To maintain control of output for their fledgling meal-kit business, Kevin McCray and Dan Costa decided to build a manufacturing plant in Stockton, California, a couple of years ago that was a little bigger than the mid-term capacity they thought they would need for their Chef’s Menu line of products for foodservice and supermarket retailers. They took over putting out the kits from a co-packer.
Good thing, because today the co-founders of CalChef Foods already are stressing their 45,000-square-foot factory to its seams after they pivoted to a new product line whose growth is exploding exponentially, way beyond any expectation they had for Chef’s Menu. The new line is Kevin’s Natural Foods, a collection of premium, sliced, vacuum-packed and refrigerated meat entrees that have found a quick home at major U.S. food retailers. Sales of the brand boomed from $4.5 million in 2019 to $48 million last year – and are projected at $100 million this year.
McCray, a serial food-marketing executive, and Costa, a serial entrepreneur, have turned Kevin’s Natural Foods into a raging, overnight success by finding white space in a market for better-for-you foods that would seem to have been saturated, by skillfully procuring and converting consumer insights, by taking advantage of Covid-related demand in their category, and by pursuing a supply-chain and manufacturing strategy that has allowed them to become stalwarts of affordable premium products in grocery giants including Costco, Whole Foods Markets and Publix.
“It sounds cliched now, but we really want to change the world,” the 36-year-old McCray, who is Calchef’s chief operating officer and founder of Kevin’s Natural Foods, told Chief Executive. Costa is Calchef’s CEO. “We feel we can democratize healthy eating.”
At the same time they were building their plant, the pair gained their pivotal consumer insight in 2019 while scouting refrigerators at Costco stores. Costco was carrying Chef’s Menu meal kits, and McCray noticed how the chain overall was “elevating refrigerated offerings” but that “there wasn’t a lot of innovation in that category.” He looked specifically at sliced-meat offerings in pouches and believed in the commercial possibilities of meats prepared using the French cooking method, sous-vide, in which meats, vegetables and sauces are vacuum-packed raw and then cooked at home.
They believed their product idea also could satisfy the clamoring of American consumers for higher-quality products, with healthy ingredients, that fit the booming paleo and ketogenic dietary regimens. And with the pandemic keeping most would-be restaurant patrons at home during 2020, McCray and Costa projected a strong market appetite for products that could vigorously occupy the crucial “center of the plate” for evening meals at home.
In addition to their own observations about the lack of such offerings even amid the ever-growing refrigerated, pre-prepared sections of warehouse stores, supercenters and supermarkets, McCray and Costa were relying on intense research through consumer panels in believing they should place a big bet on the new line that became known as Kevin’s Naturals.
“’Plant-based’ food already was all the rage, but we were hearing that people wanted convenient meal solutions and that people eating meat were getting more picky with it,” McCray said. “There was one very human insight from a focus group where someone said that what they didn’t like about prepared meals was they were always going to get a ‘bad bite,’ like a piece of cartilage. And everyone else in the group was like, ‘Yes! Yes!’”
Quickly, the two developed their concept for Kevin’s Natural Foods, and Costco buyers leapt on the opportunity in 2019, placing an order for lemongrass chicken for one of the chain’s eight regions. Calchef priced the first Kevin’s Natural Foods entrée at $13.99 for a 32-ounce pouch, essentially slapping a huge affordable price point on a product packaged as premium. Soon, Costco wanted Kevin’s stuff nationally. Then Whole Foods and major regional supermarket retailers also were signing on for Kevin’s Naturals, which expanded its product line and came up with 16-ounce packages that the stores could retail for a reasonably seeming $9.99.
“We found out later that a lot of [store] buyers had been asking for something new in the refrigerated space, and they were willing to take a chance on a young brand so that they could strategically offer healthy, convenient meal solutions for customers,” McCray said. “They just didn’t have the options.”
Stores’ staggering uptake of Kevin’s Natural Foods has created a phenomenon even in the world of better-for-you startups that have thoroughly upended traditional consumer-packaged-goods giants over the last 10 to 20 years. Key to taking advantage of the enormous opportunity – crucial to actually realizing their projected doubling in sales to a nine-figure brand within one year – is for McCray and Costa to come through on the manufacturing side.
They’ve phased out the Chef’s Meal kits and devoted the Stockton factory solely to Kevin’s Naturals. Among important manufacturing innovations was their decision to address consumers’ “bad bites” concerns by hand-trimming meats such as chicken breasts before they go into “roboslicers” in the plant. They invested heavily in sous-vide machinery to handle expansion of demand for Kevin’s Natural meats. The pair also decided to diversify their new brand into sauces and other related products, and needed to add production machinery for them, too.
At the same time, McCray has paid close attention to sourcing, both to maintain the company’s pledge to use only highly vetted ingredients as well as to keep costs in check so that Kevin’s can maintain “democratic” pricing at retail.
“A lot of companies couldn’t make these products profitably,” McCray said. “We couldn’t either, if we didn’t take every penny of costs out of the system. It’s an act of God to get our products onto shelves for $9.99. We work all day, every day. We negotiate with suppliers as far back as we can; we source our coconut products by container load directly from Indonesia.”
Company executives met with chicken processors on that score. “It’s not just about cutting out the middleman; it’s about getting decision-makers on board with our vision,” McCray said. “So instead of going to brokers to buy chicken, we met with suppliers in California, fed them our product, and said our goal is to change the world. We explained how we wanted to make these types of products not just for elite people, and that was totally possible if we sourced efficiently. And if they wanted us to be a big customer, they needed to treat us like a big customer today so we could give consumers a good price. We needed to get them on board with the vision.”