LOS ANGELES — Two years ago, a Los Angeles-based startup debuted a higher-protein, lower-sugar take on Smucker’s Uncrustables, the nearly $500 million brand of frozen, crustless sandwiches.

The J.M. Smucker Co. noticed.

“We launched with a circle-shaped sandwich, and Smucker’s within 30 days sent us a cease-and-desist for having a circle-shaped sandwich,” said Dillon Ceglio, co-founder and chief executive officer of Chubby Snacks. “I don’t think we even had 1,000 followers on Instagram or $20,000 in sales, and they’re telling us that not only are we infringing on their trademark, which is a circle-shaped sandwich, but we also were falsifying advertising and essentially slandering them. It was weird. It was almost like in the eyes of Smucker’s, I was a criminal.”

Described as “a premium yet practical choice for nostalgic, health-conscious consumers on the go,” Chubby Snacks offers frozen, crustless sandwiches featuring organic wheat bread filled with peanut butter or almond butter and specialty jams. A sandwich has 75% less sugar, 30% fewer calories and more protein and fiber than the leading brand, according to the company.

Following the order by Smucker, “I had to throttle the business for seven months to be able to essentially differentiate ourselves in the shape,” Mr. Ceglio said. “And now you see the cloud-shaped sandwich, and that’s ultimately the direction we decided to go.”

Today, Chubby Snacks sandwiches are sold online at chubbysnacks.co and in several hundred storefronts across the country, including Whole Foods Market, Amazon Go, Foxtrot and other natural grocery retailers.

The company is rolling out reformulated recipes and new grape jam offerings, based on consumer requests. In a recent interview, Mr. Ceglio discussed the inspiration and long-term vision for Chubby Snacks.

Food Entrepreneur: What inspired you to launch this business?

Dillon Ceglio: Growing up I had a mom who was a personal trainer and very much into health and wellness. She definitely instilled a healthy lifestyle early on. I used to joke with my friends that no one ever wanted to come to my house because we never had any of the fun snacks. We never even had a microwave in our house.

Where I saw the opportunity was about four years prior to launching Chubby, I was in digital marketing, mostly focusing on CPG and e-commerce brands. I was always keeping my ear to the ground and was watching these brands pop up here and there that were essentially recreating traditional products with healthier ingredients, healthier nutritional panels.  

I saw an opportunity and essentially went to the drawing board and started thinking about all the products I ate as a kid that I wanted to recreate but also saw an opportunity to disrupt the market. I kept falling back on Smucker’s Uncrustables and for good reason. Smucker’s has been around for 100 years. They’re pretty stale in terms of marketing. They have such good distribution that they really don’t have to market too much. But where the opportunity really was was Smucker’s Uncrustables didn’t have the ability to launch into the natural grocery channel. No Whole Foods, no Sprouts, 4,000 storefronts across the country they technically can’t sell into because of their ingredients. Smucker’s is a $15 billion company. Uncrustables this past year did just around $500 million in annual sales, selling more than 500 million sandwiches across the United States.

We launched in June 2020, right in the middle of the pandemic, and we started building the brand from a direct-to-consumer perspective.

Did you start out working with a co-packer?

Mr. Ceglio: Prior to launching, I essentially called every manufacturer across the country, and I got a hard “no” every single time. As you can imagine, manufacturing crustless peanut butter and jelly sandwiches is not easy. Most manufacturers didn’t want to try to solve a problem based off of an idea. Instead, we realized we had to figure out a way to prove the concept in order to then be able to convince a manufacturer to take on our business.

I launched in a commercial kitchen in downtown Los Angeles and started hiring people to manufacture sandwiches, almost as if you were in your own kitchen. From there, we figured out how to optimize the process and get better output for our input. It wasn’t until we figured out a solution and I was able to more or less triple our production overnight that I was then able to go back to all of these manufacturers who told us no and show them how we’re manufacturing 30,000, 40,000, 50,000 sandwiches a month with just a handful of people in a 500-square-foot facility. “These are our revenue numbers from our first year, these are our opportunities coming up with Whole Foods and other groceries that we’re launching into.”

From there, that’s when the conversation started to get more real in regards to being able to graduate from this self-manufacturing prove-the-concept scenario to flowing into a commercial manufacturer, and we are just now getting to that point. We just did our first production run this past month with our new manufacturer at scale.

You recently reformulated your recipes. Why?

Mr. Ceglio: Since we launched, I was very keen on getting consumer feedback, even if it was the worst feedback. You run with the mentality of “let’s put something out there, see what people think, iterate and relaunch.” We are about a week away from our third relaunch, what we’re calling Chubby 3.0. A lot of it was based on consumer feedback.

People will tell you all day long that they don’t like sugar, but at the end of the day people love sugar and taste is ultimately king. We knew we didn’t want to compete against Uncrustables in terms of what they’re doing and what they’re putting in products, but we knew that we were already better in terms of our better-for-you ingredients. We just ultimately wanted to bridge the gap in order to scale into conventional as well as natural grocers and to be able to provide a product that was healthy but also had really good taste. Because at the end of the day we are going to be competing against Smucker’s not only from a price perspective but also from a taste perspective.

What’s behind the name Chubby Snacks?

Mr. Ceglio: Simply put, we just wanted to be loud and memorable and ultimately be able to win a consumer based on what we were putting in the product. The idea is you walk down the aisle, you see our branding and see our name, and it stops you in your tracks, and you question, “What is that?” You can have fun with the brand, but then you flip the package over and realize, “Wow, this is a great product. I’m either going to eat it or feed this to my kids.”

What’s in your product development pipeline?

Mr. Ceglio: We’re really focused right now on scaling up our flagship product… Having said that, we have this little cloud shape pouch, and we can fit different types of combinations of nut butters, jams, sweet or savory ingredients in there. We can utilize our e-commerce platform to rapidly test new flavor combinations and then use the data we capture to make data-driven decisions at retail.

What was your biggest lesson or surprise from launching a food business, particularly with such a complex product and supply chain?

Mr. Ceglio: It’s a master’s degree on steroids… We opened up a commercial kitchen a month and a half prior to launching and just threw ourselves into the deepest part of the pool and said, “Hey, if we’re going to make this work, we’re going to have to tread water until who even knows when?” We’re still treading water.