Hero Bread Books $54 Million in Revenue After Subway Exit

Hero Bread generated $54 million in annual revenue last year after exiting an unprofitable Subway partnership and rebuilding around a direct-to-consumer model, CEO YuChiang Cheng said.

The low-carb, zero-sugar bakery, founded in 2019 by Cole Glass to address his severe pollen-related food allergies, has also more than doubled its retail footprint over the past two years, expanding from roughly 4,000 to 10,000 doors. A Target launch anchors the most recent gains.

Cheng, who invested in Hero Bread on behalf of 444 Capital in 2022 and stepped in as interim chief marketing officer, became CEO in November 2023. He steered the company through a $21 million funding round that closed in June 2024 in under 90 days. The round, co-led by Cleveland Avenue, DNS Capital and Composite Ventures, lifted Hero Bread's total capital raised past $68.5 million.

Why did Hero Bread walk away from Subway?

By October 2021, a Subway partnership had looked like the fastest path to scale. The sandwich chain could put Hero's macro-friendly loaves in front of millions of customers almost overnight.

The economics never worked. Hero Bread was too small to service the account, Cheng said.

"We were just too small at the time and couldn't service it, didn't have the resources and all the infrastructure put in place to effectively deliver that," Cheng said. "So we backed out of it."

Running out of cash forced a sharper focus. Hero Bread narrowed to five SKUs: white bread, seeded bread, burger buns, hot dog buns and flour tortillas. The line-up doubled as a retail thesis — everyday staples capable of driving weekly repeat purchases.

How did the company pick its retailers?

Hero Bread refused to bet on one retail channel. The team launched in Market District, Publix and Sprouts simultaneously and let sell-through decide the next move.

All three retailers delivered, Cheng said. The company then picked partners rather than channels.

"We were very, very fortunate in that," Cheng said. "So instead of picking [retail] channels, we decided to pick retailers that were more enthusiastic regardless of what channel they were in."

It's a different tactic than most CPG challengers take. Brands typically zero in on one channel and expand regionally. Cheng argues his mixed approach shortens the path to scale.

"It's a very mainstream taste profile," Cheng said. "So there was a lot of debate, if this is going to be more of a Publix, Target type product, or is this going to be more of a natural Whole Foods, Sprouts, type of product."

What's the third chapter of the DTC playbook?

DTC remains the testing ground. Hero Bread runs online exclusives — its Crafted Collection of croissants, lemon poppy seed scones and shortbread biscuits baked in Sonoma by a Michelin-trained chef — that would be uneconomic on a pallet.

"[These are] small-batch, largely handmade products that are exclusive to hero.co, where it just wouldn't make economic sense for us to hand-roll 300,000 to 400,000 croissants," Cheng said.

The model pulls double duty. Bagels launched on hero.co in December 2024 as a limited run. Customer demand was strong enough to put them on retail shelves within six months.

"We weren't sure if people would want to buy bagels from us, so we initially made them in smaller batches, sold them at hero.co, and they quickly became one of our best-selling items," Cheng said.

Retail offers lower unit costs because of pallet economics, Cheng noted: "You can move tons of pallets on a truck much more affordably than you can send individual packages through ecommerce." DTC, by contrast, behaves like a concierge channel — gathering feedback and surfacing products before they hit shelf.

What comes next?

Cheng frames Hero Bread's trajectory as a sequence of bets rather than wins.

"It's how many times you can try again, regardless of how many times you've fallen down or how much blood you get on your face," Cheng said. "There is a level of courage that is really necessary."

His near-term focus is conversion, not geography. The company's recent collaboration with Auntie Anne's on pretzel bites — a DTC exclusive — points to a template Cheng plans to repeat.

"We're always trying to meet the consumer where they are," Cheng said. "There's a specific Hero fan, and then there's the overarching bread fan. We believe that the more people who try us, the more people who will believe [in us]."

The strategy carried Hero Bread from near-insolvency to $54 million in sales and a five-figure retail footprint in less than three years; the next test is whether the company can keep converting DTC experiments into shelf SKUs without letting inventory economics slip the way the Subway deal once did.