D’s Naturals has developed rapidly from its inception just two years ago. Today, the US plant-based protein bar maker generates around US$10m in sales and has attracted investment from General Mills investment arm, 301 Inc. Founder Daniel Katz – or D as he is also known – spoke to just-food’s Katy Askew about the development of the business and its prospects.
Daniel Katz founded D’s Naturals in 2015 when he was just 18 years old. Working out of Los Angeles – and even sleeping on his office floor – the drive to get D’s Naturals off the ground came from a very personal place, Katz explains.
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While attempting to develop a drink brand, his “first entrance” into the CPG world at the age of 17, Katz discovered an unfilled niche in the market due to a “personal need”.
“I was eating two-to-three protein bars a day to get me through,” Katz, speaking to just-food at the Natural Products Expo West trade show, recalls. “I got these crazy stomach aches and realised I had a dairy sensitivity. I realised that it was a major problem in the majority of the world actually. So I was on the hunt for a dairy-free protein bar that was low in sugar and high in protein. I couldn’t find anything like it on the market so I decided to take it into my own hands.”
At the time, Katz says the use of plant-based protein for a product like this “wasn’t necessarily a mainstream” concept. In fact, plant-based options were “really just making [their] entrance into the Los Angeles market, where trends usually go first.”
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“I did some research and decided to use [a plant-based protein] in a product that fit my personal need. Luckily, a personal need for many others as well.”
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By GlobalDataAnd so the No Cow Bar was born “The existing No Cow bar is created as a low-calorie, high-protein option in between meals, before you work out, after you work out, a snack throughout the day. A big part of our consumer base is busy mums on-the-go, picking up their kids from daycare, doing yoga. People who live an active lifestyle and are looking for a quick snack and high-protein source. We are dairy-free, soy-free, gluten-free, non-GMO, low in sugar, high in protein.”
After the light-bulb moment when Katz spotted the need for a bar that ticked all these boxes, he began experimenting with recipes in his kitchen and pitching the idea to retailers.
“I cold called everybody and met with them in conference rooms. I was wearing shorts and a t-shirt. They were wearing suits and ties. I pitched them my product. At the time I just hand samples I made in my kitchen. It tasted terrible, was not a good product,” Katz reflects.
Nevertheless, the concept was enough to attract the attention of a health retailer. “Vitamin Shoppe was actually the first retailer to take a chance on the products. They said ‘we believe in it, we want you to really make this product turn to life’. They liked the concept and said if you can get it delivered in a month and a half we’ll put it in 300 stores nationwide.”
The pressure was on for Katz to turn the sample recipes he was cooking up in his kitchen into a product that could be delivered at scale. “In that month and a half, I started cold calling every co-packer, every ingredients supplier. I had a product that I literally just created using everyday ingredients and I had to set up our entire supply chain in about a month in order for us to deliver product and have a full production run.”
Establishing that supply chain was crucial to the delivery of the product and Katz’s focus on the use of quality ingredients was key.
“We use ingredients that are the highest quality. That was a big thing for me, making sure, one, that our supply chain is stable from a scaleability side and then, two, that it’s scaleable from an ingredients quality side. It is a big problem, where a lot of people care more about the price than the quality of ingredients. I like to tell people they need to keep in mind this product was made for me. I am a consumer of my own product. I am very concerned about what goes into my body and I would never put a product in my body that I wouldn’t be comfortable sharing.”
Today, the No Cow Bar is in around 12,000 stores nationwide. In addition to Vitamin Shoppe, it is stocked by GNC and has recently been picked up by CVS.
The rapid growth of the business caught the eye of 301 Inc, the investment arm of General Mills. In partnership with Chicago-based 2X Consumer Products Growth Partners, the investors have put a “significant” sum into D’s Naturals to support future growth.
The investment will first be seen through the hiring of more staff. “I think one of the unique things about our company was the fact I was running pretty much all the operations. I still do, everything about the company. It is a very tough dynamic when I am so focused on the supply chain and can’t necessarily take any of my efforts to the marketing aspect or the sales side… I can’t do everything. I am trying to place myself in a position where I can add value to the company and make the correct hires in order to delegate to others. I think that is one area that they will help with.”
Katz says he is keen to learn from the depth of expertise that 301 brings to the table. “301 is derived of individuals who have spent ten to 20 years at General Mills and were put in a position where they had more of an entrepreneurial mindset. They are able to help on the small, fast-growing business side. They are very, very involved.”
General Mills has seen its brands such as Nature Valley come under pressure in the bars category, with smaller companies viewed as more agile and innovative stealing share. Investing in up-and-coming companies like D’s Naturals was one of the primary reasons General Mills changed the focus of 301. These investments can be viewed as an innovation incubator for the larger company.
However, Katz is quick to point out General Mills was itself at the forefront of innovation in on-the-go bars. “General Mills first off were really the innovators of the on-the-go category. The created Nature Valley, which was really the first leap into this on-the-go, at the time breakfast, concept. So from an operations, a supply chain management standpoint, that is one of the big resources they are providing. Help on the management side of that, as well as sourcing raw materials.”
He also emphasises that, while D’s Naturals is supported by General Mills, it continues to operate on a stand-alone basis. “They are helping us in a way that allows us to stay very independent. They are adding help when needed,” he stresses. “It is certainly not a sell-out where we are going to start using sugar and change all of our ingredients. It is really General Mills, a large $17bn-a-year company, investing in the fact they believe in my brand. It is not in any way us matriculating into the General Mills way of life. It is them making an investment and believing in the future of us as an independent company.”
Ultimately, would Katz consider selling the business to General Mills in its entirety? He is guarded. “I would rather not talk about economics with the deal, General Mills is a large company, the obviously have goals in mind. I can tell you that we have a very good relationship with 2x and General Mills, we are all relying on the same goal of growing in the company. What is going to happen in the future, nobody can necessarily predict.”
While General Mills is offering practical assistance on a number of issues, Katz says he has decided not to use the group’s sales channels to ramp up US distribution.
“Sales support is something they do provide. We certainly could tap into [their distribution channels] if we needed but there is no need for it. It was a strategic decision on my part to partner with certain retailers that we mutually have a beneficial relationship where we support one another. Could I have expanded distribution before this deal? Yes. I chose not to.”
Rather, Katz believes it is necessary to take a slow and steady approach to innovation in order to protect the group’s relationship with its existing retail partners and to safeguard the brand’s value. “There are many concerns with expanding distribution too quickly. I want to make sure I am taking care of the retailers who believed in me from the beginning. Then you have all the kinds of pricing issues. We want to make sure we are aligning ourselves with people who believe in the same things we do.”
Katz claims the No Cow Bar is a premium product and insists he will not entertain entering into the fray of promotions and discounts that mark the US snack bar category. “Once you put the product in more places it becomes slightly diluted. I am more focused on velocity per store versus expanding distribution… We want to make sure we are doing it in the right way where first off we know the consumer base is evolved enough to purchase a product of this nutritional value in mainstream or conventional retailers,” he believes.
But Katz does expect the No Cow Bar to hit a “tipping point” when he decides it is the right time to expand into conventional retail channels – and soon. “I think within the next 24 months we are going to be a household name, whether that be from expanding distribution or whether that be from increasing velocity in our existing channels and our online platforms.”
Now that he can take a step back from running production, Katz is starting to focus his attention on developing the company’s marketing and branding. “Our goal is to create a brand. One of the things we have done a great job of is placing great product on the shelf. One of the things I am trying to do a much better job of in the next 24 months is creating a brand, something that means more than just a product on a shelf, something that’s community driven and driven on more than just a simple product.”
If it seems Katz is working to an ambitious timescale it is worth remembering he has developed the No Cow Bar into a $10m-brand in under two years. Ultimately his ambitions stretch beyond being a “household name” in the US.
“International is something that there is a massive demand for,” Katz says.” “There are plenty of markets where our product is very relevant. The Asian population for example, is about 80% lactose intolerant.”
When Katz first launched the No Cow Bar he did send product to Germany, where there was “massive” demand. But, so far, overseas expansion is something he has pulled back on in order to focus on first developing the business in the US.
“The concern there is that we have such a large market in the United States alone that I want to make sure we are doing our best to really support it. Once you start going international, we are not large enough to where we can have full support in each country. If we target 75 countries, for example, we would have to work exclusively with distributors and you lose control of what your brand is and represents. We certainly will move in there, but we need to be at the point where we can control our branding in each country. To essentially give our product to someone else to market is not something I am ready for.”
