Measure cereal into a very large bowl or on a cookie sheet. Set aside
Place Nutella and butter in a microwave safe bowl. Heat at 50% power for 2 minutes, or until smooth. Pour melted Nutella over cereal and gently toss with a spoon or plastic-gloved hands until cereal is coated. (SEE RECIPE NOTES FOR METHOD OF MIXING IN BOWL). Refrigerate for 5 minutes to cool, BUT NOT HARDEN.
Transfer chocolate covered cereal to large paper bag. Pour in 1 cup powdered sugar, roll top of bag down, and shake over sink to save yourself from cleaning escaping powdered sugar dust. Refrigerate again to fully harden, about 15 minutes. Add last cup of powdered sugar and shake again to combine.
Add optional ingredients, such as M&Ms, covered raisins, and peanuts. Store in an airtight container at room temperature.
Tips / Tricks For Making Puppy Chow
To mix cereal with chocolate in a bowl, place 1/3 cereal in a large bowl and pour 1/3 chocolate over. Stir to combine, then repeat in 2 more additions.
Add the powdered sugar in stages as well. After the puppy chow is cooled slightly, mix with 1 cup powdered sugar. Let puppy chow harden completely and then mix with remaining powdered sugar.
You can mix the powdered sugar in a large bowl, but I find it easier and quicker to do in a large paper grocery bag. Just make sure to shake over the kitchen sink in case any powdered sugar escapes from the seems!