7 things every consumer brand can learn from Magic Spoon

As consumer product brands, we are always looking for new and innovative ways to reach customers. And it is becoming increasingly more challenging as we deal with a plethora of new e-commerce obstacles.

So, when I heard Gabi Lewis (founder of Magic Spoon) speak on the This Week in Startups podcast, I was immediately inspired.

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Here is a brand that has quickly grown to become the poster child for DTC brands and CPG brands.

Below, I've outlined seven key takeaways from the interview and my thoughts on each.

If you haven't heard it, I highly encourage you to check out the This Week in Startups interview (go to minute 42:00).

What is Magic Spoon?

Magic Spoon is a cereal brand that creates high-protein, low-carb, zero-sugar, and keto-friendly cereal. Their fun flavors and memorable designs offer a sense of whimsical nostalgia most of us feel with traditional sugary cereal.

Magic Spoon was founded in 2019 by co-founders Gabi Lewis and Greg Sewitz.

According to Crunchbase, Magic Spoon has raised over $120M, closing its Series B round in June 2022.

#1 Build a brand following so large retailers can't ignore you

So, I'm going to work backward a little bit. Most of us involved with emerging CPG brands dream of one day being on the shelf of Target and Walmart. And in fact, that's the path most brands start with right out of the gate.

Most CPG brands launch to specialty and regional retailers, hoping to prove themselves to the Targets and Walmarts of the world by showing strong sell-through data. They sometimes spend years working just to get a shot at a test run with Target - if they get it.

But not Magic Spoon.

For the first two years, Magic Spoon was only available direct-to-consumer through their website, then they launched on Amazon. It wasn't until June of 2022 that you could find the brand in retailers - their first being Target.

Because Magic Spoon had built such a strong DTC following (and because they quickly grew to be the top-selling cereal brand on Amazon), large retailers like Target had no choice but to notice the brand.

And we will see how they capitalized on that in more depth later.

#2 Find [unique] ways to drive foot traffic to the retailers

Now, this may seem like an obvious one for brands whose main objective is to get into retail, but for brands that are looking to make the jump from online to in-store (like what we are doing with Crated with Love), it's something that should at the forefront of your strategy.

What's unique about the Magic Spoon story is that the product (a keto-cereal brand that goes for nearly $10 a box) was placed in the cereal aisle. Shocking, I know. But when you think about it, it might have been risky.

Their target consumer typically is someone who most likely doesn't buy sugary cereal and, thus, probably has little reason to go down the aisle.

And those that do shop there might be a little sticker-shocked to see the Magic Spoon price. So, how are they going to be successful?

Why not be placed by supplements or protein bars?

Well, at Magic Spoon, they know that all their marketing efforts outside the store (on social media, in commercials, and through direct mail) will drive consumers to the store. And if at their core, they are a cereal brand, that's the place they need to compete.

As Lewis said in the interview, "That's actually a plus for the retailer, and so we're able to show them data that were incremental with the category, and so we're not necessarily taking, you know, somebody who's in Walmart buying Lucky Charms and just making them buy a magic spoon instead where actually bringing a new consumer into the cereal aisle, and so it's a win-win for the retailer." (51:00 of the TWIST interview)

And to a retailer, that's the sweetest music to their ears.

#3 The product that gets the most clicks isn't always the hero product

The best-selling Magic Spoon flavor on their site is Fruity, but it's not necessarily the one that drives the most reorders or subscriptions.

As a CPG or DTC brand, it's really important to know these kinds of data points for yourself and as you are trying to get into retail.

At Magic Spoon, they can package this data and offer it to retailers to show not only products that are the best sellers but products that are most likely to bring customers back (which may be even more important).

As you are looking at what products are selling, think about your customers' LTV (lifetime value). Is the product they buy first the product that brings them back? And if not, how can you use that first purchase to introduce the product that gets them to stick?

#4 You can break the price mold with a phenomenal experience

As I mentioned, a Magic Spoon box can set you back nearly $10. And compared to the traditional incumbents, floating around $4, it's easy to see that MS is the premium.

But how can they get away with charging more than double the price?

In the interview, Lewis mentions other brands (like Native deodorant) have done something similar with premium products competing with more commodified offerings. So from a retailer's perspective, they've seen this strategy work.

But more importantly, Magic Spoon has illustrated its success from their online sales, notably being the #2 selling cereal on Amazon.

And to get there, I think it's been a two-pronged attack: clearly outline the benefits that make it superior to the current options, and create a killer brand you cannot help but root for.

Case in point, Magic Spoon is not the only keto-friendly option on the shelf - and I've tried a few. But to create a product that can truly break the price mold, you have to look the part, and Magic Spoon's branding and experience definitely add a little fuel to the rocket.

#5 Diversify your revenue streams

An old adage says, "a jack of all trades is a master of none."

And to be fair, there is a lot of truth to that. The things you spend your energy on, the less likely any one of those things will be great.

But, in today's e-commerce world, we have no choice but to be diversified.

Most consumer brands take either of two approaches: they go all-in on DTC, ignoring retail, or they go all-in on retail and ignore their DTC presence.

Magic Spoon has been able to do both, starting off online, then jumping to Amazon, and then using that success to leverage their retail growth.

When I think about what it takes to grow a brand in today's world, I believe we must be able to diversify our revenue stream across many different channels.

Because, firstly, it's mandatory. Consumers are not in one place, so to capture new customers, you must be everywhere your consumers are shopping.

Secondly, leveraging the data you receive on one platform will help you scale the second.

#6 Don't be over-reliant on any given advertising channel

In the interview, Lewis says, "We've been very careful from day one not to be too reliant on any given Channel. And thankfully, we had some really incredible sort of founder-investors who backed our company before we launched - the founders of brands like Harry's, and Casper, and Warby Parker, and many of the sort of Classic DTC brands, and they were able to give us really good wisdom early on. And you know, one of the pieces of advice was don't be too reliant on Facebook." (55:00 of the TWIST interview)

Over the past few years, we have seen incredible changes in the consumer brands think about their acquisition strategies, most prominently Apple's privacy changes and how that affects targeted advertising.

What Magic Spoon has been able to do really well is not to be too reliant on any given channel. The platform risk is too high, and becoming too focused on one form of advertising leaves you susceptible to its changes.

Lewis explains that the brand uses multiple strategies, including paid social, influencer marketing, direct mail, and TV, to name a few.

But to do this, you must have a strong grip on the 7th key takeaway.

#7 Focus on performance marketing (measure the efficiency)

Continuing the advertising portion of the interview, Lewis clearly illustrates the importance of "performance marketing." In a basic definition, this is the ability to attribute the success of your advertising as it relates to driving sales.

With today's marketing landscape, this often means taking a blended or aggregated approach, but the strategy is the same: how does the dollar you spend to drive sales?

In other words, impressions are not a sign of success.

Doing this lets you see which channels meet your "CAC guardrails," as Lewis calls it, or your targeted acquisition cost. And when you focus on results and performance, you can scale the successful ones and turn off the ones that are not.

Conclusion

There is a clear caveat to the Magic Spoon story. Let's be honest. Most consumer brands will never raise the same amount as Magic Spoon. When they first launched, they secured a $5.5M seed round from Lightspeed.

But, no matter the size of your brand, these key takeaways ring true. Focus on incredible consumer experience, diversify your sales channel, measure the success of everything, and build a loyal following. If you do that, everything else should fall into place.

To hear the full interview: YouTube & Spotify

Follow Magic Spoon on Twitter: @eatmagicspoon

Learn more about Magic Spoon: www.magicspoon.com

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