Fat Snax Raises Funds for Keto-Friendly Snacking Platform

Keto-focused snack brand Fat Snax will have more support as it pushes further afield into brick and mortar retailers this year. The company announced today that it has raised $4.5 million from venture group Boulder Food Group (BFG), along with investment firm BIGR and some individual investors.

The company, which has a line of low-carb, low-sugar, high-fat soft-baked cookies and bites, originally launched online in 2017. Since then, the brand has grown to be sold in 4,000 retail stores (including Whole Foods Market, Sprouts, Kroger and Wegmans) but 50% of revenue still comes from online sales.

Fat Snax retail push — it expects to add another 2,000 doors this year — required additional funding, CMO Brian Hemmert told NOSH. The business was able to achieve profitability initially as an ecommerce business, hitting 7-figure annual sales in 2018 and seeing double digit growth every year since. The company believes that it can get back to a profitable place within the next 18 months, Hemmert added.

According to a study by research firm Insight Partners in July 2019, between 2019 and 2027 the keto market will grow at a compound annual growth rate (CAGR) of 5.5%, ultimately accounting for $15.64 billion in sales by 2027.

Beyond the keto diet consumer group, BFG VP Tyler Morgan said his firm believes there’s also sticking power in the broader concept of brands who can offer shoppers low-carb and high fat products.

“We’ve been looking at keto for a while and had a hard time getting over that hurdle of how big the market is,” Morgan said. “It came down to taste… I think if you are really keto you’re willing to sacrifice a lot in order to get a product that really fits your diet. But that casual consumer is not willing to sacrifice on taste and that’s why we were really able to get behind Fat Snax.”

Morgan added that the company was also appealing as an investment because it had been bootstrapped, only really adding significant headcount in 2019, and was able to operate on a lean budget with solid margins.

Founder and CEO Jeff Frese added that he believes this “casual keto” shopper will eventually grow to be the largest consumer segment for the business. While Fat Snax is sometimes sold in the nutrition bar set, it also is sold alongside cookies as a healthy alternative.

The brand also rebranded in 2019, moving away from clear wrappers to bold, colorful packaging to suit brick-and-mortar channels.The company plans to continue to expand its portfolio, launching mini cookies (which are designed to be more of a snackable option) and crackers. Production has taken slightly longer, Frese said, to get recipe formulations correct. Covid-19 has added to the launch timeline because the brand’s copacker is busier than normal and rather than being able to attend production runs in person, samples must be shipped back and forth.

Like many businesses with strong direct-to-consumer followings, Fat Snax plans to launch its new products online first, and then roll out into retail. Despite the emphasis on building a presence in grocery, mass and natural retailers, the company plans to continue to use online as a channel to connect with its core, original group of consumers.

“You’re seeing a lot of competitors pop up now and they are clearly inauthentic brands that are just going in it for the money grab and they’re not living the life and thinking about the community,” Frese said. “Our mission is our community and our people.”