The Case for Selling Healthy Cereal on the Internet

Magic Spoon is betting you’ll buy cereal online. More specifically, the New York-based startup is betting that you’ll buy its cereal online, which comes in four flavors — fruity, frosted, cocoa and cinnamon.

The proverbial magic in Magic Spoon is that it barely resembles traditional cereal ingredient-wise, with only three grams of net carbs per half-cup serving. It’s also high in protein, with no gluten, grains, soy or wheat. What pressed juice did for juice, Magic Spoon is doing for your favorite childhood breakfast.

The company was founded just over a year ago by Gabi Lewis and Greg Sewitz, who previously sold their company Exo (which made high-protein bars with powdered crickets) to Aspire, a global leader in the edible insect movement. In April, Magic Spoon launched publicly and quickly went on backorder, despite its seemingly high price point at $39 per case (4 boxes). If you break that down, it comes out to about $1.39 per bowl, which is pretty reasonable for a protein-packed meal.

I caught up with Lewis to talk about the advantages of selling cereal direct-to-consumer, why the cereal industry hasn’t been disrupted in recent memory and how Magic Spoon is leveraging influencers to acquire new customers.

On his *aha* moment: We wanted to build another food business, so I literally walked through the grocery store looking at different categories and aisles trying to find a large, untapped category that was in need of innovation. I grew up loving cereal, like most people, and when I started to pay more attention to health and nutrition, I stopped eating cereal as often as it’s not the healthiest option. It came together by combining this food from my youth and recognizing that there’s this massive aisle in the grocery store that’s about an $11 billion market domestically, and it looks the same as it did a decade ago. There’s basically no product in that aisle that’s speaking to the modern consumer. It’s still stuck in that paradigm of grains, corn, wheat, sugar and devoid of any real nutrition.

On the challenge of getting the formula right: It’s pretty difficult to get the right taste and texture without using grains and keeping it high in protein. Typically, when you get protein to a certain level, like at 30-40%, the product starts to taste really hard and you lose that texture you’re going for. It’s also really hard to recreate the sweetness in cereal without using an actual sugar. It took several months of working with different food scientists and chefs and running through every protein source and sweetener you could possibly imagine. Hundreds of recipe iterations later and we finally got to a version of Magic Spoon we were really proud of.

On how you go about finding food scientists: I already had a network of food scientists and chefs, fortunately, because it’s very much a black box. You can’t just google “food scientists.” The same goes for food manufacturers. A lot of these organizations are not very public because most brands don’t want other brands to know where their manufacturers are. Luckily, having already been in the industry for several years, I already had those relationships.

On the puzzle of creating new cereal: The first step is creating an unflavored base cereal, which is sort of analogous to a plain Cheerio. We had to figure out how to make that base without grains or anything high in carbohydrates. We basically set parameters in terms of carb percentage, fiber, fat and so on. Eventually, we got closer and closer to actually replicating the taste and texture of a cereal puff.

The two next stages were sweetening and flavoring. The sweetening part was also pretty tricky because we wanted to create something that tasted like sugar without sugar. We also didn’t want to use any artificial sweeteners. There’s a lot of natural sweeteners out there, but most of them have a nasty aftertaste and adverse side effects in terms of things like bloating. Eventually, we came up with three specific natural sweeteners in a very specific ratio. The three are allulose, monk fruit and stevia.

Then the final piece of the puzzle is the flavoring. For our coco flavor, for example, we ordered dozens, if not hundreds, of different types of cocoa from all over the world. We combined them with the sweeteners and other natural flavors and just did lots of taste testing.

On why you can’t try this at home: If you spoke to somebody who’s starting a protein bar or cookie company, they most likely got their start making it in their own kitchen at home. Then they probably started selling it at farmer’s markets, and then maybe they rented space in a commercial kitchen by the hour. They very gradually scaled up the production through sequentially larger steps. With cereal, however, you can’t actually make the base puff at your house on a small scale. The machinery you need to use is huge, and that’s one of the reasons I think you haven’t seen tons of startups trying to reinvent cereal.

On their influencer strategy: Influencers have been an important channel for us. We’ve been working with several people who are not necessarily household names, but they have very large followings in the health and wellness space. People like Kelly LeVeque, who’s a nutritionist, and Katie Wells, who’s known for healthy recipes for young moms. Alongside those influencers, we have been running some ads on Instagram and have found that the brand resonates. People deeply love cereal and are trying to avoid unhealthy food in general. People with restrictive diets like Keto even love it.

On selling direct-to-consumer: With direct to consumer, it’s easy to explain to people why this is so different and why we’re charging this much for this. And if they don’t understand and write to us in Instagram comments or through our customer service email, they totally understand when we explain it. When you frame it as $1.39 for breakfast, compared to a Starbucks coffee for example, it totally clicks.

On selling in grocery stores in the future: Ultimately, we want to be everywhere where people are purchasing their cereal. Today, less than 2% of people purchase their cereal online. While direct to consumer is exciting and growing, ultimately most people still buy all of their food in the grocery store. We’ve been contacted by almost every mainstream grocery store you can think of because they’re incredibly excited to bring something new to the cereal aisle. The most exciting thing to happen to cereal in the last 50 years or so is maybe granola or overnight oatmeal. But right now, we can barely keep up with demand on our website so we’re going to stick with that for a while.