Rule Breaker Snacks
Better-for-you snacks that break all the rules!
Overview
Raised: $171,842
Rolling Commitments ($USD)
04/30/2022
$1,193
256
2014
Food, Beverage, & Restaurants
Non-Tech
B2C
Low
Low
Summary Profit and Loss Statement
Most Recent Year | Prior Year | |
---|---|---|
Revenue |
$444,317 |
$487,975 |
COGS |
$352,446 |
$265,728 |
Tax |
$0 |
$0 |
| ||
| ||
Net Income |
$-334,746 |
$-357,286 |
Summary Balance Sheet
Most Recent Year | Prior Year | |
---|---|---|
Cash |
$20,119 |
$28,153 |
Accounts Receivable |
$84,423 |
$74,462 |
Total Assets |
$456,242 |
$334,047 |
Short-Term Debt |
$41,795 |
$75,346 |
Long-Term Debt |
$2,665,049 |
$2,168,342 |
Total Liabilities |
$2,706,844 |
$2,243,688 |
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Synopsis
Sugar consumption has skyrocketed over time. The average American ate only six pounds of sugar per year during George Washington’s lifetime. That amount has increased to as much as 130 pounds per year in 2017. In fact, modern consumers’ obsession with sugar has even been labeled an addiction by some experts. That being said, the majority of Americans report that they try to eat healthy most of the time. But after years enjoying cookies, ice cream, and other unhealthy snacks, it’s difficult to be satisfied with a “healthy” treat. Many low-sugar processed snacks trying to replace mainstream junk food – like protein-packed cookies or vegetable chips – simply don’t taste as good.
Rule Breaker Snacks is looking to change that. The company produces plant-based (vegan) snack cookies made from chickpeas and sweetened with dates that are meant to taste nearly as good as full-sugar cookies. With a variety of cookie and brownie flavors that are soft-baked, Rule Breaker Snacks hopes to lead the next era of healthy snacking that is both nutritious and delicious.
Rule Breaker Snacks’ current Republic raise has been rated a Neutral Deal by the KingsCrowd investment team.
Price
Rule Breaker Snacks is raising capital via a Crowd SAFE at an $8 million valuation. This price is reasonably fair. An $8 million valuation implies a 6x revenue-to-valuation multiple from Rule Breaker’s projected 2021 revenues of $1.3 million. That multiple is higher than the average for publicly traded food and beverage brands, but it isn’t egregious. Rule Breaker Snacks has been generating revenue for several years and is experiencing strong year-over-year growth. If the company can indeed hit revenue projections of almost 2x year-over-year ($2.2 million) next year, investors are getting a solid deal at this valuation.
Market
There are many tailwinds propelling the plant-based and healthy snack food market. Interest in a vegan lifestyle is growing steadily, spurred by both the health and climate benefits of going plant-based. More Americans are trying to eat healthy and are more conscious than ever of the dangers of added sugar. Plus, the rise of online grocery ordering makes it easier than ever to sample a wider variety of snack brands.
Rule Breaker Snacks’ current product line, soft-baked cookies, lies at the intersection of several sub-markets. The company offers a healthy alternative within the global cookies market. This market was valued at $30.6 billion in 2018 and expected to grow at a moderate 5.3% annually over the next four years. Rule Breaker also sits in the plant-based snacks market, set to exceed $73 billion by 2028 with a decent projected growth rate of 8.7% over the next seven years. Plant-based sweets are a rapidly growing segment of the broader plant-based snacks market, with a projected 11.8% growth rate in coming years.
Rule Breaker Snacks can draw market share from several growing snacking and healthy snacking verticals, particularly as its products are offered in more mainstream grocery stores. Additional product lines beyond soft-baked cookies will open up further opportunities. Overall, the company’s market prospects are strong.
Team
Rule Breaker Snacks was founded by Nancy Kalish, a health journalist and certified health coach. Kalish has more than 20 years of journalism experience and wrote freelance health and wellness pieces for top-tier outlets like O Magazine (Oprah), The New York Times, Men’s Journal, and more. Kalish describes that her experience interviewing doctors and nutritionists for decades gave her a strong perspective on how to eat healthily, but she struggled to square her love of sweets with those nutritional best practices. She developed Rule Breaker Snacks in 2014 as a delicious snack option for those limiting sugar.
The Rule Breaker Snacks team is lean because Rule Breaker was bootstrapped until 2021. Kalish is the primary employee. One other executive is listed on Rule Breaker’s Republic page, COO Jeff Canner. Canner has apparently been working full-time on Rule Breaker for a year or so, and he has more than 30 years of experience in food sales and marketing (particularly for healthy brands). Beyond Kalish and Canner, Rule Breaker seems to have several contractors who cover sales, marketing, finance, research and development, and more.
Rule Breaker Snacks has a very small team. The company’s solo founder lacks direct industry knowledge and entrepreneurial experience. While scrappy food and beverage brands can often grow for a while without a large full-time staff, Rule Breaker will soon need to invest in additional team capacity to accelerate sales.
Differentiators
Almost all food and beverage brands struggle with differentiation. Every brand pitches the vast difference between certain ingredients, the benefits of its nutritional value, and superior taste. However, most of those differences aren’t discernable for the average consumer.
There are a lot of soft-baked “healthy” cookies on the market right now. Fast-growing protein supplement company Quest offers a line of soft-baked protein cookies, as does Lenny & Larry’s and many other similar brands. Rule Breaker Snacks cookies are vegan and allergen-free, which might be important for a certain segment of consumers. To achieve true scale, though, Rule Breaker will have to appeal to a mass market audience, and it faces fierce competition in doing so. Ingredients and subjective tastes aren’t defensible in a hot market like this one.
Performance
Rule Breaker Snacks has enjoyed many milestone successes, particularly impressive for a brand that was bootstrapped for seven years. Growth seems to have been slow in the company’s early years, but 2020 and 2021 saw major growth. Rule Breaker was featured on Shark Tank in February 2021, a huge marketing opportunity for any consumer brand. Around the same time, Rule Breaker received a strategic investment from Grupo Bimbo, the world’s largest baking company that owns Sara Lee, Entenmann’s, and several others. Rule Breaker has also been featured in several leading publications and has a large audience on social media, thanks to highlights from celebrities and influencers.
Financially, Rule Breaker is experiencing strong growth. In 2019, the company brought in almost $490,000 in revenue, with a net loss of more than $350,000. The following year was actually worse, with a slight decline in revenue to $444,000 in 2020 and a similar net loss of roughly $335,000. However, Shark Tank and other wins in 2021 helped Rule Breaker take off. While final 2021 financials aren’t available, Rule Breaker reports that revenue will come in at around $1.3 million, almost triple sales from last year. Moreover, the company projects revenues of $2.2 million for 2022, which would sustain strong year-over-year growth. It is worth noting that the company has debt of more than $2.6 million. Most of this is owed to the company’s founder, however, which is less concerning than owing the money to an outside lender.
Rule Breaker Snacks has been in operation for several years and took a while to take off. But the company has recently succeeded in all of the major areas investors would hope to see from a direct-to-consumer snacks brand: a major national feature, nationwide distribution in more than 3,500 stores (many of them major retailers like Stop & Shop), and impressive revenue growth. If Rule Breaker can sustain this pace, the company might be well-positioned for an acquisition by Bimbo or a similar company in years to come.
Risks
Rule Breaker Snacks is a slightly risky investment due primarily to two factors. First, the Rule Breaker team is small and relies mostly on a sole founder, which is always a riskier arrangement than a fully developed team with a larger co-founder group. A lone founder might have fewer skills and connections to fall back on than multiple founders, and the company’s success depends more on a single individual. Second, Rule Breaker Snacks is carrying a lot of debt on its balance sheet. The company has more than $2.6 million in loans payable. It’s worth noting that the majority of this loan balance is owed to the company’s founder, Nancy Kalish, which is less concerning than commitments to an external lender. However, Rule Breaker will still need to resolve this debt to become a more attractive acquisition candidate in the future.
Bearish Outlook
Rule Breaker Snacks has enjoyed notable momentum in the last year. However, it’s too soon to say whether Rule Breaker will be able to sustain this momentum over time. The company’s target market is extremely competitive. Healthy eating and plant-based foods are major tailwinds, and each month brings new startups offering products that could compete with Rule Breaker. Incumbent brands are also beginning to offer healthier alternatives to their mainstream junk food products Consumers may prefer to buy from familiar brands rather than unknown (and often more expensive) new options. Rule Breaker Snacks has already enjoyed nationwide consumer exposure and is already sold in 3,500 retail stores. It’s unclear if there is much more the company can do to sustain that level of growth. Minimal defensibility and major competition may hamper the company’s ability to scale.
Bullish Outlook
Rule Breaker Snacks is a stable brand with several years of operating history and a great deal of recent traction. The company had two major wins in 2021: a feature on Shark Tank – which drove $120,000 in sales immediately – and a strategic investment by the world’s largest baking company (Grupo Bimbo). Both of these successes validate the brand’s promise, particularly the investment from Bimbo. If a strategic corporation like Bimbo evaluated Rule Breaker and found it to be worthy of investment (likely indicating that it would consider acquiring Rule Breaker in the future), that’s a huge testament to the company’s progress.
While investors might be concerned about future growth potential after this banner year, there are pathways for Rule Breaker Snacks to continue scaling up. New product lines are the most obvious answer. If Rule Breaker can create additional verticals like granola bars, cereal, edible cookie dough, or any number of other options, it could maintain current customers and attract new ones. Additional packaging strategies and partnerships are also options. Rule Breaker has already positioned itself as a great snack for kids’ lunches, particularly in that it lacks the allergens commonly banned in modern schools. Future partnerships with brands in the parenting and education arena could open up new revenue models for Rule Breaker. Any of these steps would help Rule Breaker sustain growth, pay back its debts, and set the company up for an acquisition by Bimbo or another brand in years to come.
Executive Summary
Rule Breaker Snacks is a plant-based, healthy snacking company that is currently focused on soft-baked cookies made from chickpeas and dates. Rule Breaker was featured on Shark Tank this year and signed Grupo Bimbo (the world’s largest baking company) as a strategic investor. With almost 3x year-over-year revenue from 2021 and new product lines in the works, Rule Breaker Snacks has the potential to continue its rapid growth in years to come. The company’s current valuation is also a fair deal for investors.
On the other hand, Rule Breaker Snacks isn’t very well differentiated from the huge universe of other snacks brands out there. Rule Breaker sits in several markets, from cookies to healthy snacks to vegan sweets, and each market segment has dozens or more companies vying for market share. The team is lean and has a single founder, which could become an obstacle to scaling. It’s too soon to say for sure that Rule Breaker has what it takes to sustain its recent growth. Therefore, Rule Breaker Snacks has been rated a Neutral Deal.
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Analysis written on December 22, 2021.