By Eric Peterson | Feb 21, 2019
San Diego, California
Keto and Paleo snacks and bars
Industry: Food & Beverage
Products: Keto and Paleo snacks and bars
"I founded the company myself doing something entirely different," says Katleman, who previously ran a shop that made "decadent" brownies in Boston and tried to replicate the concept in San Diego. "The higher the butter fat content, the better."
But the market had shifted. "It wasn't enough volume," she says. "From my perspective, the industry has changed and my eating habits have changed," she says. "I'd given up sugar in 2010."
By 2015, she pivoted the company as a private-label manufacturer of healthy snacks. "We started making Paleo cookies in a space that was about 300 square feet in Ocean Beach," she says. "We could barely fit the wrapping machine in there."
There was an immediate trial by fire. "The first order was for 15,000 cookies," she says. "That was a miserable weekend."
The cookie production didn't scale as easily as anticipated and it was hard to maintain the same quality and consistency as compared to smaller batches. "I learned quickly to be a manufacturer on a larger scale," says Katleman. "Don't expect, just because you have a formula, to put it in a machine and have it come out the other end."
Katleman pivoted from co-packing to launch her own brand, Bhu Foods, in 2016, named for a Sanskrit word with many meanings, most prominently "to be." The initial focus was bars and cookies.
She moved from co-packing to manufacturing her own products due to "a different vision," she says. "I wanted organic ingredients and a different quality level."
She did that first with shelf-stable bars, but then saw an opportunity for a product aimed squarely at keto dieters. "We've shifted most of our production to refrigerated keto bars," says Katleman. "It took a lot of R&D to be able to produce them."
Beyond refrigeration, they're different from other bars on the market in that they're high in fat, low in net carbs and sugar to fit the keto diet. Largely organic ingredients include monk fruit, tapioca fiber, cashews, and pea protein.
Keto "is really a trend right now," says Katleman, citing a poll of dietitians by U.S. News & World Report that found their top diet trends for 2019 included keto, low sugar, and vegan. "Our refrigerated keto bars are all three."
The bars are available at Jimbo's, Erewhon Organic Grocer, and Lazy Acres Market locations on the West Coast and Wegmans on the East Coast, as well as other small chains and independent grocers. As of early 2019, Bhu had about 150 accounts.
Bhu Foods' catalog also includes bars and cookies as well as chocolate chips, cookie dough, and granola.
The company is currently based out of a 4,000-square-foot facility. "We still have some co-packing business," says Katleman, but the plan is to phase it out as Bhu Foods takes over the manufacturing capacity.
Challenges: It's all about getting more accounts. "Managing and focusing on the sales effort," says Katleman.
Opportunities: Gyms and vitamin shops are good retail channels for Bhu's shelf-stable bars and other products, says Katleman. "We're in conversations with a lot of retailers now."
Beyond that, it's all about being at the forefront of dietary trends. "High fat is the main difference between Paleo and keto," says Katleman. "The macro trend is low sugar. Keto has legs, but the thing that really has legs is low sugar."
Needs: A new facility in the neighborhood of 10,000 square feet with solid electric and gas infrastructure. "We've been looking south at the South Bay," says Katleman.
"We're looking for broker representation," she adds, citing Chicago and Florida as initial target markets.