Why Magic Spoon's Product-First Strategy Drove Its Success

0:10Hello friends, I'm Ray Lateef and you're tuned in to taste radio the leading podcast for entrepreneurs makers and innovators in the food and beverage industry. Magic Spoon is proof that breaking the rules can be the smartest move in CPG. In this episode, co-founder Gabby Lewis breaks down how the premium cereal and snack brand launched and scaled in a category most people had already written off. He shares why Magic Spoon anchored on protein and nostalgia from day one, how it made the jump from D to C to national retail without losing profitability, and what actually mattered along the way. Gabby gets candid about product market fit, pricing, branding, word-of-mouth growth, retail velocity, and the trade-offs that come with innovation, offering a clear, hard-earned playbook for founders building modern food and beverage brands.

1:14Hey folks, it's Ray with Taste Radio. Right now, I am supremely honored to be sitting down with Gabby Lewis, who is one of the co-founders of Magic Spoon. Gabby, it's great to see you. Thank you for having me. Great to see you too. Scott, living in America. What part of Scotland are you from? I grew up in Glasgow. Isn't Glasgow Anthony Bourdain's favorite city or was his favorite city? You know, I haven't heard that. That would be amazing news if that's the case. I'm pretty sure that's what he said. What's so special about Glasgow? I haven't been. I've heard amazing things. But is there something particularly amazing about that city?

1:49I'm not sure what there would be from Anthony Bourdain's perspective. It's definitely not a food capital in any sense. We have great fish and chips. We have great curry. I mean, great people. I mean, there's a lot to love about the people, the culture, but certainly not a foodie destination. Interesting. Okay. So I'll have to investigate more into, or maybe I'm getting the city completely wrong and we have to edit all this out, but I don't, I think I'm right. I think I am right. Where did your food sensibility come from? How did you start to appreciate food as a food entrepreneur yourself? It's a great question.

2:23And my parents always asked me that as well, because they're not huge food lovers themselves and it's not like it was imbued from them. But for as long as I can remember, I've been absolutely obsessed with food. you know as a kid I would remember airports or places we'd visit by the food that we had there like I remember I remember this certain airport in Spain from this amazing sweet shop candy shop I went to as a kid and that was like the only reason I wanted to go back to Spain was to get candy at this shop in the airport when I was a kid but I love food I love restaurants it's kind of I love cooking so I think about so I talk about and also really into fitness as well and so So the sort of fusion of being interested in foods, fitness, cooking definitely led me to become a food entrepreneur.

3:08Did you eat a lot of crickets as a kid? Is that part of your childhood diet as well? It's not a Glasgow specialty, no. The first time I ate crickets was actually, I took a year off after high school and backpacked through South America. And it's obviously a very common staple in many countries there. And so, and I think in Ecuador, we had crickets for the first time. Okay. I didn't know it was a common staple in South American countries. And obviously I'm asking you this question, not completely out of the blue, because before you launched Magic Spoon, you were a cricket protein entrepreneur, which I think that's a first of ever.

3:47I don't think anyone ever thought that someone would say, Hey, you know, I'm, I'm the first cricket protein entrepreneur of all time, but Hey, it's a title. Yeah. And actually, I don't even know if I deserve that title. So we launched that business. It was called EXO in our final year of college. So that was 2013. And briefly, the idea is that insect protein in general, but cricket specifically, are a really high quality source of protein, all the amino acids, but also really sustainable. So it requires less feed, water, space to raise them compared to conventional proteins. And it was an idea that seemed really intellectually engaging, interesting.

4:23How do you convince people to eat something they think is a little bit strange or even gross, if it makes sense logically from a nutritional and environmental perspective? But when we launched that business, there were two or three others that launched at a similar time to us. There was one called Chapul in Utah, a couple of others, one in San Francisco. And so I'm not sure if we were technically the first, but a few of us launched all around the same time in 2013. Sounds like a risky proposition, but it was one that generated a lot of interest and a lot of enthusiasm in the industry at the time.

4:55How do you evaluate risk? How did you evaluate risk as a first-time entrepreneur? And how do you do it today as the angel investor and as the co-founder of Magic Spoon? I would say at the time, how did I evaluate risk? I probably didn't really evaluate it. or it was a very simple rubric where I actually thought I was going to go into finance. And so I had interned at what was the time, the largest hedge fund in the world. I thought I was going to go back there when I graduated. And so I started playing around with this idea for XO in the months before I graduated and then was going to go and work at this hedge fund.

5:33And as I was working on the idea, I just became more and more in love with it and met some angel investors in Rhode Island where I was at college, met some people at a CrossFit gym at a farmer's market, convinced me this was the best idea they'd ever heard of. And so at the time, as 21, 22-year-old, to me, it just seemed like this is the time to do something crazy, like start a cricket protein bar company. If this doesn't work out at that age, I knew I'd be okay. When I was fortunate enough to be in a position where I could try something for a period of time and still know that ultimately I would be okay if it didn't work out.

6:07And it wasn't as if we did deep analysis on the idea. We didn't do a ton of consumer testing. It was simply an idea that we thought was worthy to exist in the world. It was a business that we thought should exist. Somebody should do it. And it was a kind of product that we thought logically made sense if you could figure out the marketing angle. And so we just went all in. We moved to New York. We graduated. I didn't go to the hedge fund. my co-founder who was my roommate at the time was going to go and do a phd he obviously didn't do that and we we moved to a tiny little apartment in brooklyn so tiny and so bad actually the one my mom came to visit from scotland for the first time she cried slightly when she's but that's what you do and we spent five years building that business and it was an absolute monster of an education and cbg and entrepreneurship taught us a huge amount We met retailers, we met investors, we learned how to build something from nothing.

7:05And ultimately, that became the foundation and the education for building Magic Spoon, which has obviously been far more successful in the mainstream than cricket bars. Maybe I should ask you about the risk that your investors saw in the brand. Because again, a cricket protein bar company isn't necessarily the most intuitive investment for, well, anyone. How do you convince them of your vision? You know, I actually think it was probably easier to convince investors for that business than this business. Because for a lot of investors, first, it depends whether you're talking about VCs or angel investors and, you know, the domain they know.

7:41But for a lot of investors, they're looking at something and they're asking, can this become a billion dollar business? And risk or likelihood of success is maybe even slightly secondary. So can this become a billion dollar business? And can this dominate an industry? and at the time so back in 2013 this was going to peak alternative proteins this was you know a lot of talk about the environment and we were basically making the case that insect protein is going to be an entire category of protein similar to the plant-based protein movement right we were saying it is more sustainable better quality protein people essentially want to have the amino acid profile and the protein quality of an egg or a beef protein, which is kind of the highest PDCA score, but they don't want the environmental footprint.

8:32And so insect protein, the way we positioned it was like, it's sort of the best of all worlds. It's the environmental credentials, the plant-based protein, it's the protein quality of animal-based protein all in one. And so for some investors, this was a bet on the future of the food system being both high quality and sustainable. And, you know, they could believe that there's some odds that this thing could actually become as big as the soy or other kind of staple protein sources. Obviously, we all knew it was a long shot. It was a huge swing. And I think everybody went into knowing that if this works, it's going to be massive and food system changing.

9:09And if it doesn't, that's investing. That starts up. So I think that was kind of the lens that everybody took. I'm going to be honest with you, and I'm sorry if I offend you in any way, Gabby, but if I were an investor when you were launching Magic Spoon and you said, hey, we've got this great idea for a very high macro, ultra premium cereal that's probably going to cost about$10 or$11 a box, I would have been like, I'm sorry, hang up the phone or leave the room or whatever it is that an investor might have done. And I'm sorry for saying that because clearly I would have been in the wrong. Again, going back to risk, Magic Spoon as a business proposition wasn't necessarily something that made sense, at least I think for most people.

9:54What did you see as the opportunity? What did you see as that quote unquote white space for a brand like this? I think you're right. And it's not actually just you. Lots of investors we spoke to casually gave us a list of reasons why this business wouldn't work or didn't make sense to them. And some of the reasons were the market was declining, right? So cereal, yes, it's enormous, but it was in decline for several years. And investors would say to us, you should never get into a declining category, which is kind of funny because some of them would say, hey, you should enter this growing category that's very small.

10:28But when I looked at that, I saw$10,$12 billion category, very slightly declining, still going to be big for a very long time. or you look at a$200 million category, which even if it's growing 30, 40%, that's still going to be pretty small for a long time. So I didn't really get that argument, but we heard it. They'd say to us, you'll never get shelf space. They'd name the big three cereal companies. They'd say it's going to be very hard for us to break through. I'd actually seen with Exo though, that if you generate enough hype, enough consumer demand, retailers will take a gamble on you or at least enough retailers, one retailer, that then you get a chance to prove yourself with velocity, take that to the next retailer.

11:05So I didn't really buy that argument. They'd say to us, nobody will ever pay$9,$10 for walks of cereal, which again, nobody had proven that you could do it. But all these other categories, you'd seen something similar happen, right? And that's true in food and beverage, where there's many categories where a brand creates something that's genuinely better and can charge a premium. But you even saw it at the time, native deodorant had just sold to PNG. And they had a natural deodorant, three times the price in conventional deodorant. So you'd seen all these examples in different aisles of the store that prove to us that people will pay for something that's actually differentiated.

11:39And we also just knew that there are very few categories that are as big that people love so much. And you'd speak to anybody and they have all these incredible memories of eating cereal as a kid and they stopped. And that included me, my co-founder, but it's also most people you talk to that care about health and wellness. And so it seemed obvious to us that if you could create a breakfast cereal, they looked and tasted close enough to the sugary classics, but was massively upgraded in nutrition. So not just 20 % less sugar, because that had been done before, not just a few grams of protein that had been done before, not just making the ingredients more natural and organic, but keeping the macros the same that had been done, but actually taking the protein from one gram to 14 or 15, the sugar from 20 grams to zero.

12:29It's a completely different product. we thought that there'd be a lot of people very excited to eat that in place of their Greek yogurt, their stodgy protein bar, their green juice, all these things people eat that they don't really enjoy. So that was what we saw. Love investors didn't see it. Thankfully, a few did. And so we raised some money and we got to work. At launch or actually at pre-launch, can you arrange in order of importance these three aspects of the brand? Hype, product, brand. Products, I think, is going to be number one. I think brands can mean so many different things. And I think when you're launching, when people say brand for an early stage company, they probably just mean packaging and website.

13:16Or for a brand that's not DTC, probably just packaging. Ultimately, brand encompasses every interaction somebody has with your company, including how they perceive the product, including how customer service interacts with them if they write in, social, everything. But when you're just launching, there's not really a brand, there's packaging and a site. I think for us, packaging was really important because we wanted to create that feeling of nostalgia. And we wanted somebody to not see this as just another Better View health product. There had been cereals or Better View cereals, and they all took this approach of basically doing the opposite of what the sugary cereals do.

13:55So you see the sugary there's cereals, characters, bright colors. They're fun. You know, they're not very good for you. All these other better few brands in cereal, but you see this more broadly at the time as well. They're going very minimalist. They're doing muted packaging. There's, you know, maybe on the back, there's a farmer with a stalk of wheat. It's very kind of like wholesome branding. And it's not fun and it's not enjoyable. And you don't think it's going to taste good. And so for us, it was very important from a branding perspective to say to people, we're creating something that doesn't involve compromise.

14:25You can have something that's fun, tasty, makes you feel good, makes you feel like a kid, but it's legitimately good for you. In fact, better for you than all those other brands that try and make it seem like they're healthy with the white, minimalist packaging. So brand and packaging was really important to us, even the format of the product. So we thought for a moment, maybe we should do a stand-up pouch that's resealable. Because cereal boxes are actually not a great experience, right? You kind of rip it open, it tears. You don't reseal it. Like it's not a great way to package and consume something, but what it does have is that amazing feeling of nostalgia.

15:01And it's fun to rip open a cereal box. It's fun to look at the back and play the game. And so we even chose the format of the packaging through that lens of brand, and we wanted someone to feel. So that was very important for us. But ultimately, product is number one. We basically had a list of all the nutritional attributes we were trying to meet and formulating. And so we had to be over 10 grams of protein, as close to zero sugar as possible, gluten-free, grain-free, low-net carb. And then within that, taste as close as possible to the cereals that people grew up with. And yeah, I think we got close enough.

15:36And the launch was a really, really amazing launch. And then I think if you get the product right and you get the brand right, the hype a little bit comes from them. It's not something you build in isolation as distinct from those two aspects. To be fair, though, there was a lot of hype for Magic Spoon. And I feel like that's where I learned about the brand. I wasn't necessarily seeking out a cereal brand for me. I understand that, you know, this is something that, or the brand that is Magic Spoon is something that was sort of right place, right time, particularly in 2020. But for a time, it was known as Instagram's favorite cereal, right?

16:16Yeah. So we generated awareness a few ways early on. So one was we relied heavily on health and wellness influencers, not with massive followings, though. So we actually brought on some small health and wellness influencers as investors in the business. You know, Kaylee Levesque, for example, is one who she's a nutritionist, dietitian to a lot of celebrities. People really trust her for food recommendations, nutrition recommendations. so we actually brought people on like that as kind of part of the business and so that was one piece we did a lot of seeding of small kind of micro influencers on instagram literally just me and the dms finding someone with 30 000 followers that i thought might like the product asking them if they were interested in trying it no pressure to share but if they like it they typically will share so a lot of that with smaller influencers and then as the sales started to come in and we had some money to spend, we also started to invest in podcasts.

17:14And the podcast environment was a little bit different five years ago than today, a little bit more underpriced. You were able to invest in some of these podcasts. And actually, for us, that was a profitable acquisition vehicle kind of on day one, right? So it wasn't a lot of DTC brands back in the day were spending more cash than they can really afford, getting the payback over a longer period. For many of these channels, including podcasts, that wasn't the case for us. And so we're able to generate a lot of early interest through influencers, podcasts, and of course, some ads on Instagram as well.

17:43But as you say, that's incredible, but it only ultimately matters if you can then get the repeat rate. And so that's where it's really important to make sure the product delivers and also find ways to keep people excited. And so in our first few years, we actually launched new flavors online every four to six weeks. Somebody might come in on a sampler pack, four boxes top four flavors but then in four to six weeks they get an email saying hey we have a brand new limited edition flavor we developed a bit of a playbook for that so we wouldn't make very much of these flavors we dropped them to our kind of early access vips first of all through sms through email and that generated a lot of excitement but also a reason to repurchase as well i think there's so many options out there and so for us to be able to say to someone you You can have your classic flavors, but also there's more coming every six or eight weeks.

18:34We're always going to keep it exciting. There's no reason to get bored of this product, this brand. That was really key to generating those repeat sales in the first few years, DTC as well. So it was about maintaining that enthusiasm and excitement for Magic Spoon among your core consumers. Were they, by that point, convincing a lot of other people to try the brand? And was word of mouth a really big part of generating excitement for Magic Spoon? A hundred percent. And I think it's word of mouth at every level, right? So we took the view early on that running ads and our brand saying, trust us, this brand you've never heard of, this product is good for you and delicious.

19:18That's not how you build a brand and no one's really going to believe you. And so we realized early on that word of mouth at every level is how we're going to get this product out there. And so that was some early celebrity investors. That was these kind of mid-tier and smaller-tier influencers. That was the micro-influencers we're just sending product to, hoping they talk about it. And that's also just your customers telling their friends. And if you can facilitate that or encourage that more through a referral program or something like that, it can also be powerful. But so at every level, you're building it through word of mouth, broadly defined, 100%.

19:49ahead of major trade shows food and beverage professionals across the industry are turning to bevnet and nosh to stay informed if you have a brand update share it with us at submit.bevnet.com forward slash news i just want to back up for a second i wanted to ask about the name magic spoon which feels pretty intuitive. It feels fun. It feels like a cereal brand. If you think about the names of cereal brands, the legacy ones anyway, they're often two words, you know, a cornflakes, a frosted flakes, a honey smacks, corn pops, you know, Lucky Charms, any of those. And Magic Spoon, each word is five characters, which again, feels really easy for that consumer.

20:36How much do you think about the brand name as being a really important part of the brand itself? Were there any other names that were on the cutting room floor? Yeah, we thought about it a lot. We probably overthought it, and I think every founder probably overthinks it. There was actually a different name we had for a while, which was Discos. And that was what the name was going to be. We thought, you know, Disco, 70s, vintage nostalgia, they're shaped as O's, Discos. And people told us they liked that name. Looking back on it, I think that's a horrible name. at the time, you know, because these names before you launch, there's no brand or world built around them.

21:14And so it's very hard to wrap your head around what a word or two words really feels like or means until you build everything around it. We eventually thought the discos felt too small, too tight, didn't feel like, you know, a big brand. And we wanted to nod at this idea of magic because where that came from was we want somebody to think when they try our product for the first time. What is going on here? How did this company create cereal that tastes and looks so colorful and sweet, but there's zero sugar in it? It must be magic. So that was the idea we wanted to convey. And we also felt like a two-word name kind of made sense in this category.

21:55See, Spoons, Cereal. One of us just said, what about Magic Spoon? And it kind of felt right, but it didn't feel instantly right. It wasn't like someone said that and we all thought, that's the name we have to have it. And I think until you actually build the branding and the world and the packaging around it, it's very hard for a name to mean very much. And I think it ultimately probably matters less than everything you build around it. So we thought about it a lot, weren't incredibly confident of it, honestly, in the early days, but now we think it's a very strong name and it's served as well.

22:29Well, for sure. Disco actually feels like maybe a dive bar in Brooklyn. So I can understand. Yeah, 100%. Or, or, which we didn't even think of this at the time, getting discord from a retailer, right? Like it's got pretty negative connotations in CPG. Definitely don't want to be discontinued at a retailer. Yeah. Well, let's talk about that for a sec. Because for a long time, you were D to C and patient about going into retail, or at least brick and mortar retail. When did you feel like you had permission to make that leap? And think about Magic Spoon is more of an omni-channel brand. So we actually thought about it as an omni-channel brand pre-launch.

23:06When we launched, it was not my intention to launch a DTC brand. We didn't think that our innovation was in channel. We thought our innovation was in product. And so people would talk about us in the early days of Magic Spoon is the Casper, the Harry's, or whatever DTC brands of cereal. And that actually annoyed me a little bit because those brands, whilst they're incredible brands, their innovation was cutting out a middleman, getting someone essentially the same product, but more directly and more affordably. They didn't really do a whole amount of product innovation. For us, everything we thought we were doing was product innovation.

23:45We were taking sugary cereal and making it vastly healthier with similar taste. And it just so happened that we were selling on the internet. So that wasn't important in our minds to the business model. and pre-launch, if you had asked me when we would go to retail, I would have said six or 12 months into our journey. Our goal was prove the concept online just enough to convince a retailer to take us. That was shattered in our first week. So our first week online, we probably did more in sales than we'd forecast for our entire first year. It's a massive first week. And a lot of that was due to the excitement at launch, some of the press and the creators that got behind it, and just incredible efficiency once we turned on ads a little bit later as well.

24:33And that continued. And so because D2C was growing at such a clip, and it was enough for us to focus on, we didn't need additional things to think about, we kept our heads down. And throughout the entirety of the business, it's been really important for us to do as little as possible. We want to be really good at a small number of things and not get distracted by any of the shiny objects. And so to the extent the DTC was working really well and we were growing as quickly as we could have ever wanted to grow, we just kept our heads down. And retailers would reach out. We'd very politely explain that we're excited about partnering with them at some point when the time is right, but we weren't quite ready yet.

25:13And we ended up building the business DTC only for essentially three years. And then we launched in retail two or three years ago. And we did it in a major way. So we launched Nationwide and Target, firstly. Six months later, we were in Walmart, Sprouts, Kroger, Costco, a lot of retailers. When Magic Spoon was a D2C-only brand, what was the most important metric for you as a founder? and how has that changed, if at all, in becoming an omnichannel brand? In terms of sales metrics, when we're D2C only, we're looking at some measure of what it's costing us to find and acquire a customer. So CAC, cost of acquisition.

26:00And then we're looking at some measure of how long does that customer stick around, how much they're spending with us over time. So lifetime value, lifetime revenue. and we're trying to find the balance there that makes sense to build a sustainable business and of course within those like they capture a lot of different things right so within lifetime value lifetime revenue repeat rate kind of factors in there so it's also a measure of how much someone likes your product you know within the cost of acquisition obviously how efficient can you get the eyeballs in the first place how efficient can you get a click and so your brand matters your packaging matters the creative matters so within those there's a lot of stuff it's kind of bound up.

26:39But those are ultimately the two things that kind of mattered most in the DTC days. Now retail velocity is probably the number one sales metric. We're less concerned about things like door counts. We're really trying to be healthy in terms of velocity and flying off shelves. And that's going to be true since day one in retail. That's been a major focus. And a lot of things go into that as well, right? So repeat rate is really important. front of pack like are you getting someone to pick you up off the shelf so there's a lot that goes into that that we look at kind of one layer down but ultimately retail velocity is probably the single most important sales metric at this point and then higher level as a company you know in the early days we're thinking a little bit more about revenue for startup that's zero to three years in revenue growth probably one of the more important metrics especially because the market was a little bit different six years ago.