Led by Union Grove Venture Partners with participation from new and existing investors including the D’Amelio Family Fund 444 Capital, GreatPoint Ventures and a star-studded line-up of sports and entertainment celebrities, the investment will help Hero Bread expand retail distribution from just 23 stores to nearly 2,300 doors nationally in less than six months and further develop its portfolio of better-for-you bread, tortillas and baked goods.
The young company caught investors’ – and consumers’ – attention by delivering a macro-nutrient profile, clean ingredient deck and taste experience that makes eating fluffy bread, moist and chewy tortillas and other flour-based foods guilt- and compromise-free, CEO and innovator Cole Glass told FoodNavigator-USA.
He explained that he developed the unique flour blend of “normal” ingredients that serves as the basis for Hero Bread’s products after making 100 muffins a day for nearly two years and documenting 15,000 experiments in his kitchen. He finally landed a blend that didn’t trigger his allergies, had no net carbs, no sugar, less than half the calories and more protein and fiber per serving than their traditional version.
While the blend met the needs of consumers watching their carbs or managing diet-related chronic disease, like diabetes, Glass said it the taste, texture and overall experience rivals that of its traditional counterparts prompting an early supporter to joke there was “no f-ing way” the products could be healthier of conventional baked goods.
Glass continues to lean into this “NFW” factor – highlighting the “shockingly” clean label deck, taste profile and macro-nutrient values when promoting Hero Bread to consumers and investors.
“Our flour, bread and tortillas are the natural evolution of what these products should be for humans to consume” – building on and improving early successes of low-carb products so that they aren’t just healthier but they are also “cool” and something that “people gravitate towards,” he said, comparing Hero Bread to Tesla, which made electric vehicles not just an environmentally responsible choice but also one of the most desirable.
Hero Bread strikes a ‘harmonious balance’ between price and margin
Like Teslas, Hero Bread is on the higher end of the price scale, selling for $6.99 to $7.99, but Glass says this is necessary to protect the company’s margins and he has plans to bring it down as he scales.
“Price is something we look at five times a day every day and not just in terms of competition, but trying to find the right harmonious balance between having the right margins as a business, and making it as accessible as possible,” Glass said.
Continuing with this Tesla metaphor, Glass explained that he plans to take a similar “stair step” approach to pricing and expansion – with the price coming down with new products and increased distribution.
But for now, he added, as a venture backed business, Hero Bread can’t afford to squeeze its margins like some startups might to gain consumer loyalty. Instead, the company is relying on the better-than-expected experience of a better-for-you product to help drive velocities.
“We need to make sure that we maintain very healthy margins and have a business that is investable – not just on growth and projections in revenue, especially in this day and time, but on profitability,” he said.
Pitching a business, not a dream
As Glass noted, the current economic environment is challenging for companies fundraising as investors take a more cautious approach to food and beverage businesses than they have in the past 10 years.
So, how did he raise $15m in this series and $47.5m in total?
“The key for us was going from pitching a dream to pitching a business,” Glass said, explaining that investors today are laser-focused on results and less on projections.
“You can have the greatest ambitious, but the rubber has to be meeting the road in order for things to be working. And so the first indicator that everybody is looking at these days is … margin and how profitably you are,” he said.
This includes velocity and repeat purchase rate, which Hero Bread is hitting on the head with a 54% consumer repeat purchase rate in the first months on grocery shelves and a 74% repeat purchase rate through its direct-to-consumer and online sales.
“We didn’t know exactly how direct-to-consumer was going to do, but its been killing it exponentially to become the No. 1 selling sliced bread or No. 1 selling on Amazon,” which Glass said surprised even him.
Investors also are interested in portfolio development, added Glass, but he qualified this takes a backseat to fundamentals and execution.
Glass attributes Hero Bread’s strong performance in part to a positive consumer experience, but also the company’s aggressive support for its retail partners – including couponing, sampling and employee education. It also helps that the brand is backed by some serious star power, including Super Bowl champion Tom Brady, Keven Durant and Rick Klieman’s Thirty Five Ventures, Diamond-selling artist The Weeknd and artist Lil baby.
Leveraging this star-power, new round of funds and proven strategy for driving velocity, Hero Bread is ready to expand into its first natural channel distribution with a national retail launch in Sprouts Farmers Market, followed by regional launches in Albertsons in Texas and Louisiana, Tom Thumb, Randall’s, Heinen’s and Buehler’s Fresh Foods so that by the end of this month its products will be in 32 states and 2,300 grocery stores.