New York based Kaliannan – like many entrepreneurs – launched his career in food by creating a product that he wanted to eat, but couldn’t find on the market.
Diagnosed with diabetes and epilepsy as a senior in high school and put on a keto diet (which is sometimes recommended to people with certain types of seizures), he was bored with eating eggs for breakfast and looking for something more like the sweet chocolatey cereals of his youth (think Cinnamon Toast Crunch and Cocoa Puffs)... without the carbs.
“So at breakfast, keto means no bagel sandwiches, muffins, acai bowls, pancakes, breakfast burritos, or waffles… which basically leaves eggs, and it was getting very boring, even though there are a lot of things you can do with eggs. The same applied to snacks. I was basically eating nuts every day and I missed the crunchiness of cereals and crackers.
“It’s very hard to find foods that are keto-friendly as you don’t have a lot of variety, and everyone around you is eating fun things,” added Kaliannan, who has an educational background in systems engineering, mathematics and statistics, and had already founded two companies before turning his hand to breakfast cereals in his late twenties.
Obviously, it tasted awful, because I didn’t know what I was doing
“One day I walked past the cereal aisles and saw all the cereals – Trix, Froot Loops, Cap'n Crunch, that I liked as a kid - and had this wave of nostalgia, I thought well I’m already making low-carb crackers at home, maybe if I just add some cocoa, make some dough into a ball rather than a square, and I’ll have some low-carb cocoa puffs. And obviously, it tasted awful, because I didn’t know what I was doing, but I got better.”
Pretty soon, he was making the puffs for his friends in ziplock bags, who sent him some cash via a mobile payment app (“I hadn’t asked them to pay me or anything like that, but they just venmoed me”), and then making it for their friends, and before he knew it, he was spending all Sunday afternoon baking.
“So I decided either I’m going to stop this and just make it for myself again, or I was going to try and turn this into a business.”
Cashflow: When you're selling direct to consumer, you're getting your money back as soon as you sell something
He attended a baking conference where he learned all about dough moisture and elasticity, shelf-life, and rancidity, started manufacturing his wares at a commercial kitchen with Hobart mixers and bread ovens, and selling his products online.
Pretty soon it became clear that he needed something bigger, and rather than work with a co-packer, he leased a food grade facility in the Midwest and set up his own commercial scale operation.
“We didn’t want to do the bag into the box type packaging, and there are not a lot of folks that do packaging into stand-up pouches, plus when you’re selling online, you’re making your money back as soon you’re selling, so we could buy used bread ovens as we needed them.
“Now we split volume across two facilities, our own as well as co-manufacturing facilities, as you never know if a tornado is going to hit.”
New York based Catalina Crunch sells keto-friendly cereals in four varieties: Cinnamon Toast, Maple Waffle, Dark Chocolate, and Honey Graham.
Ingredients (dark choc): Catalina flour (organic pea protein, potato fiber, non GMO corn fiber, chicory fiber, acacia fiber, guar gum, turmeric), tapioca, organic high oleic sunflower oil, baking powder, natural flavors, sea salt, calcium carbonate, vitamin E, organic monk fruit, cocoa.
Each 26g serving contains 8g protein, 7g fiber, 0g added sugars, and 90 calories.
The number of people that eat our cereal out of a bowl is only around 45%
The great thing about direct to consumer is that you get to talk directly with customers, not just buyers, from the outset, said Kaliannan, who is now talking to bricks & mortar retailers after proving he has a viable product and enthusiastic consumers.
“There are a whole bunch of folks that are buying the cereal for different reasons. There’s the plant based community, especially the ones on a keto diet, as if you can’t eat meat or eggs or cheese it’s hard to find anything to eat for breakfast. Then we have folks that eat Cheerios, but they don’t want to eat a whole bunch of empty carbs, and they also think this tastes better.
“I’d say plant-based protein is our #1 attribute, then keto, and then zero sugar.
“We also learned that the number of people that eat our cereal out of a bowl is only around 45%. People are eating them directly out the bag, baking with them, making cereal bars with them, giving it to their kids or eating it at the office as an afternoon snack, or putting it on top of yogurt or on top of smoothies to add crunch.”
Snacks: They have no carbs
Inspired by the knowledge that many people were consuming Catalina Crunch as a snack, Kaliannan recently introduced a second product line – crunchy ‘keto’ cheese bites – made from a single ingredient (vacuum dried grass-fed Cheddar cheese), which is already selling well, said Kaliannan.
“They are a dream thing to eat for someone on a low carb or keto diet. To consumers eating Cheezits, they maybe think they are eating something very cheesy, but it’s just bleached enriched wheat flour coated in a cheese seasoning, with added orange color.”
When it comes to marketing, Catalina has relied upon a mix of organic customer acquisition (eg. posting on social media, blogging, giving free samples to influencers who then post about it if they like it); paid customer acquisition via digital advertising – most fruitfully on Instagram; and word of mouth; said Kaliannan, who has raised money from a mix of investors including "Sequoia Capital, Blue [Seed] Collective and the folks behind BarkBox.”
“I’m really excited about where we are and where we going and using the online route has allowed us to scale the business much more quickly than I ever thought was possible, and we now have funds to help with the development of new products and markets.
“We’re close to doing almost a million dollars in revenue a month via our website, so I’m excited to launch into retail. We’ve secured a few accounts and our strategy is to focus on making a big splash in January in stores.”