Catalina Crunch: Krishna Kaliannan. From Homemade Keto Cocoa Puffs to Breakfast Aisle Breakthrough

Krishna Kaliannan wanted to start a tech company but failed at every attempt. On the side, he was teaching himself how to cook with high-protein, low-sugar ingredients. Not just out of interest, but out of necessity. As a teenager, Krishna had been diagnosed with diabetes and epilepsy, meaning he adopted a keto diet long before it was trendy. Krishna’s home experiments with pea powder and monk fruit eventually became Catalina Crunch, one of the country’s most popular high-protein, low-carb breakfast cereals and snacks. In this episode, Krishna shares how a life-changing health condition sparked an obsession with healthy baking— and a brand that reimagined snacking. What You’ll Learn How to turn a health challenge into a business opportunity The art and science of baking with esoteric ingredientsWhen to trust partners and when it’s best to take charge yourselfWhy the DTC model is great for some industries and disastrous for others Timestamps: 00:06:16 - Dealing with diabetes and epilepsy as a college student 00:12:38 - What Krishna learns from his early failures in tech 00:22:43 - The first, low-sugar cocoa puffs: “Rocks that tasted like soil.” 00:27:36 - His homemade cereal gets good enough to sell 00:32:42 - Naming the brand: classy alliteration and a nod to a Will Ferrell movie 00:44:51 - Learning to make cereal like the pros at Texas A&M 00:54:43 - Krishna moves from NYC to Indiana to make sure the cereal is made right 01:01:04 - Whole Foods, Costco, and becoming a household brand This episode was researched and produced by Chris Maccini with music composed by Ramtin Arablouei. It was edited by Neva Grant. Our engineer was Kwesi Lee. Follow How I Built This: Instagram → @howibuiltthis https://www.instagram.com/howibuiltthis/ X → @HowIBuiltThis https://x.com/howibuiltthis Facebook → How I Built This https://www.facebook.com/howibuiltthis Follow Guy Raz: Instagram → @guy.raz https://www.instagram.com/guy.raz/ Youtube →guy_raz https://www.youtube.com/channel/UCNSfrxNEmCruNtjIzxCBHjg X → @guyraz https://x.com/guyraz Substack →https://urldefense.com/v3/__http:/guyraz.substack.com__;!! Iwwt! RZoD751oWzUzoqqdJiqaoL6HdJfRHDUO1TKvYJ424d3Udn7-Pw9Nj6nEsauh9zcgEvLjUEc$guyraz.substack.com http://guyraz.substack.com/ Website →https://urldefense.com/v3/__http:/guyraz.substack.com__;!! Iwwt! RZoD751oWzUzoqqdJiqaoL6HdJfRHDUO1TKvYJ424d3Udn7-Pw9Nj6nEsauh9zcgEvLjUEc$guyraz.com http://guyraz.com/ See Privacy Policy at https://art19.com/privacy and California Privacy Notice at https://art19.com/privacy#do-not-sell-my-info.

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• 0:00Guy Raz?

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• 4:23Speaker 01

  I happened to meet a friend in Central Park, and I had told him that I'd been trying out the cereal I was making, and he could try some if he wanted. And then he Venmo'd me for it. And I think he Venmo'd me like $7.99 or $8.99, what looks like a grocery store price. And that's when it kind of struck me, oh, you could actually make food and sell it to people.

• 4:58Guy Raz?

  Welcome to How I Built This, a show about innovators, entrepreneurs, idealists, and the stories behind the movements they built.

• 5:09Guy Raz?

  I'm Guy Raz, and on the show today, how Krishna Kaliannan created a high-protein, low-carb breakfast cereal in his New York City apartment and grew it into a $100 million brand, Catalina Crunch.

• 5:29Guy Raz?

  A few years ago, I tried the ketogenic diet. And for about a year, I ate no bread, no pasta, almost no sugar at all. And I will tell you, it is brutally hard. Because once you start paying attention, you realize that carbs and sugar are in nearly everything. A bagel with cream cheese can blow the whole day. So can a plate of pasta, or for that matter, a bowl of cereal. Americans spend somewhere around $20 billion a year on cereal alone. There's 60 feet of it in almost any grocery store, dozens and dozens of brands. But for decades, it was basically the same stuff. Corn or rice, a lot of sugar, a little bit of color, and a different name on the box.

• 6:14Guy Raz?

  Today's guest, Krishna Kaliannan, wanted to make something different, a high-protein, low-sugar, low-carb breakfast cereal that actually tasted good. And to do that, he had to work with ingredients that were barely known or were just starting to enter the CPG marketplace at the time, things like pea protein and monk fruit. Those early experiments eventually became Catalina Crunch, a keto-friendly brand of cereals and snacks that's now doing around $200 million in annual sales. Now, one of the reasons Krishna became an early adopter of the keto diet was because he had to. He had type 1 diabetes and epilepsy, and he needed to cut sugar and carbs from his diet.

• 6:56Guy Raz?

  Krishna grew up in Orange County, California, in the 90s and 2000s. As a kid, he played tennis and also became a competitive chess player. His dad, who's an immigrant from rural India, was a veterinarian, and his mom was a nurse.

• 7:12Speaker 01

  My parents were big on education, but they were also big on you deciding what you want to do with your life as opposed to us telling you what you should do with your life. So my mom, I think, hoped for a while that I'd become a veterinarian because it'd be easy to take over my dad's practice and then run that practice myself. But both of them were very, were very hands-off and didn't really say, oh, become a doctor, become a lawyer, anything like that.

• 7:38Guy Raz?

  I mean, you know, your dad was an entrepreneur. He ran his own business, but I wonder if you, if you ever thought of it that way? I mean, did you ever, you know, some kids are selling candy bars at school and, and running lemonade stands and car wash businesses. And like, did you do any of that stuff growing up?

• 7:55Speaker 01

  I did not, no. I did not do any of that stuff. I don't think I really contemplated starting a business, nor do I think I thought of my dad as a, as an entrepreneur, to your point, even though he is.

• 8:05Guy Raz?

  Yeah, okay. A very sort of life-changing thing happens to you in the senior year of high school. And I think it happens during a visit to Penn. Tell me the story. You got, you're a senior in high school. It's 2009, and you are, you're in Philadelphia, visiting Penn. Why are you there? Why are you visiting? You're visiting because you're presumably because you want to go there? Tell me the story.

• 8:30Speaker 01

  Yeah, so I was actually just a step back, right? So a couple of months before visiting Penn, I was starting to feel thirsty a lot. And so I got to the point where I couldn't go through a whole hour-long class without having to leave, go get some water from the water fountain and come back. And then it got to the point that I couldn't drive from school back home without stopping at a convenience store to buy a gallon of water and drink it on the way back. And so I'm getting more and more thirsty. I don't know why I'm getting thirsty. And to me, drinking water is a good thing, so I wasn't too concerned about it. And then I got accepted into Penn, and so I went to Penn for this kind of new student day. And I got there with my family.

• 9:12Speaker 01

  We're staying in a hotel the night before this whole thing's scheduled to start. We walk around campus, and I pass out as we're, as we're walking around campus.

• 9:22Guy Raz?

  You just pass out on, on campus?

• 9:24Speaker 01

  Yes, yep. Go to the emergency room, and one of the first things they do is test my blood sugar, find that it's over 1,000, and that's when they diagnosed me with, with type 1 diabetes.

• 9:36Guy Raz?

  So you were 17?

• 9:38Speaker 01

  Yeah, probably 17 at the time, yep. They don't have, or we don't have, a full, complete understanding of type 1 diabetes, but what we know is that something happens in the body. It triggers your white blood cells to attack the insulin-producing cells in your pancreas, leaving you with, without the ability to produce insulin.

• 9:57Guy Raz?

  That's wild. And so now you are diagnosed with this condition that you have to manage, and you're about to start college, and your parents are going to go back to California. Man, that's a lot. That's heavy. It's like, you are now going to have to completely change your diet and do all these, and you're on your own.

• 10:15Speaker 01

  Yeah, I mean, luckily, you know, UPenn's got a great health system, so I got an endocrinologist there. You get a dietitian that specializes in diabetes care as well. But yeah, it was a lot. My parents were always calling and checking in. What's your blood sugar? What's your A1C? How are you feeling? That sort of thing.

• 10:32Guy Raz?

  All right. From what I understand, not that long after you were diagnosed with diabetes, you had another diagnosis, something else happened. What? Tell me the story.

• 10:46Speaker 01

  Yeah, I was diagnosed with epilepsy as well. I had woken up in the morning, I was taking a shower, and then I had a seizure. My mom heard me, and then she called the ambulance and I went to the hospital and was diagnosed.

• 11:00Guy Raz?

  Wow, I mean, there's a lot, there's a lot, there's a lot of obstacles you're dealing with, like, from a young age. That's tough. But I think that that diagnosis of epilepsy actually was a hidden blessing for you, right? In many ways?

• 11:15Speaker 01

  Yeah, yeah, I mean, there's different types of epilepsy. But to your point, the ketogenic diet was first invented, quote unquote, in the early 1900s, and it was for the purpose of treating epileptic patients.

• 11:30Guy Raz?

  And it's basically, it's low sugar, high fat, high protein, fiber, low carbohydrates.

• 11:37Speaker 01

  Yeah, the idea is that your brain is using sugar or glucose to power itself. And so the idea is, can you starve the brain of sugar and kind of reduce the, I'd say, the electrical signaling inside the brain so that you don't have a seizure, or reduce the chances of having a seizure?

• 11:52Guy Raz?

  It basically, you're trying to change your body from burning carbs as an energy source to burning fat.

• 11:58Speaker 01

  That's right, yep.

• 12:00Guy Raz?

  It's an amazing, I've done it. I did it for about a year, and it's amazing. It's really hard, because you have to really be careful about keeping your carbohydrates to under like 30 grams a day, or 40 grams a day. And this diet, it's, as you say, it was like introduced in the 20s to help people treat epilepsy, and was found to be really successful. You were not, I mean, you, even though you were diagnosed with diabetes, you were still eating a lot of carbohydrates, which no one told you was not a good idea.

• 12:33Speaker 01

  Yeah, yeah, at first, I was, I was still eating a lot of Philly cheese steaks and things like that, and all the, all the bread that comes along with it. One of the reasons I actually went to Penn was, when I was visiting a friend there, I noticed all the great food trucks in Philadelphia. And so I was very excited about all the different options for, for eating on campus. But yeah, with, with diabetes, it's, it's challenging, right? And then you start to learn, you know, as a diabetic, type 1 diabetic, you're taught to take insulin in ratio to how many carbs you eat. And so if you eat more carbs, you take more insulin. If you eat fewer carbs, you take less insulin. The challenge, or I think the opportunity is, is if you eat more carbs and therefore have to take more insulin, if you get it wrong, in terms of the number, amount of insulin

• 13:17Speaker 01

  you're supposed to take, you can end up easily taking too much or too little. And then obviously, insulin is, is, is or was relatively expensive. So less insulin is, is less money, which was also very, very helpful for me as a college student.

• 13:32Guy Raz?

  So how were you eating? I mean, you know, were you focused on meat and, and healthy fats and, you know, fiber? I mean, how were you just using the dining hall at, at college?

• 13:46Speaker 01

  Yeah, so once I learned kind of how my body responded to different types of foods, I started eating basically eggs every day for breakfast, and snacking on nothing but nuts. And so I started eating a lot of that, and it reduced how much insulin I had to take by, by a lot.

• 14:02Guy Raz?

  All right, so you completely transformed your diet in like around 2009, and keto was still very weird, that like, it was not, like, I'm sure your friends were like, wait, you're doing what? What kind of diet is this? Like, it was weird, right? People probably thought that your diet was strange.

• 14:18Speaker 01

  Yeah, definitely, yep. It was, it was strange, and it was, it could be a bit expensive as well. But it worked for me, and so I, I stuck with it.

• 14:28Guy Raz?

  All right, so you graduate from Penn in 2013, and I know you worked for like a hedge fund in New York for, for a little while?

• 14:34Speaker 01

  Yep.

• 14:35Guy Raz?

  But I guess you stayed there for, you know, roughly a year, and from what I read, you really wanted to become an entrepreneur. You wanted to start your own thing. And you tried, you had, I guess, a sort of an online recruiting tool that you, you tried to launch, and then a, an online car insurance company, and, and I guess neither of those worked out. But it sounds like you really wanted to do your own thing. You didn't want to work for somebody else.

• 14:57Speaker 01

  Yeah, yep. You know, I think there, there's just kind of this night and day difference, in my mind at least, as it relates to owning your own destiny. And so I was, I was all in on making something happen. So I spent some time, you know, I was working on a number of different projects. I can't tell you, or even remember, 20-plus different apps, websites, services, products that I'd probably launched in the course of this. And I had, I had tried certain things that I was very familiar with, and I, I felt more strongly about, and I'd felt, found other things where it's like, huh, it seems like there's a group of people that have this challenge, let me just go try to solve it. And so I quickly realized, if you're going to have the motivation to succeed, you're

• 15:41Speaker 01

  going to have to really believe deeply in what it is that you're doing. I think that was a good lesson that I learned early on, because otherwise, when the going gets tough, you just want to throw in the towel and move on to the next idea, rather than double down and really figure out how to overcome the challenge.

• 15:58Guy Raz?

  Yeah. And you had, I mean, you had two businesses, basically tech startups, right? You know, one was a recruiting platform, one was an insurance platform, but they were tech startups. And so it, naturally, you would think that you would try another one, another sort of tech startup.

• 16:15Speaker 01

  Yeah, I mean, I knew how to write software and build fully functioning apps and websites, and you can do that without spending any money, other than your time. And so I was very interested in that path. I actually, to be frank, probably didn't spend as much time as I should have or could have, thinking about, hey, well, what industry might I want to go into, what I might want to do? I just knew I wanted to help people, and I thought that if I could come forward with a product or service that helped people and made their lives better, that they would pay me for it, and I could worry, you know, and the rest of it would fall into line after that.

• 16:52Guy Raz?

  So what were some ideas that you were mulling over?

• 16:56Speaker 01

  Well, so one of the more, quote, "successful" projects that I worked on was, Trump had been elected president in 2016. And one of the things that came out of it was this kind of increasing polarization in the country, and the idea that in social media, you were being fed information that, that confirmed your pre-existing beliefs.

• 17:21Guy Raz?

  Yeah.

• 17:22Speaker 01

  And so I had started and built this Chrome extension. It was called Escape My Bubble, very straightforward. And it would insert into your Facebook newsfeed, articles that challenged your beliefs. That got widely covered in the media at the time. I think it was written about, or mentioned in the New York Times, and that drove close to 100,000 signups for the, for the extension.

• 17:49Guy Raz?

  And it was free, that, I mean, how were you, how were you going to make money from this?

• 17:52Speaker 01

  It was free, yeah, yep. I didn't know how I was going to make money.

• 17:56Guy Raz?

  You were just getting signups, yeah.

• 17:57Speaker 01

  Yeah, I was just trying to, I was, I was trying to get a lot of people using it, and then think about that afterwards, right? So I got a lot of press, and a lot of people signed up for it. Then the news media moves on, and there's no more, there's not as much talk around the bubble and the social media algorithm problem. And I kind of went into this valley where the, the number of new people that were signing up every day had dropped way down, and I was trying to figure out, you know, kind of what's the future of this thing.

• 18:26Guy Raz?

  Yeah. It turns out, people really don't want to read news about the other side.

• 18:32Speaker 01

  Yeah, yeah, I think it's challenging. I, I got the increasing sense that I was fighting an innate psychological bias, or psychological, kind of hardwired into our brains, and it's so much easier to read things that confirm our existing views than to challenge them.

• 18:49Guy Raz?

  Yeah, I mean, it sounds like such a great idea. I mean, right, and now, in 2026, I mean, it just, that concept is, just seems so unlikely. People are so much farther away from wanting to exchange ideas in a rational way.

• 19:08Speaker 01

  Yep, yep.

• 19:10Guy Raz?

  I, I should mention that, from what I understand, in the, sort of as, in the background, or as a part of your life, you got, were getting into cooking and baking, right? Because of your diet and what you had to eat, and you would experiment in the kitchen just for you, I guess.

• 19:27Speaker 01

  Yeah, so, you know, me, I think, along with a lot of other type 1 diabetics, start eating the same thing every day, because it's very predictable, and so it kind of takes the mental load off of managing diabetes. So I think I had mentioned that I had started eating eggs every day for breakfast, snacking on nothing but nuts, and then eat chicken breasts every day for lunch. And then I'd get some spinach and some other things like that as well. But it was largely the same food, over and over and over again. Living in New York, you know, New York's like the food capital of the world, maybe? Or one of the food capitals of the world? All the new, fun, exciting stuff tends to come to New York first, and, and it's very exciting, right? So I'm looking at, at all this stuff, and, you know, I can't eat any of it.

• 20:12Speaker 01

  So to your point, I got really interested in the opposite, which was just meal prepping, and it was just the same thing every day. But along with the grilling of chicken breasts, I actually got interested in, in baking as well. And so, you know, the, the whole concept here is, you have a typical cookie recipe, for, as an example. The idea is, take that recipe, go out to GNC and buy some protein powder, and put that in place of the wheat flour, go out and to Amazon and get, you know, kind of some alternative sweetener, use that instead of sugar, add some cocoa powder, and try to make cookies that taste halfway decent.

• 20:54Guy Raz?

  Right.

• 20:55Speaker 01

  It's difficult, there's actually a whole science behind baking. And so, you know, how the protein powder hydrates when you mix it with water. You know, if you're trying to make a dough, you need something that's sticky. So when you add water to protein powder, it doesn't necessarily get sticky. Now you need to replace that with something else, which is going to get sticky, so you can form a dough in the first place. So it was very intellectually challenging to try to figure that out, and try to make these things taste from awful to decent to pretty good to really good.

• 21:25Guy Raz?

  And I guess at a certain point, you decide that you want to try to make, like, breakfast cereal? Like a ketogenic, like, something that you could eat? Which, I mean, I don't even know where you would start. Tell me what, what you were thinking, like, how did that even, that idea even come to you?

• 21:41Speaker 01

  So I had eaten a lot of cereals growing up. Cinnamon Toast Crunch, Cocoa Puffs, you know, Golden Grahams. It was one of the high, you know, it's one of the classic American staples, so to speak, that I think a lot of kids in the 90s ate a lot of. I also had really fond memories of going to the grocery store with my mom when I was a kid and kind of picking out the new stuff, right? I mean, it's like 60 feet worth of cereal in the grocery store. So you can eat and try a lot of different things. And so I had craved that variety in my life. And I had just gotten sick of eating eggs for breakfast. I'd been eating it for such a long time. I'd eaten it with over 100 different hot sauces and other sorts of sauces to try

• 22:25Speaker 01

  to make it taste different every morning. But ultimately, it's that same eggy taste with that same eggy texture, right? It's not crispy, it's not crunchy, and I'd just gotten really, really bored of it.

• 22:39Guy Raz?

  So you decide that you want to see if you could, in your kitchen, recreate breakfast cereal?

• 22:44Speaker 01

  Yes, yeah. I was thinking in particular about Cocoa Puffs. That was my favorite cereal growing up. And I realized that the chocolate-iness from Cocoa Puffs is coming from a combination of cocoa powder and sugar. And if you can take the sugar and replace it with something like monk fruit, keep the cocoa powder, you now have this zero sugar or low sugar chocolate taste.

• 23:06Guy Raz?

  And monk fruit is an extract that doesn't spike blood sugar. It's like, it's a sweet, it's like a miracle sweetener. It's super sweet, but it doesn't have the same impact on your, on your glucose levels as sugar or honey or maple syrup.

• 23:20Speaker 01

  Yeah, everything that you just mentioned is all, you know, if you break it down scientifically, it's all glucose, fructose, sucrose, which are three of the most common sugars in food. So a lot of people, I think, think that sugar and sweetness are the same thing, but they're actually not. And there are actually other things beyond sugar which give your brain the sweet sensation, right? I mean, what we perceive as sweetness is really kind of neurochemical changes in the brain. And so, yeah, monk fruit has seeds. The seeds are extremely sweet, but they are not sugar, and so they do not spike your, your blood sugar.

• 23:57Guy Raz?

  It's the same with stevia, which comes from a leaf.

• 24:00Speaker 01

  Yes.

• 24:01Guy Raz?

  Right.

• 24:02Speaker 01

  And I just became enthralled with the, the whole subject. You know, it's kind of like opening a door to a whole new world. When you think of cooking as just follow the recipe and you get your food, and then all of a sudden you open this door to this whole new world of, oh, wait a minute, there are all these ingredients that, you know, I would even go so far as to say humanity itself has not spent a lot of time thinking about or, or trying out. And so it almost felt like exploring something totally new.

• 24:32Guy Raz?

  Okay. I mean, Cocoa Puffs are puffed corn, basically. I think rice and corn, maybe some wheat in there. But what, what were you going to use to make your keto version of that?

• 24:44Speaker 01

  So I was trying to make something, you know, first of all, I was rolling the ingredients into a dough. I was cutting the dough into squares.

• 24:53Guy Raz?

  And again, this is for what? Protein, pea protein powder?

• 24:56Speaker 01

  Yes.

• 24:57Guy Raz?

  Cocoa powder and stevia or monk fruit?

• 25:00Speaker 01

  Yeah, yeah. At the simplest form, exactly, it was those three ingredients. But if you mix these three things together with water, you're not going to get a dough that sticks together very well. And it's also going to be very hard and very flat, and it's not going to have a lot of crispiness to it. So you're also adding, or I was also adding at the time, baking powder. Baking powder, as you know, helps things rise, right? And then when, when they rise, and so there's kind of air pockets inside and then set with the air pockets inside them, that's where you then have that structure that, that enables the crispiness or the crunchiness, right?

• 25:36Guy Raz?

  Yep.

• 25:37Speaker 01

  And then, yeah, you, you take those ingredients, you mix them together, you form it into a dough, just like you're making crackers, right? Roll the dough out into a thin sheet on a baking pan, cut it into squares, and then bake it in the oven.

• 25:50Guy Raz?

  Okay. And how was it?

• 25:53Speaker 01

  Yeah, again, it was an evolution. It went from really bad to better over time. I think the first one I made was as hard as a rock. You could not eat it. And that's when I started to realize the importance of baking powder to get it to rise a little bit. I also started to realize that cocoa powder is extremely bitter. It only tastes like chocolate when you add the sweetness to it and that those two things come together. So I think the first iterations I made were hard rocks that tasted like soil.

• 26:25Guy Raz?

  When we come back in just a moment, Krishna finally makes an edible version of a cereal and then names it with a nod to Will Ferrell. Stay with us. I'm Guy Raz and you're listening to How I Built This.

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• 28:12Guy Raz?

  tasks and problems, and lets you ask complex questions in plain language, like talking to a knowledgeable colleague. But technology is only part of the story. AI is also reshaping how people and teams work together, and that shift is already underway. That's why NetSuite wants to put a new, expert-created business guide in your hands today. It's called Aligning for the Agentic Era: How AI is Changing Everyday Work. And right now, it's yours, absolutely free. Inside, you'll discover how AI could reshape work across your entire organization and how to position your business to prosper from it. If your revenues are at least in the seven figures, get NetSuite's free business guide,

• 28:57Guy Raz?

  Aligning for the Agentic Era: How AI is Changing Everyday Work, at netsuite.com/built. The guide is free to you at netsuite.com/built. netsuite.com/built. Does your team want a website that looks and feels handcrafted but is still fast to ship? Well, Framer is built exactly for that. With Framer, you design on a visual canvas with responsive layouts, hosting, and a CMS built in, so the work is production-ready from day one. And you can get it done with help from Framer's AI agents. Framer is the AI website builder that helps creators, teams, and businesses ship production-ready

• 29:40Guy Raz?

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• 30:24Guy Raz?

  Hey, welcome back to How I Built This. I'm Guy Raz. So it's 2017 and Krishna is playing around in his kitchen and he's trying to make something that tastes like Cocoa Puffs, but without all the carbs and sugar.

• 30:37Speaker 01

  I got it to the point after meticulous trial and error to where it tasted pretty good. I was eating it with almond milk in the morning for breakfast. It didn't send my blood sugar through the roof like Cocoa Puffs would, but it still tasted good. I happened to meet a friend in Central Park and he was not diabetic, but he had gotten interested in getting more protein for breakfast and he was sick of eating eggs. And we were just, we just happened to be talking about this. I don't think we had, we had really planned to talk about it. And I had told him that I'd been trying out the cereal I was making and I, and he could try some if he wanted. So the next time I saw him, I

• 31:19Speaker 01

  gave him a bag of it and then he Venmo'd me for it. And I hadn't asked him to pay me for it. So I wasn't expecting it, but it was nice. It was a nice gesture of goodwill on his part. And I think he Venmo'd me like $7.99 or $8.99, but he Venmo'd me a price that it wasn't like, oh, here's 10 bucks or here's five bucks for this stuff. Here's like what looks like a grocery store price. And that's when it kind of struck me, oh, you could actually make food and sell it to people. Now, it's obvious to people that there are, there are big companies that do this. I had not really considered that. I had just been thinking about, hey, I know how to make apps. I know how to make websites. I'm going to do something with that. And I reflected back and realized, oh, I've been

• 32:02Speaker 01

  actually working on making a quote product or a cereal product, but that was not the intention of it, you know, going forward.

• 32:10Guy Raz?

  All right. So, so walk me through like how you got to a place where you were like, okay, I'm going to try and make a business out of this. I think I want to put all of my energy into this cereal idea.

• 32:24Speaker 01

  Yeah. Well, when I saw that my friend was not diabetic, yet he was also trying to eat a lot of protein for breakfast, I kind of put two and two together and realized, oh, there's not really many options in the grocery store that are a good fit for people that, that are trying to achieve this. And so that's when I realized, oh, there's actually a, a big need here that no one really seems to be meeting. And so I walked through the grocery store cereal aisle, which I hadn't been to in, in probably a decade. And it was exactly the same as I think I had found it when I was a teenager and had last been

• 33:06Speaker 01

  there. And it struck me that there's a lot of different cereals in the grocery store, but they're all sort of the same cereal with different branding.

• 33:16Guy Raz?

  Yeah.

• 33:17Speaker 01

  And, and so that's when I realized, oh, you know, that could be exciting. And I think finally I had come to realize that the obesity rate in the country and the rate of diabetes in America were both through the roof.

• 33:33Guy Raz?

  Yeah.

• 33:34Speaker 01

  And when you start to think about all the money we're spending on healthcare and the negative repercussions that can have for our country, I got really excited about it. It was like, hey, there's a big challenge here, but a big opportunity to help a lot of people.

• 33:48Guy Raz?

  All right. So you, you decide that you're going to go pursue this, but what was the first step that you did? I mean, you're making it for friends, right? And in your apartment, but this is a complex product. It's gonna, it's gotta be crispy in milk or almond milk or soy milk. It's gonna stay crispy and it's gonna taste good and it has to be healthy and it has to have low carbs and high fiber and high protein. That's a lot. I mean, there's a, you know, you've been doing some of these experiments in your kitchen, but did you feel like I've got a, I gotta get more training. I get a better understanding of how to do this?

• 34:27Speaker 01

  Yeah. So it was, it was an evolution. So there were a lot of mistakes I made along the way that, that anyone who was in the food industry wouldn't have made, but they were all learning for me. You know, I think the first one was I didn't do the math, right? I looked at my oven in my apartment and it has like five layers on it, racks. You really only ever use one rack. And so I thought to myself, oh man, I could just make a bunch of cereal right in this oven. Once you do the math, you realize that a sheet of dough doesn't really weigh that much. And so you're taking up maybe three racks of your oven just to make like one, you know, kind of stand up pouch worth of cereal. And then you're baking it for a long time. You do the dough for a long time. You can really

• 35:11Speaker 01

  only make it in an eight hour day out of your oven, maybe like five or six pouches of cereal.

• 35:17Guy Raz?

  And I guess I should describe your cereal for people who are not familiar with it. It looks like Golden Grahams, right? For lack of a better description. It's, it's sort of a little square that's sort of curvy, but you were making it in sheets on baking sheets and scoring it and then sort of breaking it apart. So I imagine the first year, so it wasn't perfect. I'm, I'm sure some of those squares were not squares. Maybe they had like a, a chip on them or something.

• 35:42Speaker 01

  Yeah, yeah.

• 35:44Guy Raz?

  And you had a name for this cereal?

• 35:47Speaker 01

  Yes. Yep. I called it Catalina Crunch.

• 35:50Guy Raz?

  From the beginning. Okay. Catalina's Island off Southern California. I'm assuming that's the Catalina you're talking about?

• 35:57Speaker 01

  Yeah. I'd grown up in, in, in California and so I was aware of Catalina Island off the coast. One thing I did realize was that this cereal was going to be priced at a premium to other cereals on the market. And the reason for that was when I started to look at different ingredients, you look at the corn flour and the rice flour and the wheat flour, that's down at like 10 to 20 cents a pound. You go to GNC and you get one of those tubs of protein powder for like 30 bucks. You know, that stuff's like, can be, is way, way, way more expensive.

• 36:33Guy Raz?

  Yeah.

• 36:34Speaker 01

  And so I realized, hey, I need to come up with a name that, that it kind of has this premium feel to it, right? I wanted the name Crunch because I thought like my snacks and everything I was eating was, was more mushy, like eggs. And I was craving the pretzels, chips, crackers, cereal, the crispy crunchy bite. So I wanted Crunch in the name. And then I was trying to think of something that started with C that would kind of go with Crunch. So it would be like alliteration. Chobani is a good example of like, you know, it sounds premium. It sounds nice. It starts with a C, but I think that's

• 37:14Speaker 01

  like Italian or European of some sort. Cereal is a very American invention. And so I was thinking of something that was American and I knew the Catalina wine mixer from the movie Step Brothers. I really loved the movie Step Brothers. I think enough people had, had been introduced to Catalina Island through the movie Step Brothers. So I went with Catalina Crunch. It sounded good. It had a ring to it. Easy to say. I liked it.

• 37:37Guy Raz?

  I'm curious. I mean, clearly you were, you liked cooking, you liked baking, but this was not how people identified you probably. Probably people thought of you as a guy who was going to start a tech company. When you started to talk to people who knew you, maybe your family and others, that you were like, I'm gonna make a go at this thing. I want to see if I can turn this into a brand. Did you get any pushback from anybody? Was everybody super supportive?

• 38:05Speaker 01

  I'm very lucky. I have a very supportive family, but it's definitely challenging being an entrepreneur because an entrepreneur is like a adjacency to being unemployed. And when you go from working at a hedge fund, right? Where you're making a ton of money and you're kind of in one of the most difficult, demanding and respected jobs in New York to all of a sudden, quote, playing around in these various ideas. There's pressure, quote unquote, from society. But no, my, my, my parents, my, my girlfriend, who's now my wife, family, they were, they were kind of, I would say, rocks in my life that, that helped me pursue these things with confidence.

• 38:45Guy Raz?

  And, and you were initially going to, so you set up a website and you were going to sell bags of this cereal. And what, the flavor was chocolate?

• 38:53Speaker 01

  Chocolate. Yep.

• 38:54Guy Raz?

  And how did you market it? Did you call it a keto cereal? Cause still, a lot of people don't know what that means. Did you call it a low carb cereal, a high protein cereal?

• 39:04Speaker 01

  When I started out, I was very focused on low sugar because sugar in particular is what makes your blood sugar spike and go up and down and up and down.

• 39:13Guy Raz?

  Yeah.

• 39:13Speaker 01

  So I was very focused on the low sugar nature of it. It happened to be high protein and high fiber at the same time. And so people were eating it for a variety of reasons. And that goes back to something very important when selling something is like you might put something out into the world for a reason and then people might buy it for a different reason. And you need to go talk to people to understand that, right? But yeah, I was very focused on the fact that it was low sugar.

• 39:39Guy Raz?

  How did you get people to be aware of it? Was it, I can't imagine you just put the website up and all of a sudden the orders start flooding in. I'm assuming it was just kind of friends and friends of friends.

• 39:50Speaker 01

  No, actually, it kind of was more put the website up and the orders start coming in. You know, one thing that happened was someone found out about it and then posted it on a like diabetes, type 1 diabetes group inside of Facebook. And then like 100 people from that group came and bought the cereal. So we had a lot of what you would call guerrilla marketing. It was a ton of really word of mouth, offline word of mouth, people posting about it on Instagram, Facebook, that sort of thing.

• 40:22Guy Raz?

  Okay, so you, you've got this, and how are you making it? I mean, how are you actually fulfilling orders? Let's just say you're getting 10 orders a day. Is that about right?

• 40:35Speaker 01

  We quickly got up to hundreds of orders a day.

• 40:37Guy Raz?

  I'm assuming you had to start hiring people to help you quickly.

• 40:41Speaker 01

  Well, so we went, so I went from the kitchen in my apartment to a commercial kitchen. And in the commercial kitchen, I could make dough in bigger sizes, right? They have these Hobart mixers. So I think with like an 80 quart Hobart mixer, you can make like, I don't know, 30, 50 pounds of dough at a time.

• 40:58Guy Raz?

  And you were doing this?

• 41:00Speaker 01

  Yes, yep.

• 41:00Guy Raz?

  And fulfilling orders?

• 41:02Speaker 01

  Yes, yep.

• 41:03Guy Raz?

  Okay, so but you had to hire people to help you, I imagine?

• 41:06Speaker 01

  I did not, I just had my trusty wife on the weekends. That was it at the time. And so, yeah, once again, you know, you have these like sheeting belts in the commercial kitchen. You got rack ovens now, right? So you can put whole racks of, of cut crackers, you know, cereal into the ovens.

• 41:26Guy Raz?

  Again, it's complicated because imagining you're cooking this at low temperatures for a long time, right? Or you, it's not, because you have to kind of dry it. It's not just like putting it in the oven at 400 degrees because you'll burn it.

• 41:37Speaker 01

  Yeah, yeah, yeah, yeah. I can't remember exactly, but I think I had it in for like 275 at 18 minutes or, you know, 250 at 18 minutes, something like that. Yep.

• 41:46Guy Raz?

  And then put them in bags and seal them?

• 41:50Speaker 01

  Yes. So this commercial kitchen was in industry city. It was very busy. So I had the last shift, which I believe was 10:00 PM to 5:00 AM or something like that. So I was working overnight in there and making the cereal, packaging it. And so I would go to, to the post office by my apartment with tons of boxes, drop them all off, and then, and then kind of start that again.

• 42:17Guy Raz?

  And sleep for what, how many hours a night?

• 42:20Speaker 01

  Yeah, yeah, I wasn't getting a lot of sleep. It was just a lot of, it was a lot of work.

• 42:24Guy Raz?

  Tell me what that felt like. I mean, you know, you're obviously a smart guy. You go to this elite college. You get this sort of elite job out of college on Wall Street. A lot of your friends are probably already, you know, making a lot of cash in these different businesses. You're now four years out of college. And I don't know, was any part of you questioning what you were doing?

• 42:48Speaker 01

  I was intellectually enthralled by the adventure. And I was, I was very busy. So there were challenging times when I questioned what I was doing. But at this point, like when you're getting orders coming in, you're seeing the orders come in every day, and then you're getting emails from people and they're loving what you're making, it's like, it's thrilling. It's really exciting. And I don't know how else to describe it, but you've, you've just put something new into the world and people are telling you that they love it. And so that, that was foremost on my mind at this time.

• 43:21Guy Raz?

  All right, I want to go back to the ingredients for a sec because in, in that first year of making it yourself and going, you know, selling it, I mean, were you were literally going to GNC and buying protein powder and, and ordering, you know, other ingredients probably through Amazon and just, that was it?

• 43:39Speaker 01

  Yeah, I started ordering everything off Amazon. Yep.

• 43:41Guy Raz?

  Because the ingredients today are quite complex. I mean, there's still pea protein and, but there are other ingredients that are not so obvious, right? Like corn fiber or pea fiber or chicory root fiber that, you know, it's, it's a corn, but it's, it's a part of the corn that doesn't have as much carbohydrates. And so to get what you have today, you've mixed all these things. But I imagine in that first year, it wasn't so sophisticated.

• 44:12Speaker 01

  Yeah, yeah. So one of the things with the ingredients is I had also wanted to have a lot of fiber in the, in the cereal, if I could. And I had been using almond flour and then coconut flour to put a lot of fiber into the cereal. And one of the challenges with fiber is if you put too much fiber into a food, it becomes hard to digest. And that's when I started to realize, oh, there's actually different types of fiber. And each of these fibers can act differently in the digestive system. So I've spent many years trying to understand what combinations of fiber, one, do I think, or do I want to eat and do I want my kids to eat?

• 44:55Speaker 01

  And I think that are, that are best, quote unquote, for my health. And then also so that you can eat a significant amount of it, but without having an upset stomach afterwards.

• 45:05Guy Raz?

  And, and the amazing thing about this to me is you couldn't do this in the year 2000. Even in the year 2010, it would have been hard. But in 2018, you could get pretty much chicory root fiber and, you know, you get powdered spinach, like whatever you need, you could just get online now.

• 45:23Speaker 01

  Yeah, yeah. I mean, it's fascinating and you're absolutely right. And an interesting kind of side bit, but the, you know, we talk about whole grains, right? So a whole grain has the, the bran, the germ, the endosperm, the entire grain.

• 45:40Guy Raz?

  Right, like a wheat berry before it's ground up is, is, that's what you're talking about?

• 45:44Speaker 01

  Yes, exactly. Yep. And so it has all the protein, all the fiber and, and all the starch all in one. We started, or the food industry started removing the protein and removing the fiber as a way to make products taste better.

• 46:01Guy Raz?

  Yep.

• 46:02Speaker 01

  And so that was the first iteration of this was going from whole wheat flour to, to bleached white flour and going from brown rice to white rice, et cetera. And so when you start taking out the protein and fiber so that you can get this isolated starch source, A, it's a lot less healthy for you. And there've been a lot of people writing about the problems with, with that. But B, well, where does the protein and fiber go? It's just being thrown away.

• 46:28Guy Raz?

  Thrown away, yeah.

• 46:29Speaker 01

  Yeah. So to your point, a lot of these new ingredients are actually byproducts of other ingredients. And, you know, we talk a lot about food waste. This is, this is a way to avoid food waste by, by reusing some of the most nutritious parts of the legumes, the lentils and whatever else.

• 46:48Guy Raz?

  Yeah. I mean, it's like whey. For a long time, whey was just thrown away. When, when people would make yogurt and then somebody was like, wait, why don't we'll take it and dry it, powderize it and turn into a protein powder?

• 46:59Speaker 01

  Yep.

• 46:59Guy Raz?

  So, okay, so you're, let's go back to, so it's 2018. You're working at the commercial kitchen and trying to learn about what's going to make this better. Because I imagine like version 1.0 that you're selling in 2018 is probably okay, but, but I, but probably not really what you wanted it to be yet.

• 47:21Speaker 01

  Yeah. So, so what I was making out of the commercial kitchen, again, you know, trying to make it quickly, you're making larger batches now. And, you know, there's, there's variability in the baking process and I'm basically only able to make so much each day. And so was kind of going through this in stock, out of stock pattern on our website, right? Where we'd sell and then I'd have more orders than I could ship. So I'd turn it off and say out of stock, then, then make all the cereal, ship it and then turn it back on again. And I realized that it was very physically demanding on me. And even still, we weren't making that much cereal.

• 48:00Guy Raz?

  Yeah.

• 48:01Speaker 01

  And so that's when I went to Texas A&M. They have a, basically like a exec ed short course on how General Mills and Kellogg's and Post make cereal.

• 48:14Guy Raz?

  Wait, Texas A&M? That's amazing. You go to Texas A&M and how long is the course?

• 48:22Speaker 01

  It was, I think it was a week.

• 48:24Guy Raz?

  That's so interesting because I'm sure you know the story. Maybe you don't. But Ben and Jerry's, right? Ben and Jerry, they took a correspondence course in ice cream making at, I think Penn State, back in the seventies. And that's how they learned how to make ice cream. So Texas A&M has a cereal making course, which makes sense. Texas A&M, huge ag school. And so you fly there to College Station for a week and take this course?

• 48:50Speaker 01

  Yeah. I mean, you know, so I think the course, to your point, Texas A&M has an ag school. It's a lot of companies that maybe are thinking about getting into making cereal. And so they want to send someone from their company to understand how to make cereal.

• 49:03Guy Raz?

  In a kitchen in this class?

• 49:05Speaker 01

  No, no. So in this class, they have what they call pilot sized versions of the equipment that the, that the bigger companies use to make cereal.

• 49:15Guy Raz?

  Okay.

• 49:15Speaker 01

  Yep. So like one of the first things you learn, for example, is in the commercial kitchen or in your own kitchen, you're baking in batches in this like standing oven, right? But in bigger food manufacturing, they actually have continuous ovens, right? So you have like a conveyor belt.

• 49:32Guy Raz?

  And it's just be, it's like a Papa John's pizza, you know? They put in a conveyor belt and it just cooks the pizza, comes out, they put in the box.

• 49:39Speaker 01

  Yeah, yeah, yep. So you learn about that. You learn about equipment to package food products as well. And, and you know, you go to any modern food facility, they don't have a bunch of people just sitting there scooping cereal and putting it into, into bags. They have, they have scales and better ways of doing it, right? So I learned a lot about that. The other thing that happened in this world was bars, you know, right? So protein bars became more popular and an ingredient into protein bars is protein crisps.

• 50:09Guy Raz?

  Which is whey puffs, right?

• 50:11Speaker 01

  Yes, well, they have whey puffs, they have pea protein puffs, they have many different ingredients. But those are also made on cereal making equipment. And you can think of whey puffs, if you added cocoa powder to them, you could think of them as miniature cocoa puffs made high protein. And so as the, as the bar market was growing, demand for this same manufacturing process was growing and hence investment in it was growing.

• 50:39Guy Raz?

  Interesting. I mean, the people you met in that course were like, you're doing what? You're wait, you're cereal with what? Like, I imagine the people running that program may have been skeptical of what you were doing because if you are teaching people about cereal, well, cereal is wheat, corn, and rice.

• 50:57Speaker 01

  Yeah. So hey, so cereal, you know, it stands for cereal grains, right? Which, to your point, you know, like corn is a cereal grain. So what I was doing with the protein powders was highly unconventional. And so what was challenging about it was everyone I talked to, no one said I was going to be able to make the cereal that I was making in large volumes. You know, they're saying that it wasn't going to work for one reason or another.

• 51:24Guy Raz?

  But what you're doing, again, I would think, how, I mean, if you're at this cereal course and they're saying, yeah, what you're trying to do can't be done at scale. I mean, game over. Those guys are the experts.

• 51:38Speaker 01

  Yeah. I mean, you know, they're the experts. They're not geniuses. And experts every so often find themselves in the experts dilemma, where they have all this knowledge, but that knowledge becomes outdated over time. And so the world's moving forward. There are new ingredients, right? So you talk about it being hard, but you know, a lot of these folks haven't tried some of these new ingredients we're talking about, like chicory root fiber and pea whole fiber and things like that, right? So yes and no on, you know, when everyone, someone tells me something's not possible, my first question is, is why is it not possible? And if I can't get down to the first principle of reason as to why it's not possible,

• 52:19Speaker 01

  then I, then I walk away believing it's possible and that we just need to do more work.

• 52:25Guy Raz?

  When we come back in just a moment, Krishna puts in the work and learns why Indianapolis is a really smart place to make cereal. Stay with us. I'm Guy Raz and you're listening to How I Built This.

• 52:46Guy Raz?

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• 53:31Guy Raz?

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• 53:53Guy Raz?

  Hey, welcome back to How I Built This. I'm Guy Raz. So it's 2018 and Krishna is selling Catalina Crunch entirely online and making it in a commercial kitchen in Brooklyn. But after finishing a course in cereal making, he now has connections that can help him make cereal at scale.

• 54:11Speaker 01

  I then met a partner, a company that specialized in do this sort of thing. Again, they were already making crisps for the protein bar industry and working on some like baby cereals and some other more organic products. And so, once I was working with them, I could then make, you know, rather than making 50 pouches a day, or whatever it was in the commercial kitchen, you know, they could make 10,000 pouches in a day, right? Far, far larger quantities of it. But, you know, the thing is, when you have this big equipment, all of a sudden it costs a lot of money to do the work on it because you need to buy bigger quantities of ingredients and the whole nine yards.

• 54:52Guy Raz?

  So, did you raise money?

• 54:54Speaker 01

  Yeah. So, so I had raised, over the course of two rounds, first $100,000 and then $800,000 afterwards.

• 55:05Guy Raz?

  Okay. And this is in 2018?

• 55:06Speaker 01

  Mm-hmm. Yep.

• 55:08Guy Raz?

  And who were your investors?

• 55:11Speaker 01

  Yeah. So first investor was a good friend of mine from college. And yeah, he wrote me the first check that enabled me to, to do a lot of this work that I talked about in making the cereal.

• 55:24Guy Raz?

  And this co-manufacture, and you're back in New York?

• 55:27Speaker 01

  Yes.

• 55:27Guy Raz?

  And so that's it. You're going to work with this, this co-manufacture on making, on scaling this?

• 55:33Speaker 01

  Yes. I went back and forth. This company's based in the Midwest. I was in New York. There were two things that were going on. One, I wanted to make sure that it tasted great and that everything went according to plan. So every time they would make Catalina Crunch cereal, I'd go there and watch them make it. Number two was, they could make the cereal squares, but they could not package the cereal itself. They could only put the cereal into the bag and box model, if I wanted to do that. They couldn't put the cereal into stand-up pouches.

• 56:10Guy Raz?

  Which is what you had. You weren't using a box, cereal box. It was a pouch.

• 56:14Speaker 01

  Yep. Yep. And I was, you know, for better or for worse, I was insistent on the stand-up pouch from day one. The reason was, I had spent a lot of time as a kid trying to get the bag of cereal back in the box after I'd taken it out of the box. And I got grown very frustrated with the bag and box. Also, if you open that bag up, you then have no way to reseal it. So you now need to go find a paper clip or something else before you put it back in the box. I thought the pouch is easier to carry around. It reseals itself because it has its own zipper. You know, to me, it's just better. So they were making the cereal. And then I had a second company, which was putting it into pouches for me.

• 56:56Speaker 01

  And then from there, I was able to take it and ship it out to customers as they ordered it.

• 57:03Guy Raz?

  All right. This is all happening in 2018, your first year in business.

• 57:07Speaker 01

  Mm-hmm. Yep.

• 57:08Guy Raz?

  So this is a busy year.

• 57:09Speaker 01

  It was. It was a very busy year. Yes.

• 57:12Guy Raz?

  Okay. Late in 2018, you decide to leave New York City and move to the Midwest. What happened? Why, what was the catalyst for that decision?

• 57:22Speaker 01

  Yeah. So we had this company that was packaging the cereal into the stand-up pouches. The owner of that company was a type 1 diabetic like I was. And so he was very passionate about kind of helping me with this. The challenge was, is they are a very large company. They do probably tens of millions of packages of food every day. And we are a very small company. So we weren't really a good fit from the go-ahead.

• 57:51Guy Raz?

  Yeah.

• 57:52Speaker 01

  And so eventually, they kind of came to me and said, hey, we're just not going to do this anymore. You're not, you know, your volume's not big enough. Our equipment's having problems putting the cereal into the pouches. We're done. So that was probably the first time that I was really trying to figure out what to do. And so I basically moved out to Indiana and started doing it myself.

• 58:20Guy Raz?

  But you, there was no one else who could do it for you?

• 58:24Speaker 01

  There was no one else I could find that was a good fit. And just to go into a little bit more detail, there's, there's three steps here, right? There's the making of the cereal squares. There's then the tossing of them in things like cinnamon, or tossing them in cocoa to give a chocolate flavor. Then there's the packaging. And so I needed a company that could toss it in the seasoning and then put it in the packaging. And many of the companies that could do that also had other, some other sort of manufacturing process before it, which I didn't need and they wanted to use.

• 58:59Guy Raz?

  So you had to build your own production facility? Or was it a turnkey operation? Like, what, did you have to buy a bunch of equipment? And why Indianapolis?

• 59:13Speaker 01

  Yeah, yeah. I took, I took a big risk, honestly. At least it seemed like a big risk in my mind. Because at this point, when I couldn't find anyone else to coat and package the cereal, that was the first time that I kind of asked myself, man, should I keep doing this or should I shut this thing down? Because I had, I had emailed a million and one food companies. A lot of people are like, you're too small. A lot of other people are like, we don't do that. Or we can do this, but we can't do that. And so I was kind of thinking, all right, am I going to stop doing this? Or am I going to do it myself? And can I do it myself?

• 59:52Guy Raz?

  Yeah.

• 59:53Speaker 01

  And I thought, kind of like, the hell with it. Let's give it a try. I chose Indianapolis because it is somewhat close to the center of the country. And so from Indianapolis, you can ship both to California and to New York in one week. So I've gotten, I've gotten a little smarter at this point from back when I was making things in my kitchen. And I started to realize from buying ingredients, if you have your thing located in New York, you're paying a lot more to ship those ingredients, say from Chicago to New York, right? Where a lot of the ingredients come out of the heartland, than to just have your place right where the ingredients are coming from. And then if you're in New York and you're shipping your finished pouches of cereal,

• 1:00:33Speaker 01

  say out to California, you know, that can be two weeks for them to get over there on trucks. So I looked at different places. I ended up renting about a 3,000 square foot space in an office building in Indianapolis. And I basically moved into that building, bought a, like a cot off Amazon, set it up in the office, and then I would do the cereal in the back.

• 1:01:00Guy Raz?

  And what is it? I mean, did you have to buy like huge mixing bowls to like, to mix the cinnamon and cocoa? Like, how, is that, it doesn't sound that complicated. But if you're talking about large volumes of cereal, I imagine you need, you know, like, I don't know. What do you need?

• 1:01:18Speaker 01

  Yeah, yeah. So, so there's, there's a few different ways of doing it. When I started, I was thinking about it and it's like, hey, I just need something that's going to turn around and that I can put the cereal into and it'll kind of spin around. And then I can put the cinnamon into it and then, and then mix it all together, right? And so I actually started by buying a washing machine and just not turning the machine on and just having it spin, and then having the cereal inside of the machine. And so that was the first way that I was getting the cinnamon and the chocolate onto the cereal.

• 1:01:50Guy Raz?

  Okay. So you are in Indianapolis, just grinding away, sleeping in the facility. And give me a sense of like, what, what your sales were like overall in 2018?

• 1:02:03Speaker 01

  It was probably a million dollars or something like that.

• 1:02:06Guy Raz?

  In your first full year?

• 1:02:08Speaker 01

  Yes, yep.

• 1:02:10Guy Raz?

  That's a lot.

• 1:02:11Speaker 01

  Yeah, I mean, I think it's crazy to say it, but you know, social media connects a lot of people together. Also, it hired a marketer, and this guy was also obviously instrumental to helping with running ads on Instagram, running ads on Facebook, basically getting the word out.

• 1:02:30Guy Raz?

  Okay, I imagine that you are, you've got a D to C business. And was that sort of the direction you wanted to head towards? Like, did you think that D to C was the way to go? Or obviously, you would eventually get into retail, but was that even on your radar at all?

• 1:02:48Speaker 01

  So, D to C was the way that I wanted to go. It was another thing that got me interested in starting the business in the first place, is I was starting to see lots of stuff was being sold online. There was Dollar Shave Club as an example of a company, which had kind of gone outside of the usual retail channel and had grown really quickly. I realized after some time that we weren't going to sell to the entire nation online. When you're selling sunglasses, as an example, if it's like a hundred dollar pair of sunglasses, and it costs like $7 to ship them to the consumer, you know, that works, right? But when you're selling a bag of cereal for $7, and then you're spending $7 to ship it to

• 1:03:30Speaker 01

  the consumer, that doesn't work. And so, that's when I realized, okay, if we're going to get really big, we got to be in the grocery stores as well.

• 1:03:40Guy Raz?

  Yeah.

• 1:03:41Speaker 01

  We went into Whole Foods first. Whole Foods had actually just moved from region-by-region buying to what they call global buying, which was basically one person that buys cereal for the whole country and puts it into every store. And so, in 2020, in January, I believe, we got the cereal on shelf at all Whole Foods across the country.

• 1:04:04Guy Raz?

  Wow. What are some of the things you did to create awareness at Whole Foods?

• 1:04:09Speaker 01

  So, I think within six months, we became one of the top-selling cereals at Whole Foods.

• 1:04:14Guy Raz?

  Wow.

• 1:04:15Speaker 01

  If not the top-selling cereal at Whole Foods. And the reason that happened is, I think, a couple-fold. In 2019 or so, keto became very popular.

• 1:04:27Guy Raz?

  Yeah.

• 1:04:27Speaker 01

  Great buyer there at Whole Foods. She was very excited about what we were doing. And she said, hey, we want to take your cereal, but we want you to change the packaging so that rather than saying low sugar in big letters, it's going to say keto-friendly in big letters. So, I then made that change. We'd been selling direct-to-consumer for, you know, close to two years or so at that point. And so, we had a lot of people that knew us. But again, because of the cost of shipping online, we were selling four packs to people online, and it was relatively expensive. It was like $49 for four pouches or something like that. When it was at Whole Foods, it was like $8.99 for a pouch, which was a really good price.

• 1:05:11Guy Raz?

  So, one of the things that is challenging, right, especially with the food business, is the fluctuation of prices, like cocoa and, you know, and different ingredients that are affected by, you know, like, like the Ukraine war affected sunflower oil, right? And, you know, the price of cocoa has skyrocketed, I think, in, in recent years. How do you manage those fluctuations? And then, but you got to sell the cereal for the same price.

• 1:05:42Speaker 01

  Yeah, that's, it's been, it's been a really big challenge. Not going to lie. The, the prices of these, you know, commodities, as they call them, right? You can go online and look at the price of sunflower oil and see a graph of it over time on Google Images. And you'll see that when the, when the Ukraine war, when Russia invaded Ukraine, the price of sunflower oil skyrocketed, because I believe Ukraine and Russia are two of the largest growers of sunflower seeds. So, yeah, you occasionally have these major spikes in prices, which can threaten basically your whole business model.

• 1:06:20Guy Raz?

  Yeah.

• 1:06:20Speaker 01

  One thing that I feel proud of is, we have worked hard to work around those spikes to avoid having to increase the price of our cereal. So, you know, a lot of people complain about shrinkflation. So, so another thing you can do is, you can say, all right, the price of this has gone way up. Let's reduce the amount that's in the bag. We have never reduced the amount of cereal that's in our, like, say, pouch of cinnamon toast cereal. It's nine ounces today. It was nine ounces when we started the company. So, one, you try to find new suppliers from new regions, right? Like, yes, the dominant supplier of sunflower seeds is Ukraine and Russia, but that doesn't mean that literally 100% of the, the ingredients are from there. And then, two, you try to make changes to your

• 1:07:05Speaker 01

  recipe when you can, right? So, we had, due to the tariffs on, on China, the price of, of monk fruit went way, way, way up. And it was like an extra $85,000 a pallet for us to buy monk fruit.

• 1:07:19Guy Raz?

  Wow.

• 1:07:20Speaker 01

  It was a crazy increase. And so, yeah, you're, we're now working on, like, okay, how can we make the cereal taste sweet, but use a little bit less monk fruit? So, there's no one solution. It depends on the situation, but you're trying to pull those levers to keep your costs in check.

• 1:07:37Guy Raz?

  So, cereal was, I mean, it was your sort of main product, right? And, but I think pretty quickly, like, within two years, right? You launched in Whole Foods 2020, roughly, right? And I think the next year, you expand out. So, snack mixes and cookie bars and cookies. So, the idea is, hey, we can be a snack company.

• 1:08:04Speaker 01

  So, when I started the company, I was taking the cereal I was making, mixing it with almond milk, and then eating it out of a bowl for breakfast.

• 1:08:12Guy Raz?

  Right.

• 1:08:12Speaker 01

  Going back to talking to consumers to understand why they love and are buying what you're selling, I realized that a lot of them were actually snacking on our cereal rather than eating it as breakfast cereal. And then, I see people writing into us, writing letters, saying, hey, look at what Chex Mix is doing. We'd love for you to make a snack mix. And I realized, okay, we can take our same cereal squares, mix some cashews and almonds in with them, and then we can toss that in a, you know, call it a Parmesan garlic seasoning, and that's a snack.

• 1:08:49Guy Raz?

  So, the business really starts to grow, and you're in Whole Foods. And I think Costco, you guys also got into Costco pretty early on.

• 1:08:59Speaker 01

  Yep.

• 1:09:00Guy Raz?

  And in 2024, I think, you, you brought in a CEO, Doug Behrens, to run the company. And tell me what, I mean, you, you, you know, you started this, right? And, and it was scaling. And so, tell me what your, what that freed you up to do.

• 1:09:20Speaker 01

  So, what it's freed up me to do, really, is, one, focus on nutrition, basically nailing protein, fiber, and sugar. That's like the, the biggest three things you can do, right? I think people should be eating more protein and more fiber. I think very few people eat enough fiber. Fiber and protein actually work synergistically to help you feel full and stay feeling full throughout the day. So, if you ask me, like, what do I think's coming next, and how can people kind of make a step change improvement in their eating? It's not just protein, it's protein and fiber.

• 1:09:57Guy Raz?

  When you think about, you know, the journey you took, and, and the, all the sort of failed businesses that you started, and then this thing, which is a complete left turn, and then it really grows really fast. And it's, I think, you know, you guys are, are doing more than $100 million in, in sales, maybe even higher than that. How much of your, of where you got to now, and the success of this, of this product and brand, do you attribute to the, to the work and the grind you put in? How much you think had to do with luck?

• 1:10:28Speaker 01

  Oh, man. I think it's a lot of both. You know, I talked to a lot of other people that have started successful businesses. There's no school, or course, or training that you can go through to basically prepare yourself to, quote, be an entrepreneur. You just have to do, and then learn, and do, and learn, and do, and learn. You know, it's funny, I was reflecting, the name of your, your podcast is How I Built This, but it's really How We Built This. And it's not just me, but it's, it's the retailers that support us, right? That enable us to get our products out to consumers. It's the ingredient vendors. It's the early investors, as well, as well as other investors, that have given us the

• 1:11:11Speaker 01

  money that's enabled us to get the equipment. And, you know, now we have a 125,000 square foot facility in Indiana, much bigger, does much more volume. Again, have had some great mentors and advisors along the way, you know, and then, and then just having a family, a wife, that are kind of like a rock, and that have helped me see it through to the end, and not, not go crazy. You know, again, it's all, it's all luck. It's all being in the right place at the right time.

• 1:11:41Guy Raz?

  That's Krishna Kaliannan, founder of Catalina Crunch. Hey, thanks so much for listening to the show this week. Please make sure to click the follow button on your podcast app so you never miss a new episode of the show. And as always, it's free. And if you're interested in insights, ideas, and lessons from some of the world's greatest entrepreneurs, sign up for my newsletter at guyross.com or on Substack. This episode was researched and produced by Chris Messini, with music composed by Ramtin R. Louie. It was edited by Neva Grant. Our audio engineer was Quacey Lee. Our production staff also includes Alex Chung, Carla Estevez, Casey Herman, J.C. Howard, Sam Paulson, Catherine Seifer, Kerry Thompson, John Isabella, and Elaine Coats. I'm Guy Raz, and you've been listening to How I Built This.