Magic Spoon raises $85M as better-for-you cereal launches at retail

Dive Brief:

• Magic Spoon, maker of better-for-you cereals, has raised $85 million in a Series B funding round. HighPost Capital was the lead investor. It was joined by several investment firms as well as celebrity investors, including musicians Shakira and Nas, comedian Amy Schumer, and athletes Russell Westbrook and Odell Beckham Jr.
• The brand, which first launched in 2019 as 100% direct-to-consumer, also announced its national retail launch at Target, which will stock three of its best-selling flavors: Fruity, Cocoa and Peanut Butter. Magic Spoon plans to roll out to additional retailers throughout the rest of this year.
• Magic Spoon said it will use the funding on brand building and product innovation. The cash infusion sets the stage for an aggressive retail rollout at a time when consumers are rediscovering breakfast and competition is growing for their attention.

Dive Insight:

With 13 to 14 grams of protein and only 4 grams of carbs per serving, and free of added sugar, gluten, grains, soy and artificial ingredients, Magic Spoon does not necessarily sound like a fun time. But the brand has established its success thanks to its whimsical packaging and flavors like Blueberry Muffin, Cookies & Cream and Maple Waffle that make its millennial fan base feel like they can eat healthier while being reminded of childhood cereal favorites.

In the past three years, Magic Spoon has reached more than 1 million customers through its cereal, according to the company. In February, the brand introduced a line of limited-edition bars that also boast a high protein and low sugar and carb content, as well as being gluten and grain-free. They quickly sold out, according to the company. Magic Spoon plans to make the cereal bars part of its permanent lineup this month.

It’s quite the fast path to success for Magic Spoon, which launched as a purely DTC brand aimed at reinventing cereal only a few years ago, and with vague ambitions of a retail presence. Gabi Lewis and Greg Sewitz founded Magic Spoon to compete against the big three cereal makers — Kellogg, General Mills and Post Holdings — and disrupt what they described as a “stale yet massive category.” 

“When you look at the products that they are all putting out, pretty much everything in that cereal aisle today is high sugar, high carbs and full of junk, which is counter to every consumer trend we’re seeing,” Lewis told Nosh in 2018.

While they continue to churn out more indulgent fare, the Big Cereal makers have also been chasing the better-for-you breakfast trend. Kellogg has rebranded and invested in Kashi in its pursuit of Gen Z and millennial consumers, and its clean-label RX brand has expanded into cereals and breakfast bars. General Mills has honed in on innovation with brands like Morning Summit and GoodBelly probiotic cereal.

Then there are other scrappy startups like Three Wishes, which also launched in 2019, and has a focus on high-protein, low-sugar and grain-free cereal options in a similar range of fun flavors. Unlike Magic Spoon, Three Wishes began with a brick-and-mortar retail model, and today is stocked at Whole Foods Market, Wegmans, Sprouts Farmers Market and Erewhon, although it is also building its e-commerce presence.

For Magic Spoon, this latest, massive fundraising round will bring its total raise to nearly $100 million, according to Crunchbase. The money will be critical to help it stay one step ahead of its competition — and keep up with evolving consumer needs.