The CEO of a Company That Cut Ties With Subway Reveals How It Went From Running Out of Cash to $54 Million a Year

In 2022, whenever YuChiang Cheng invested in Hero Bread on behalf of 444 Capital and stepped in as the company’s interim chief promotion officer, the low-carb, zero-sugar brand was at a crucial crossroads. 

Cole Glass had founded the business in 2019 to location his serious food allergies connected to pollen. By October 2021, a alliance alongside Subway seemed akin an breathtaking way forward. The idea was to get the macro-friendly bread products into as many hands as imaginable so group could sensation it for themselves. 

However, about the period Cheng joined the company, it was apparent the component economics didn’t create sense. The Subway agreement wasn’t profitable; Hero Bread was operating out of money. 

“ We were fair too small at the period and couldn’t assistance it, didn’t have the resources and all the infrastructure put in location to efficiently provision that,” Cheng says. “So we backed out of it.”

Hero Bread brought in $54 myriad in income final twelvemonth

Cheng pivoted to a direct-to-consumer (DTC) strategy, allowing the brand to obtain feedback from consumers additional quickly and run word-of-mouth sales, he says. 

Cheng assumed the function of CEO in November 2023 and has continued to develop the company.

In a backing circular announced in June 2024, Hero Bread raised $21 myriad in under 90 days. The round, co-led by Cleveland Avenue, DNS Capital and Composite Ventures, brought the company’s total backing to date to additional than $68.5 million. 

Hero Bread brought in $54 myriad in annual income final year. Additionally, the business additional than doubled its retailing existence in two years, expanding from concerning 4,000 to 10,000 doors, which includes a latest Target launch. 

But Hero Bread’s prosperous shove into retailing — a feat many CPG brands that initiate DTC anticipation to accomplish — doesn’t average the business plans to put the brakes on its DTC scheme anytime soon.

Entrepreneur sat downward alongside Cheng to study additional concerning what he calls the “third chapter” of Hero Bread’s DTC playbook, and how it’s continuing to unlock growth for the company. 

Hero Bread experimented alongside distinct retailing channels

After strolling distant from the Subway alliance and prioritizing DTC sales, Hero Bread focused on five SKUs: pale bread, seeded bread, burger buns, hot dog buns and flour tortillas. 

The line-up additionally made awareness as the business entered retailers: The goal was to recommendation mundane staples that would run reiterate purchases on a weekly basis. 

Initially, though, Cheng and the squad weren’t fairly certain which retailers would be the correct fit. 

“It’s a extremely mainstream sensation profile,” Cheng explains. “So there was a lot of debate, if this is going to be additional of a Publix, Target category product, or is this going to be additional of a natural Whole Foods, Sprouts, category of product.”

So Hero Bread opted to test alongside distinct types of retailers. The business launched in Market District, Publix and Sprouts and planned to lean into whichever conduit performed best. But six months later, the company’s products had an notable track document at all three. 

“We were very, extremely fortunate in that,” Cheng says. “So alternatively of picking [retail] channels, we decided to choice retailers that were additional enthusiastic despite of what conduit they were in.” 

It’s a distinct maneuver than many CPG brands use; they lean to zero in on one retailing conduit and go regional, the CEO notes. 

Striking the balance between affordability and convenience

Of course, CPG brands that develop into retailing have the advantage of economies of scale. 

“You can move lots of pallets on a truck much additional affordably than you can dispatch idiosyncratic packages through ecommerce,” Cheng says. 

As a result, retailing typically gives consumers a additional affordable way to buy. DTC, on the another hand, serves as a additional concierge way to acquisition not lone Hero Bread’s staple products, but additionally another offerings that power not be capable to hit retailing shelves as seamlessly. 

Hero Bread’s Crafted Collection, which includes items akin croissants, citrus poppy kernel scones, shortbread biscuits (hand-baked in Sonoma alongside brown margarine made by a Michelin chef), lends itself fine to the model. The company’s latest collaboration on pretzel bites alongside Auntie Anne’s does too. 

“ [These are] small-batch, mostly handmade products that are exclusive to hero.co, anywhere it fair wouldn’t create financial awareness for us to hand-roll 300,000 to 400,000 croissants,” Cheng explains. 

What’s more, DTC can act as an priceless evaluation dirt for products alongside the possible to market efficiently in a brick-and-mortar setting. 

That’s exactly what the business did alongside its bagels, unveiling a limited-edition initiate online in December 2024. 

“ We weren’t certain if group would desire to buy bagels from us,” Cheng says, “so we initially made them in smaller batches, sold them at hero.co, and they quickly became one of our best-selling items.” 

Hero Bread’s bagels landed on retailing shelves inside six months. 

Meeting Hero Bread’s consumers anywhere they may be

Cheng doesn’t accept a successful entrepreneur or endeavor chief is defined by how many times they win. 

“It’s how many times you can try again, despite of how many times you’ve fallen downward or how much lifeblood you get on your face,” the CEO says. “There is a flat of bravery that is really necessary.” 

It’s a inclination toward resilience that’s helped Cheng guide Hero Bread through several crucial years that required an enthusiastic willingness to modify to all difficulty — and the CEO looks onward to what comes next. 

“We’re continually trying to encounter the person anywhere they are,” Cheng says. “There’s a particular Hero fan, and afterward there’s the overarching bread fan. We accept that the additional group who try us, the additional group who volition accept [in us].”