Chubby Snacks, the maker of cloud-shaped superfood peanut butter and jelly sandwiches that’s pegged to the idea of “cutting crusts, not corners,” has raised $3.25 million in capital from a roster of CPG founders and institutions to gear up for its upcoming launch nationwide.
These investors include MVMT’s cofounder Jake Kassan; founder of The Angel Group Adam Spriggs; Patrick Schwarzenegger, cofounder of brain health-focused nutrition company MOSH; Jeff Weisberg, CEO of J.W. Sales & Marketing; as well as D’Amelio family’s 444 Capital; and Villam Ventures, the family office of RXBar’s cofounder Jared Smith.
The product, which was created by former digital marketers Dillon Ceglio, Brett Perrotta, alongside former Nike executive John O’Brien, has experienced several iterations since its debut in 2020. Upon streamlining its manufacturing process recently through full automation that will help the company significantly improve its margins and efficiency, Chubby Snacks believes it’s well positioned to compete against incumbents in brick-and-mortar retailers.
“Our focus is to continue to lean into what we’re really good at: manufacturing and selling crustless PB&Js,” Ceglio recently told me in an exclusive interview. “We have our first nationwide partnership quickly approaching so all hands on deck to ensure our automation and production capabilities align for a successful launch.
“We believe that Chubby Snacks brand equity provides an immense amount of opportunity to launch exciting new products that will increase our real estate within frozen as well as different aisles of the grocery store.”
Although the company didn’t disclose its new national retail partner, its refrigerated snacks that are available in peanut, almond, and sunflower butters through both grape and strawberry jam flavors are already sold across multiple natural and specialty stores, including Foxtrot, Central Market, Whole Foods, and Gelson’s Markets.
From Trademark Infringement Threat To ‘Einsteins of PB&J Manufacturing’
Chubby Snacks started a digital native brand. When Ceglio and Perrotta were building their performance marketing agency Street Logic Media, the pair noticed a slew of brands start popping up that recreated nostalgic snacks with elevated tastes and ingredients, which ultimately led them to identify peanut butter and jelly sandwich as an opportunity for disruption.
“We kept falling back on Smucker’s Uncrustables. In our eyes, they were a sleeping giant,” the duo explained, since the brand that has more than 85% household penetration has seen a steady double-digit growth rate in annual sales over the past decade. But Uncrustables’ lack of online presence, and its absence from the natural and regional channels lend Chubby Snacks a whitespace opportunity to reach consumers.
“Our focus is on the family,” Ceglio noted, “Because the kids’ lunchbox is the gateway into a household’s eating habits, we’re targeting health-conscious shopping moms. They’re the decision maker and have one of the most powerful voices when it comes to word of mouth. Through customer surveys and focused messaging, we’ve also found that fitness goers, millennials, and workaholics are all consuming our products.”
However, manufacturing peanut butter and jelly sandwiches has proven to be an arduous and complex task, Ceglio recalled how his team was constantly rejected by co-packers for partnerships during their early days, which forced them to handmake their products at a 500-square-foot plant in Los Angeles. “We threw ourselves into the deepest part of the pool,” he said, “and we’d tread water as long as we needed to until we became experts.”
Within 30 days of launching their initial prototype of Chubby Snacks that was circle-shaped at the time, the company received a cease and desist letter from J.M. Smucker outlining a list of its potential violations, specifically trademark.
“We were at risk of being sued,” Ceglio said. Over the next seven months, the company onboarded O’Brien who came up with idea of cloud-shaped sandwich, secured a patent for it, and changed the branding. “This was the first time when we almost ran out of funds and nearly went out of business.”
It continued to be a bumpy ride for the trio even after they convinced a handful of co-packers of their business feasibility. “We started referring to ourselves as the ‘Einsteins of PB&J manufacturing’ because we tried 100 different ways on how to make these things faster with less people and without any machinery,” Ceglio said.
But when he finally showed up at their first co-manufacturing plant in Denver, CO, Ceglio was told the facility has filed for bankruptcy and was going shut down on the same day when Whole Foods placed its second largest purchase order of Chubby Snacks.
“This was a huge turning point for our business, and the second time we thought we could go out of business,” he recalled. “We quickly ramped back up our operations in LA and called another co-man who was interested. We packed up our materials, ingredients and shipped them out to their facility with the hope that they’d accept our business. Within 45 days, we flew back and forth almost every week to build rapport with our new partner and help the production team get familiar with our process in order to produce as efficiently as possible.”
Equipped with a fully automated production line Chubby Snacks recently assembled in the Chicago region, the company will be able to maximize its annual output to 26 million sandwiches from two million in 2022, while driving margins upwards to 70%, according to Ceglio.
Winning Retail In The Creator Economy
In the growing creator economy, Chubby Snacks plans to leverage more digital influencers who are aligned with its value to acquire new customers. These efforts will further help lay a solid foundation for the company’s continued expansion in traditional retail.
“Two examples that support this theme came from strategic partnerships we’ve entered this year: one with Heidi D’Amelio and the other with Disney,” Ceglio explained. “Both of these relationships were leveraged when discussing nationwide rollouts with large grocers.”
While Chubby’s team has solely focused on the natural channel to avoid direct competition with Uncrustables, they noted how the brand is also garnering interest from an array of convention leaning retailers where shoppers are more sensitive to pricing.
“We pursued some of these opportunities and in turn found that by sitting next to the Uncrustables, our sales velocities are actually greater than when there are no competitors in our set,” Ceglio said. “Although this is a relatively small sample size today, it does provide insights into where our brand can go from here.”
“It’s difficult to say what our business will look like in the next five years, but our focus will always be centered around providing delicious yet nutritious snacks,” Ceglio added. “We see a few categories within frozen where there’s room for disruption. But when the time is right, we want to continue to build trust and permission from our consumers before making decisions to move into different aisles.”