Go Nuts And Build An Ecom Growth Empire

0:00This week on the Nosh Podcast, why Amazon is facing new scrutiny for its selling practices, What's the future for meal companies Blue Apron and Jenny Craig? And how Nuts.com built a successful snacking business entirely online.

0:24Hi, everyone. I'm your host, Carol Ortenberg. On the NOSH podcast, we go inside the business of natural, organic, sustainable, and healthy food. Today, the team discusses meal kit moves, the impact of Amazon on the retail landscape, and then we hear from the executive team of Nuts.com on how the company scaled and built its multi-million dollar company solely via online sales. Joining me today are reporters, Adrienne DeLuca. Hello, Carol. Hi, and Brad Avery. Howdy. Brad, you're back again. We didn't scare you away last week. Back to back, two weeks in a row. The Brad double feature. I feel like giving Brad such a movie buff.

1:06That's a good way to phrase it, Adrian. The double feature? Yeah. Do they make triple features if you come back next week, Brad? Or is it just a marathon at that point? I think. Yeah, triple feature is a thing. I mean, it's not common these days, but it's been a thing. I saw a triple feature of Shaun of the Dead, Hot Fuzz, and The World's End back in 2013. and there was this woman there. It was at the Brattle Theater in Cambridge and there was this woman before the movie who just had her shoes off and was painting her toenails on the theater seat, like right behind me. And I was honestly like, this is some real next level, you know, just social norm breaking.

1:51If you start pulling that here, you're not getting added to the permanent cast list. what's a triple feature in cpg is that like three trade shows back to back i'm not sure yeah uh i think that's uh human torture is what it's called i think that's just your feet are by that point you know worn down to nubs and you're never gonna walk again i was gonna say it's like three news stories back to back to back but that's just like every week generally speaking. Sometimes every day. Yeah. Well, speaking of the news, let's get right to it. Brad, I know you've been doing a lot of research around Amazon.

2:33Why are you looking into this retailer? What's the news this week? Well, Carol, they're being sued. Okay. They're being sued by the government. Can you elaborate? Why? So I feel like at this point, most people have probably heard there is an ongoing antitrust lawsuit filed by - I thought you were going to say most people have heard of Amazon. Most people have heard of Amazon. That is also true and factual. I'd say their brand equity is pretty high these days. Middle market business, but okay. The Federal Trade Commission is filing an antitrust lawsuit against Amazon. This happened last week. It's been highly discussed in a lot of media.

3:15So much of it is really about the marketplace and what it means for sellers. And effectively, what the government is claiming is, you know, I want to borrow from CNN's copy here because CNN just put it really in an interesting way. The complaint portrays Amazon is offering a kind of Faustian bargain, first enticing sellers with the ability to access tens of millions of potential customers and drawing in shoppers with low prices and numerous prime benefits. And then Amazon takes advantage of sellers and shoppers' dependence by increasing platform fees, bloating its search results with advertising that sellers are forced to buy if they want any hope of reaching shoppers and requiring sellers to use Amazon's in-house fulfillment services.

3:56I quoted from CNN there because I just thought they put it really well. Yeah, Brad, what does that mean in Brad's beat? What does that mean? What does that mean is you buy into Amazon's platform, you put your brand on there, you want to reach consumers, and then you start getting hit with fees. And suddenly, your brand's not getting seen despite how much you're spending because you're not using their advertising services, or you're not using their fulfillment services. There's a lot of myriad issues to sort of break down with this. And I should be careful about how I phrase things, because there's a lot of specificities in here.

4:32So if I misstated anything by trying to abbreviate it. Just note that there's a lot of real mechanical workings into what these issues are, because we're talking about an antitrust case here that, in a funny way, isn't quite seeking to break up Amazon so much as it is looking to tamp down on their practices and enforce some regulation on how they are managing their seller marketplace. I have heard or read, not heard, but you know the FTC in bringing this suit already knows it's not going to hold up in court so yeah to your point Brad I think a lot of it is very interesting because it's not trying to undo what it's like stop trying to do that yeah yeah knock that off stop giant warning but in the form of a lawsuit but I think if if you're a brand that's using Amazon a lot of this probably isn't news to you.

5:33You're probably experiencing it. You're probably living it. You just didn't really have a choice. Right. And that's a big part of the issue. That's where the monopoly allegation comes in is you didn't have a choice. But here's a good number. A report came out last month right around the timing of the government filing its complaint from the Institute for Local Self-Reliance. This is from September 2023, and their numbers show that in 2014, about 19 % of every$100 a seller earns in sales, whether you're a food brand, a beverage brand, you're selling furniture or T-shirts or whatever, every$100 you would sell on Amazon, 19 % went back to Amazon in fees in 2014.

6:20This year, in the first half of 2023, first six months, 45 % now goes to Amazon because they've been increasing the fees through various means over time. And it's getting much tighter for brands to be profitable and continue driving positive revenue through Amazon because of a lot of these various costs. Yet at the same time, we've heard brands say that they are shutting down their own D2C to just drive traffic to Amazon. You know, Partake sent out an email saying that it just wasn't worth it for them to keep managing their own D2C program. While there are these fees and other hardships associated with selling on the platform, there's certainly a lot of advantages for brands as well.

7:13Right. And there are advantages, but the system as it's set up is not always fair to the brands. At least this is what the government is claiming and what a lot of the complaints against the company are claiming. One issue, for example, is that brands often feel pressured to keep their prices down because anything that's seen as potential price gouging, they can do basically a blackout of the buy box on brands. So the buy it now box that you might see when you're on the search page. If they determine that your product is too expensive for what it is, they can clear that away or they can add in, check out these other products first.

7:59And - At least that's the allegation. That's the allegation, allegedly. Brad, I don't think this was part of the suit, but the other thing that I've heard come up from brands is cracking down on fraudulent products or gray market products. And so you're buying a product that actually is coming from some random warehouse in New Jersey. It's not coming from the brand, but the consumer thinks it is. And they have a really negative experience or they get expired product or damaged packaging. I remember one time I was at Expo West and I asked a vendor, why are people taking so much stuff? And they're like, oh, they're going to resell it on Amazon.

8:37Now, I don't know if they're going to do that with a box of cookies versus maybe a pricier body lotion. But that is something that I've heard brands struggle with and talk about how they don't know how to combat that. And that's a reason why they often feel like they have to also sell on the platform is so that they have their own presence. Now, to get around the pricing issue, you've mentioned a lot of brands also create their own pack sizes for Amazon. which again, when you're trying to streamline operations and lower costs in today's economy, means you have to invest more into packaging and labor and co-packers just to make this Amazon package.

9:23Now, it's not arduous for everyone, but for some brands, certainly that's difficult. As you all have been running down the dynamics of selling on Amazon, I'm just reminded of our discussion last week about the rising costs of retail. So if any of our listeners have, you know, an idea of a channel that might not be laden with fees and surprise costs, drop us a line. We'd love to hear it. Maybe we'll have a whole episode on some alternate channel no one's discovered in CPG. Well, we'll totally give you credit. I hope so. Adrienne, let's continue on this e-commerce retail bet. You have long been covering the twists and turns that is Blue Apron's business strategy and financial performance.

10:14I know you were really excited Friday. There was some more news. I don't know about excited, but you were eager to cover the next chapter in this story. What happened? You are correct, Carol. I have been invested in Blue Apron's financial state for well over a year now. Have you actually made a Blue Apron kit ever? No. Okay. Best part. Well, despite never subscribing, Adrienne, you've been very invested in this story. What happened last week? on friday it was announced that blue apron has been acquired by mark lor's wonder group which is essentially a what they are calling fast fine dining platform basically it's very specific yes very specific a little niche but i could see where they're where they're going with us basically through the wonder app you can order a meal from multiple different very nice restaurants or per chef.

11:15If you have a specific chef you like a meal from, that's on the Wonder app. And you can place all those different orders in one, like you're ordering DoorDash from a certain restaurant or Grubhub, whatnot, but from multiple locations because of their centralized model, where they've developed a lot of these menus and recipes directly with their partner chefs. And then they have physical locations, I think, too, where they're preparing stuff. It's not so much a ghost kitchen in that there's lots of different small businesses. It sounds like it's all Wonder staff sort of executing so you can keep that quality high and not have a Mr.

11:54Beast Burger type situation. That is exactly correct, Carol. I think that's what they're hoping to avoid. But anyway, so Wonder has brought Blue Apron into their portfolio for about$130 million in equity value. they're taking the company private with the deal and lore who you know has founded this group said since the beginning getting into meal delivery and meal kits has been part of their plan and the ability to acquire blue apron which has been as we've noted struggling in the past few years with consumer order volume kind of falling off and they had some financing that never came through um it just seems like a perfect opportunity so that is the rundown there I think the idea is to, with one platform, you get access to all these different meal options versus Blue Apron.

12:48You know, they've tried to add other options into your basket. I know they've added some snacks that you could purchase. They've tried to expand into other day parts like breakfast. And then something that seems really popular is heat and eat meals for people who don't even want to prep a meal kit. You just pop it straight in the oven. They also launched all of their, not all of their products, but select products through a non-subscriber model, which I thought was an interesting move last year. Also, you know, in an effort to reduce that churn they were seeing and maybe drive a bit more trial.

13:28They also set up an Amazon store. They've certainly thrown a lot of ideas at the wall. And kudos to them for trying a bunch of different things. But HeatNeed in particular is seeing a lot of interest from the market recently. I saw this ad for a meal kit company called Tempo. And I think I got an ad on Instagram. One of my tricks is when I see Instagram ads or Facebook ads, if they look really polished, I'm like, who's behind this? Somebody knows what they're doing. It was a better for you D2C pre-made meal company looked up, started Googling who was behind it. And it turned out it was Home Chef, which is owned by Kroger.

14:11So, you know, I'm curious to see where that goes, why they decided to brand it separately instead of just keeping it under its parent brand name. But that's one thing I'll be keeping an eye on. And Adrienne, I know you also had some heat and eat meal news you covered. You're correct. Last week, Wellful, which acquired the Jenny Craig brand back in July, relaunched the company as a direct-to-consumer weight loss meal management company, basically. What does that mean? What do you get sent to your house? You are getting sent frozen meals geared towards weight loss. You get two weeks' worth of meals in each shipment.

14:57They're kind of following those Jenny Craig recipes and model. But instead of opening physical retail stores like the previous company had, they're just focusing on bringing meals to customers. And they have, you know, an online support staff that you can contact, you know, if you need additional guidance through your weight loss journey. are they still focused on are they still focusing on weight loss as the primary angle they are indeed they are trying to keep the ethos of the original jenny craig brand but modernize it a bit with this new approach to how they deal with weight loss it's less following like a specific diet trend as well i know you know i have not followed jenny craig's diet specifically throughout its multi-decade evolution.

15:52But with the announcement the past week, a lot of the emphasis was on just like wholesome, full ingredients and less like, we have a keto line for you to purchase if you are interested in that. It's fascinating to me that they're focusing on weight loss. Growing up, we were a big lean cuisine family. And there was a period of time where that was my lunch every day. Definitely, I think middle school even, where my parents just thought that was like a healthier option than cafeteria food. I was a big fan of the Swedish meatballs option. Might be why I love going to Ikea now still. But when I think about eating frozen meals today, I don't know if Lean Cuisine would be top of mind for me.

16:44Did Lean Cuisine have a fettuccine Alfredo? I feel like I remember eating that a lot. They did. That was another favorite. You're right, Brad. I remember we had that in our house a lot. And in hindsight, like a fettuccine Alfredo that you could eat and help you lose weight, it honestly does sound like a miraculous invention. It really does. I need to Look at the recipe for that. Like what was in it? I just want a better for you fettuccine Alfredo now, though. Like how do I make that? Maybe they were like the original like cauliflower Alfredo sauce people. You know how that's become a trend? Maybe I'm.

17:20New podcast. The history of cauliflower Alfredo sauce, guys. They do. It's been a thing in the plant-based world for years. What's old is new again. Anyways, it seems like, you know, consumers have always wanted something more convenient and hopefully healthier for them. However, that definition evolves. Back in your lean cuisine days, Carol, I'm sure healthy was a very different definition than it is now. But, you know. Are you calling me old, Adrienne? Back in your lean cuisine days? I'm calling middle school Carol as someone who existed a while ago. Okay. Thanks. That's a politer way of putting it.

17:59Somewhere in time and space. Somewhere back there. I got to wonder, is it surreal for anyone listening to be listening to a podcast where there is just extensive discussion of meal kits without any meal kit ads at all? Like, is it is it is it feels like some sort of, you know, reciprocative loop or something like that? Some real just time out of space type of deal is just we're just going to talk about meal kits, but you don't have to listen to a meal kit out in this show. I feel badly, though, because everyone's Facebook feed or Instagram feed is just going to be filled with Blue Apron ads now.

18:36Well, Carol, in keeping on our e-commerce beat today, I believe you covered this discussion from another angle during our interview. What are we going to hear? Adrienne, I spoke with Nuts.com executives PJ Olisak and Jeff Braverman on the eve of a leadership transition at the company. And together they shared the history of how the online-only company built a very profitable business serving over a million customers a year. We discussed not only why the brand first decided to move online, they originally started as a small retail store decades and decades ago, but then remain online only, and now how the company is approaching potentially brick and mortar retail, selling on Amazon, and perhaps growing their 92 followers on TikTok.

19:29Well, let's get to it. Hey, PJ. Hey, Jeff. Thanks so much for joining me today. Hi. Thanks for having us. Hi. How are you? I have to say, when I was recording the introduction to the podcast with our team, I wasn't entirely sure how to refer to you both because you're undergoing a leadership transition this week. So I think I'm going to start by letting you two share the news about what's going on. Sure. I'm really pleased to announce that I am no longer Chief Nutt. I've been elevated to chair nuts. And we've just recently made PJ has been our president for the last two years, our CEO, and may take a couple more years for her to embrace the, the chief nut title, but that that's up to her.

20:16But something super exciting. You know, PJ's brought such a breadth and depth of experience to the organization, and just just really been a trailblazer. And she's going to help us help to us help me help the organization go to the entirely different level. Now I want to know like what type of nut is a chief nut and is that different for the two of you? Are we talking like hazelnut, macadamia, tiger nut, even though I don't think that's really a nut? Like what does chief nut look like? How hard is it to crack? Like there's a variety of questions I could ask here. Well, if you want to get technical, I've always associated we have all these characters that represent the family members and so on.

20:56I don't know how this exactly came about, but somebody became the peanut. This is a long time ago. peanuts as you know what you said about tiger nuts it's on peanuts are a legume and not not technically a nut um and i've for a while i used to have long hair and i don't want to comb it so i wear a hat so i have the peanut with the hat on top of it so that's all i can tell you we're gonna get uh pj her own character soon well i'll hold you guys to that we'll see what happens introductions aside jeff tell me a little bit about how did nuts.com get its start my grandfather had a little nut store in newark new jersey starting in 1929 and it stayed that way for forever my dad and uncle went into the business i grew up in the business didn't change that much um had to be a slight evolution from just a little store to a little bit of wholesale just because the business wasn't doing great the retail store wasn't doing great over the, I can even say over the, over the decades.

21:56I didn't know it wasn't a great business. I just, fun going in, but I was a freshman in college in 1999 and internet was booming or starting in 1998. And I thought, Hey, maybe we could sell nuts online. So, so that's, that's what we did. Launched a website, did a few orders here and there. I didn't go into the business immediately after, after college, but after about seven months, I decided I want to express my entrepreneurial side a little bit more or do so better than investment banking and dove into the four-person family business. It was my dad, my uncle, and two employees. All of them are still with us today.

22:35So that's really, really special. And just dug in and realized the opportunity was going to be online, explored other opportunities and just tried to be world-class in what we did. Jeff, it's a good thing you didn't have any food allergies or else like the nut dynasty would have stopped with you. oh, it would have been impossible for me to have food allergies. My dad came home stinking like peanuts all the time. And it's one of these things where a lot of the allergy is because we make our environment too sterile. Oh no, not in my household. You breathe it all throughout the home. Why would you say, okay, let's take this relatively small brick and mortar business, wholesale business, and what the world needs now is a website for nuts?

23:19Yes. So we had such we had such history with our store where we used to have tons of customers. But things changed in Newark, New Jersey, and we had fewer and fewer customers. And then we got bulldozed in 1985. We had fewer and fewer customers as we moved to another location and so on. Our stuff was just so good. And I loved eating this. So I assume there's more people like me out there. Turned out we were right. So it's like, well, why not reach a larger audience? Maybe Newark wasn't doing great for us, but maybe the country at large would do better for us. And, you know, we had really modest goals.

23:53Early on, there were a few orders here and there. And it was something as simple as if there are 50 states and we get one order per state a day, we get 50 orders a day. This would be unbelievable, you know, or literally earth shattering. Like you have to understand this was such a small business. When an order would come on the website, my dad would announce, we got an order, right? Like this is from where I come. So it's always this modest, you know, expectations and so on. And like I hinted at, I was the customer. So there's got to be more people like me. And if we just push great quality and great service and give people more and more products, we went from a hundred something products to thousands of products.

24:31Yeah, there's probably a great opportunity here. It was as simple as that. What did marketing look like at that time? Because I mean, were you just like in AOL chat rooms being like, hey, anyone want to buy some filberts or hazelnuts? So when I was in college, it was still early. You couldn't pay Google. I did stuff like Link Exchange. So it was a company called Link Exchange. That was Tony Hsieh from Zappos, one of his first companies where you could buy banners. And it's almost like an affiliate type of a setup. Then there was a company, for example, called goto.com, which became Overture, which ultimately became Yahoo.

25:07So we did have a decent understanding, did buy banner ads. I remember talking to Yahoo sales folk at the time, call it 99 or so. And I was like, you should just exercise those options and run, right? Like the math, there was just like economics didn't make sense. So, right. And then you fast forward a few years when that December 4th, 2003, when we relaunched the website, my dad screamed, shut it off. It was just - What happened? It was unbelievable. Like you're talking about instantaneously because then I had the marketing plan in place. And my dad being a creature of habit, when the store, when the retail store in Newark was dead, he was anxious.

25:49When we were getting slammed, somebody's like screaming out the window, throwing these papers down into the floor of the store, you know, to do the orders. He just got nervous, but we didn't, we didn't shut down the website. I mean, a lot of folks talk about when they see that bump on website traffic. Like I think often nowadays it's maybe like you were on Shark Tank or something. They have to scramble to make the back end work with supply chain and, you know, fulfillment. What did you do? Still small in the scheme of things, right? So like you go from, I'm making up a number, but you go from three orders to 30 orders.

26:28Okay, okay. Not like, it's not insane. But like, we're just like worker bees, right? a mistake my family made over the years was like not to hire amazing people like PJ, just kind of do it yourself. Right. So when we would get really busy leading up to Christmas for years, even as we started scaling, you brought in friends and family. You didn't pay them. You just fed them. This is before all this food safety stuff. All the nuts you can fill your pockets with. On the stuff. Yeah. Cause the stuff was really unbelievable. So like we just did it. We rose the occasion. And we were growing. We grew at first.

27:04It was like really like absolutely crazy growth rates, but then you probably go 50 % a year for like 10 years. You just kind of get, get used to it until COVID until COVID comes. That was a whole nother level. Well, I want to hear the story of the domain name too, because you didn't launch as nuts.com. That is, you know, kind of close to my heart because we did not launch as nosh.com. We were projectnosh.com. I think I now have like four email addresses because we've changed my email and domain so many times. So how did that go on nuts.com? I always had my eye on it. Not always. I think when you go back to 1998, when I started looking for domain names, I never, there was no money.

27:48Like I had to, I didn't even conceive of buying something that was taken. Didn't even cross my mind. I had to find something that wasn't taken. A lot of domains were, you know, as you can imagine in this genre a lot of domains were taken um so i loved america online you mentioned america online earlier i loved america online so like that was kind of inspiration for uh nuts online um but fast forward a few years it was always in the back of my head like i felt it'd be much stronger you know in 2005 i happened to record it who owned it so that was good that was before domains by proxy so you didn't know who owned them 2008 i was about to hire a private investigator because I did have the guy's name.

28:26A private investigator? To track this guy down because at least I had some information. Okay. Okay. But I'm frugal. So I just did it myself. He was a moderator on some, I knew the other domains he owned and I found one forum. I've never been on a forum before. I'm like picturing you skulking in the bushes of this guy's house. Not to a lot of extent. No. Okay. Okay. He ended up being in Guam, I believe. So that wasn't going to happen okay but uh i dm'd him on i direct messaged him or whatever it's called on this forum he was on and in 2008 i got him to redirect traffic for about 36 hours to a server we had with google analytics because i i'm all about value i wanted to see what that how many people were typing it in was there any fundamental value to this besides it's a nice thing to have that i could do back of the envelope calculations on retention and all these other things and 85 percent of the traffic was coming from the UK.