we were going to put a lot into this new launch.

The claim is credible, with one necessary correction: tortilla chips did not single-handedly save Late July from the loan default. Money and patience did that first. But Dawes is right about the deeper save. A refinanced company without a high-velocity product is just a patient moved from one room to another. The tortilla chips gave Late July a pulse.

The make-or-break moment came at Stop & Shop. Dawes says she had not done much selling herself, partly because her father had been so good at it. Now she needed the retailer to say yes so a distributor would take the product. She was so nervous that she read the presentation, then broke the sales-call rulebook by asking the buyer directly for the answer.

And he looked at me and he said yes, which I mean, I’ve been on a thousand sales calls since and that has never happened.

That yes changed the company. Dawes says Late July went from barely hanging on to being on track for $100 million within a few years. Snyder’s-Lance later increased its stake, Campbell’s eventually took in the brand through the Snyder’s-Lance deal, and Dawes went on to start Nixie, an organic sparkling water company. Of course she picked beverages next, because apparently after surviving the second-hardest supermarket category, the only sensible move is to walk directly into the hardest one.

There is a clean lesson here, but not a cute one. Mission helps people love a brand. Taste gets the second purchase. Category velocity pays the bills. If Dawes’s story is true, and the details make it hard to dismiss, Late July was not saved by being organic. It was saved when organic food finally learned how to behave like a chip.