Masters of Manufacturing: Crafty Counter CEO Manufactures ‘Flexitarian’ Alternative to Chicken Nuggets

Entrepreneur Hema Reddy is remaking the beloved American staple into a fast-food-health-food hybrid. But will the price be right?

This is the latest in our “Masters of Manufacturing” series, presented in partnership with The Indiana Economic Development Corporation. Each month we share insights and ideas from innovative, growth-minded manufacturing CEOs from across the nation as they navigate this tricky time in history.

The chicken nugget has been an icon of American food  manufacturing—and a staple of mainstream menus—for decades, but Hema Reddy has come along with a new way to make nuggets. The founder of startup Crafty Counter has put a “flexitarian” twist on the product in a pitch to the sensibilities of mindful moms but with an appeal to the picky palates of their children.

Under the brand Wundernuggets, the former IBM executive-turned-healthy-food entrepreneur has managed to come up with a manufacturing approach and market proposition that have landed her products in an important test in Walmart stores after just two years on the market.

Popularized by McDonald’s decades ago and since adopted and adapted by many better-for-you startups as well as by fast-food rivals, the nugget holds an enduring fascination for today’s children as it did for their millennial parents. Reddy launched Crafty Counter only a couple of years ago in Austin, Texas, with a unique approach stemming in part from the India native’s appreciation of her home country’s cuisine and ingredients.

Wundernuggets are about half chicken and about half plant-based ingredients, such as protein-rich lentils. “I think I speak for the majority of the population who find it intimidating to completely give up eating meat,” Reddy told Chief Executive. “That’s the reason only three percent of the U.S. population actually is vegan. Most people who are driving the demand for plant-based foods aren’t 100-percent vegan. We’re providing a [path] for this population. Why not start with a flexitarian lifestyle that allows you to eat that occasional piece of animal protein?

“If you can go vegan 100 percent, it’s great for the planet,” she said, “but I relate things to my family: They want to eat more vegetables, but they’re not ready to give up on eating animal protein, at least not yet. So let’s make it less intimidating for everyone.”

Reddy began having children nine years ago. “Growing up in India, we ate meat only once a week, on Sundays; on the other days we had a veggie diet, or poultry,” she said. “When I started my own family, I realized we were eating too much meat. So for me it was having a mixture of good proteins that was inclusive. We didn’t need to give up eating poultry – just supplement it with plant-based sources.”

So Reddy took to her own kitchen, first coming up with the predecessor to Wundernuggets, combining chicken with plant-based protein sources including chickpeas, vegetables and whole grains. She worked only with 100-percent-muscle chicken, not anything like the “junk parts” and fillers that account for much of the ingredients in mainstream fast-food or commercial-CPG nuggets which are rendered into a slurry that isn’t an appealing sight in video glimpses online.

About 100 formulations later, Reddy test-sold Wundernuggets in late 2017 at a farmer’s market and a handful of stores in Austin as well as on her own web site. After a positive consumer response, she invested in better packaging and a production scheme and began to broaden distribution. She finally quit her position at IBM about four years ago.

But commercialization and scaling, she discovered, presented challenges. For one thing, it was difficult to find a manufacturer that could produce both chicken and vegetable-based nuggets on the same line, especially early on. “Every manufacturer wants you to commit to doing 50,000 pounds per SKU on a single run, and we wanted to start with 5,000 to 10,000 at most,” Reddy said.

Also, it took her about a year to settle on a coating for Wundernuggets that could be contract-produced, eventually settling on chickpea flakes despite challenges such as the production bottlenecks of dealing with fresh chickpeas instead of canned ones.

As a result of starting with low-volume production runs, Reddy priced Wundernuggets admittedly high, around $8 to $10 for an 8-ounce bag of about 15 nuggets at many stores, and sometimes higher. “That was a cost-prohibitive level for many consumers, we knew,” Reddy said. “The formulation was very high quality, but nuggets aren’t exactly like gourmet food. They’re comfort food.”

Scaling has gotten easier now that Crafty Counter has a deal with Walmart to sell Wundernuggets at more than 200 stores, many in Texas. Retail pricing is just under $7 a bag at these Walmarts. Along with the hope for an expansion of the footprint in Walmarts, Reddy is “talking with a few other retailers” to get into their stores over the next year.” Crafty Counter also is raising new funds from angel investors.

Reddy also is eager to roll out new products. “Flexitarian is a real trend, not a fad, and it’s a better way to live your life,” she said. “But it’s incredibly hard. I thought I could do this easy-peasy because I’ve done such complex marketing campaigns [in the computer business], globally and in 28 countries at a time. But this is a different beast.”