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

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28:21Hey, 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. 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.

29:01And 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 he could try some if he wanted. So the next time I saw him, I 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 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.

29:39And 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 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 actually working on making a, quote, product or a serial product. But that was not the intention of it, you know, going forward. All right. So walk me through how you got to a place where you were like, okay, I'm going to try and make a business out of this.

30:16I think I want to put all of my energy into this cereal idea. 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 are trying to achieve this. And so that's when I realized, oh, there's actually 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 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 there.

31:03And 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. 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. 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's like, hey, there's a big challenge here, but a big opportunity to help a lot of people.

31:45All right. So 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 got to be crispy in milk or almond milk or soy milk, it's going to stay crispy, and it's going to 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 to, I got to get more training, I get a better understanding of how to do this?

32:24Yeah, 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, the 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.

33:04And then you're baking it for a long time. You do the dough for a long time. You can really only make it in an eight hour day out of your oven, maybe like five or six pouches of cereal. And I guess I should describe your cereal for people who are not familiar with it. It looks like golden grams, right? For lack of a better description. 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 or so it wasn't perfect. I'm sure some of those squares were not squares. Maybe they had like a chip on them or something.

33:39Yeah, yeah. And you had a name for this cereal. Yes, yep. I called it Catalina Crunch. From the beginning. Okay, Catalina's Island off Southern California. I'm assuming that's the Catalina you're talking about. Yeah, I'd grown up 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 way way way more expensive yeah um 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 um 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.

34:55So 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 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 been introduced to Catalina Island through the movie Step Brothers.

35:28So I went with Catalina Crunch. It sounded good. It had a ring to it. Easy to say. I liked it. I'm curious. I mean, clearly you liked cooking, you liked baking, but this was not how people identified you, 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 going to 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? 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.

36:13When 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 parents, my girlfriend, who's now my wife, family, they were kind of, I would say, rocks in my life that helped me pursue these things with confidence. And you were initially going to, so you set up a website, and you were going to sell bags of this cereal. And the flavor was chocolate? Chocolate, yep.

36:51And how did you market it? Did you call it a keto cereal? Because still, a lot of people don't know what that means. Did you call it a low-carb cereal, a high-protein cereal? 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. 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.

37:29And 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. How did you get people to be aware of 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. 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 one diabetes group inside of Facebook. And then like 100 people from that group came and bought the cereal.

38:07So 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. Okay. So you've got this, and how are you making, I mean, how are you actually fulfilling orders? Let's just say you're getting 10 orders a day. Is that about right? We quickly got up to hundreds of orders a day. I'm assuming you had to start hiring people to help you quickly. Well, 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?

38:47They 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. And you were doing this? Yes. Yep. And fulfilling orders? Yes. Yep. Okay. So, but you had to hire people to help you, I imagine. 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 cut crackers, you know, cereal into the ovens. It's complicated because imagining you're cooking this at low temperatures for a long time, right?

39:28Or 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. 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, 18 minutes, something like that. Yep. and then put them in bags and seal them. Yes. So this commercial kitchen was in industry city. It was very busy. So I had the last shift, which I believe was 10 p.m. to 5 a.m. or something like that. So I was working overnight in there and making the cereal, packaging it. And so I would go to the post office by my apartment with tons of boxes, drop them all off, and then kind of start that again.

40:14And sleep for what? How many hours a night? Yeah, yeah. I wasn't getting a lot of sleep. It was just a lot of work. Tell me what that felt like. I mean, 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 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? I was intellectually enthralled by the adventure and I was very busy. So there were challenging times when I questioned what I was doing.

40:57But at this point, when you're getting orders coming in and 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 thrilling. It's really exciting. I don't know how else to describe it, but you've just put something new into the world and people are telling you that they love it. And so that was foremost on my mind at this time. I want to go back to the ingredients for a sec, because in that first year of making it yourself and going, you know, selling it. I mean, you were literally going to GNC and buying protein powder and ordering, you know, other ingredients probably through Amazon and just that was it?

41:35Yeah, I started ordering everything off Amazon. Yep. because the ingredients today are quite complex. I mean, there's still pea protein, 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 a corn, but 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. Yeah, yeah. So one of the things with the ingredients is I had also wanted to have a lot of fiber in the cereal if I could.

42:18And 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 and I think 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.

43:01And 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 get powdered spinach, like whatever you need, you could just get online now. Yeah. Yeah. I mean, it's fascinating and you're absolutely right. And an interesting kind of side bit. But, you know, we talk about whole grains, right? So a whole grain has the bran, the germ, the endosperm, the entire grain. Right. Like a wheat berry before it's ground up is that's what you're talking about. Yes, exactly. Yep.

43:42And so it has all the protein, all the fiber and all the starch all in one. We started, the food industry started removing the protein and removing the fiber as a way to make products taste better. Yeah. And so that was the first iteration of this was going from whole wheat flour to bleached white flour and going from brown rice to white rice, etc. 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 have been a lot of people writing about the problems with that. But B, well, where does the protein and fiber go?

44:23It's just being thrown away. Thrown away, yeah. 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 a way to avoid food waste by reusing some of the most nutritious parts of the legumes, the lentils, and whatever else. Yeah. I mean, it's like whey. For a long time, whey was just thrown away 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 it into a protein powder. Mm-hmm. Yep. So, okay, so let's go back to, so it's 2018.

44:59You'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 probably not really what you wanted it to be yet. Yeah, 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 variability in the baking process. And I'm basically only able to make so much each day. And so I 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.

45:42So I'd turn it off and say out of stock, 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. 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. Wait, Texas A &M, that's amazing. You go to Texas A &M and how long is the course? It was, I think it was a week. 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 70s.

46:33And that's how they learned how to make ice cream. So Texas A &M is 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? 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. So you're in a kitchen in this class? No, no. So in this class, they have what they call pilot-sized versions of the equipment that the bigger companies use to make cereal.

47:11Yep. 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. And it's just being, 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 it in the box. Yeah, yeah, yep. So you learn about that. You learn about equipment to package food products as well. And, you know, you go into any modern food facility, they don't have a bunch of people just sitting there scooping cereal and putting it into bags.

47:50They 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. Which is whey puffs, right? Yes, 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 bar market was growing, demand for this same manufacturing process was growing and hence investment in it was growing.

48:36Interesting. I mean, the people you met in that course were like, you're doing what? Wait, you're cereal with what? 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. Yeah. So, hey, so cereal, 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 it in large volumes.

49:18You know, they're saying that it wasn't going to work for one reason or another. 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. Yeah. I mean, they're the experts. They're not geniuses. And experts every so often find themselves in the expert's 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, and pee hole fiber and things like that.

50:02Right. Um, so, 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 principles reason as to why it's not possible, then I, then I walk away believing it's possible and that we just need to do more work. 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.

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53:09Hey, welcome back to How I Built This. I'm Guy Raz. So it's 2018 and Krishna's 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. 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 baby cereals and some other more organic products. And so once I was working with them, I could then make, rather than making 50 pouches a day or whatever it was in the commercial kitchen, they could make 10 ,000 pouches in a day, far larger quantities of it.

53:59but 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 so did you raise money yeah so so i had raised over the course of two rounds first a hundred thousand dollars um and then eight hundred thousand dollars afterwards okay and This is in 2018. Yep. And who were your investors? Yeah. So first investor was a good friend of mine from college. And yeah, he wrote me the first check that enabled me to do a lot of this work that I talked about in making the cereal.

54:40And this co-manufacturer, and you're back in New York. Yes. And so that's it. You're going to work with this co-manufacturer on making, on scaling this. Yes, I went back and forth. This company is 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 which is what you had you weren't using a box cereal box it was a pouch yeah yep and I was you know I 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 it got grown very frustrated with the bag in box.

55:50Also, 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's as 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. And then from there, I was able to take it and ship it out to customers as they ordered it. All right. This is all happening in 2018, your first year in business. Yep. So this is a busy year. It was. It was a very busy year.

56:27Yes. Okay. Late in 2018, you decide to leave New York City and move to the Midwest. What happened? What was the catalyst for that decision? 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. Yeah. And so eventually they kind of came to me and said, hey, we're just not going to do this anymore.

57:15You'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. But there was no one else who could do it for you? 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 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.

57:56Then 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 some other sort of manufacturing process before it, which I didn't need and they wanted to use. So you had to build your own production facility or was it a turnkey operation? Like, what did you buy a bunch of equipment? And why Indianapolis? Yeah, yeah. 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?

58:49because 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? Yeah. 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 a little smarter at this point from back when I was making things in my kitchen.

59:29And 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, 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 3000 square foot space in an office building in Indianapolis.

1:00:06And I basically moved into that building, bought a, uh, like a cot off Amazon, set it up in the office and then I would do the cereal in the back. And what did it be? I mean, did you have to buy like huge mixing bowls to like to mix the cinnamon and cocoa? 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? Yeah, yeah. So there's a few different ways of doing it. When I started, I was thinking about it and was 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.

1:00:48And then I can put the cinnamon into it 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. Okay. So you are in Indianapolis, just grinding away, sleeping in the facility. And give me a sense of like what your sales were like overall in 2018. It was probably a million dollars or something like that. In your first full year? Yes. Yep. That's a lot. Yeah.

1:01:28I mean, I think it's crazy to say it, but 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. Okay. I imagine that you've got a D2C business. And was that sort of the direction you wanted to headed towards? Like, did you think that D2C was the way to go? Or obviously you would eventually get into retail, but was that even on your radar at all? So D2C 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.

1:02:15There 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$100 pair of sunglasses and it costs like$7 to ship them to the consumer, that works, right? But when you're selling a bag of cereal for$7 and then you're spending$7 to ship it to the consumer, that doesn't work. and so that's when I realized okay if we're gonna get really big we got to be in the grocery stores as well yeah um 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.

1:03:20Wow. What are some of the things you did to create awareness at Whole Foods? So I think within six months, we became one of the top selling cereals at Whole Foods. Wow. 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. Yeah. 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.

1:04:01We'd been selling direct to consumer for 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 899 for a pouch which was a really good price so one of the things that is challenging right especially with the food is the fluctuation of prices like cocoa and different ingredients that are affected by, you know, like the Ukraine war affected sunflower oil, right?

1:04:46And, you know, the price of cocoa has skyrocketed, I think, in recent years. How do you manage those fluctuations? And then, but you got to sell the cereal for the same price. Yeah, it's been a really big challenge. Not going to lie. The prices of these commodities, as they call them, 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 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.

1:05:36yeah one thing that 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 um 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 is 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 ingredients are from there.

1:06:19And then two, you try to make changes to your recipe when you can, right? So we had due to the tariffs on China, the price of monk fruit went way, way, way up. And it was like an extra$85 ,000 a pallet for us to buy. 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. So cereal was, I mean, it was your sort of main product, right? But I think pretty quickly, like within two years, right?

1:07:02You launch 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. 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 right 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.

1:07:47And 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. 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. Yep. And in 2024, I think you brought in a CEO, Doug Behrens, to run the company. And tell me what – I mean you started this, right? And it was scaling. And so tell me what that freed you up to do. So what it's freed up me to do really is one focus on nutrition, basically nailing protein, fiber, and sugar.

1:08:46That's like 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 is 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. When you think about, you know, the journey you took and 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.

1:09:24And it's, I think, you know, you guys are doing more than$100 million in sales, maybe even higher than that. Um, how much of your, of, 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? Oh man. Um, I think it's a lot of both. You know, I, I talked to a lot of other people that have started successful businesses. Um, 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.

1:10:06You know, it's funny, I was reflecting the name of your podcast is how I built this, but it's really how we built this. And it's not just me, but 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 money that's enabled us to get the equipment. And 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. 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 go crazy.

1:10:52Again, it's all luck. It's all being in the right place at the right time. That's Krishna Kalyanen, 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 gyros.com or on Substack. This episode was researched and produced by Chris Messini with music composed by Ramtina of Louie. It was edited by Neva Grant.

1:11:26Our audio engineer was Kwasi 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 Coates. I'm Guy Raz, and you've been listening to How I Built This.