Successful Merchandising Strategies For Ecomm Retail

0:00What trends and news the team is keeping an eye out for at Expo East, Who are the two new funds backing CPG brands? And what it takes to catch the eye of an e-commerce buyer? This week on the Nosh Podcast.

0:25Hi 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 the upcoming Expo East show, some new funds backing CPG brands, and exciting news about how brands can connect with retailers at Nosh Live Winter. Joining me today are reporters, Adrienne DeLuca. How are you doing, Carol? Doing great. And Lucas Southerd. Bonjour. Bonjour, Lucas. Is that your greeting prepared for Expo East? Do you wish it was in Paris? Is that what's going on? I was frantically thinking about what would be an Expo East appropriate one.

1:04I don't really know. My greeting at Expo East is, what's new with you? What's new with the brand? Well, that's a good greeting. Leads into what are you guys excited for Expo East? Adrian, what odd, I mean, super trendy ingredient are you looking out for at the show? You were really excited about kelp in previous years. is kelp still hot or is that very 2022 you know i'd say kelp is still hot but it's definitely not it's it's a little overdone we've seen some kelp at this point adrian you're so fickle i can't believe this you know i just have to constantly stay on top of like that new cool ingredient because who else is kelp heads are so disappointed in you right now the konjac people are like what the hell, Adrian.

1:53Don't worry. I'm still obsessed with kelp, konjac, millets, all those other good things, which leads me to what I'm excited for this show, which is mainly ancient grains like millets. So millets are still hot, Carol. Okay. I'll keep that in mind. Adrian, can you tell me the difference between how you would define an ancient grain versus an heirloom grain? Because I've had this conversation with at least one brand about they are not interchangeable, even though I thought they were. They are not. She said that very definitively. Like, I am just so dumb that I didn't know this. Absolutely not, Lucas.

2:35I don't know how you still work here. You didn't know there's a difference. Kidding. Anywho, I actually don't know the specifics of heirloom grains. I know they're a subset of ancient grains, is my understanding. Ancient grains covers a lot of different things. You've got like teff, quinoa, buckwheat, sorghum is technically an ancient grain. Pretty much any grain that has not been commoditized for industrial ag use is pretty much considered an ancient grain. Because at this point, the food system has kind of largely forgotten they exist. We've messed with the genetic makeup of enough grains. These are the ones that we haven't.

3:15We tend to prioritize. A few here in the U.S. thanks to some historical subsidies and all of those fun things we can get into later. All right, Adrian, calm down. I can't. Yeah, let's have like an hour long conversation about ag policy in the 21st century. No, no, guys, Jeff's not here. I gotta ran you to it. Dang, we almost had it, Adrian. The episode, it's time to pivot. You're not getting Expo East news. Well, Lucas, what are you excited about at Expo East? Well, I'm a little bit more of, I'm old fashioned, I guess, in that I'm still looking at what's going on in plant-based. And, you know, we've seen a lot of interesting news come out in the last year or so.

4:03Two years ago. Yeah, I know. I know. It's passe to be still focused on the plant-based meats. Obviously, there's been some news with plant-based. Yeah, Adrian, there's been some news. Yeah, I mean, you've written about it. Thank you very much. But, you know, we've had brands like Hooray announce that they will no longer be making, well, that they're closing out shop in general and no longer making their plant-based bacon. Nowadays is also closed. We've had a series of layoffs at Meaty, even though they seem to be getting more and more funding. And I get an email a day, it seems like, from them about all the fun stuff they're doing.

4:46But I just think that there's a lot going on in plant-based that I'd be interested to see what the rest of the industry is showing and talking about when we're at Expo. Lucas, it's not just plant-based meat. I'm sure there'll be a lot of discussion around plant-based dairy. I saw Good Planet is launching a new line of olive oil-based cheese. I'm curious to talk to them because the front of pack really calls out the oil used, that it's not a seed oil, doesn't mention that it's plant-based as much. You know, Carol, I think since earlier this summer, there was a new report that came out that studied consumer perceptions around plant-based and plant-based foods.

5:29And one of the main findings that I've heard quite a few brands reference in recent weeks is the fact that consumers are gravitating away towards that plant-based and vegan labeling. So I'm wondering, you know, if olive oil-based cheese, I don't know how much olive oil is in Good Planet's new cheese, but if that call out itself is going to, you know, help set them apart. I will point out that Good Planet does put vegan on the front of their package. So they are still using a dairy free synonym, shall we say? But yeah, it's definitely not as like in your face. Like this is dairy free, plant based.

6:08Yeah, it's it's more like, hey, you know, for those vegans. So I feel like also like the days of things being labeled as like cheese with just a Z and like those kind. That I think we finally moved beyond, which I'm really happy about. We have all vowels. That's exciting. Yeah. All the vowels. No substituted. You still get that with the plant-based chicken. There's always the, you know, they take the C out or they take the I out. It's just like C-H-K-N or something. I'm like, we get it, guys. It's, yeah, it's not real chicken. Thanks. All right. Enough talking about plant-based cheese and ancient grains.

6:45Let's be honest. Only Adrian really cares about Teff. Bended. I would like to know, as you should be, I would like to know a little bit about some of the big news that we got this week involving two new funds that closed that are being run by some former CBG execs. Carol, I know you covered, I think, both of these big deals. This week saw two new funds, each coming in at over$300 million. The first Unfold is backed by Fidelity and also counts Sir Kensington co-founder and former CEO Scott Norton as a founding partner. While Humble Growth was started by longtime CPG execs Peter Rahal, Nick Gianuzzi, and Andrew Abrams, and both are looking to write fairly significant check sizes into CPG.

7:40I'll admit when I talked to Peter, I had to needle him a little bit because when he formed his family office, Latani Ventures, I asked him if he would invest into CPG and he was like, never again. No. Turns out, we talked about that a little further. It's not that investing into CPG is risky. It's that investing into really early stage CPG. There's just so many brands. It's hard to tell what's going to be a winner at that stage. So they want to invest into brands that are a little further along in their revenue development and have proof of concept. And both he and Nick emphasized have data to prove out what they're saying they can achieve.

8:21I also thought it was interesting, as you noted in the story, Carol, that they're also looking to fund some of that infrastructure and back of house type stuff that goes into building these successful and more mature CPG brands. Do they share anything else about what's going on with that tier of their investment arm? Well, I think Peter referred to it as things that make the industry better, faster, or tastier. Tastier seems like it's a subjective term, depending on what diet you follow. But certainly, they see that as a secondary set of targets. They're going to invest across pet, beauty, food, and beverage.

9:03So there's a lot of room on the supply chain side for them to invest. They wouldn't tell me who, but they said they have invested in one e-commerce related company so far, as well as one raw materials company. So prized whoever gets the scuttlebutt at Expo East about where those investments were. What a weird word. Congratulations, Carol. You've just used your favorite Scrabble term. I almost said 10 points to me for using the term scuttlebutt. I've always wanted to say that. Well, Carol, I'll race you through all the SEC filings and whatever else we can do to track down who that. I tried. I tried.

9:47Company is. I failed so far. Well, to wrap things up, a little bit of news that we announced on NOSH. We're excited to announce at NOSH Live Winter, attendees will have the opportunity to meet with executives and buyers from Kroger, Thrive Market, and Foxtrot, and they'll be sharing advice about partnering with retailers and how to maybe make your brand more successful in the retail channel. So in order to help brands prep for that a little bit, today we're going to air a session from Nosh Live Winter 2022, where attendees at the conference heard from Brandy Miller, Senior Director of Grocery for Misfits Market, and James Wren, Head of Merchandising of Food at Thrive Market.

10:33I should add, James will be one of the buyers in attendance at Nosh Live Winter 2023. And the duo shared what it takes to catch the eye of an e-commerce buyer or category manager. How do they think about assortment given the option of an endless aisle, and what really makes a brand successful with their consumers. So let's get to it. Yesterday, we heard from Holly about how Kroger is bringing emerging natural and organic brands into their stores, the evolution of these products and Kroger banners, and why these have become a particularly important part of the company's strategy. Now, we're going to switch to a different channel, speaking with two of the leading e-commerce players to look at how they find onboard and work with natural and better for you brands, a core part of both of their platforms.

11:24So please welcome James Wren, head of merchandising for food at Thrive Market, and Brandi Miller, senior directory of grocery at Misfits Market. Well, thank you guys so much for being here. Tell me a little bit about your roles at respective organizations and how the buying teams are kind of set up and where you fit in. Sure. So I'm the head of merchandising over our branded food business that includes shelf stable ambient as well as frozen. So roughly about 50 ish percent of our business and assortment. I have a couple of category managers that help manage various categories from beverages to condiments and sauces, to bars, to baking.

12:08I mean, the list goes on. But pretty much, I mean, the category managers own their categories. I still happen to hold on a couple categories, like snacks is one. But other than that, like, we run our businesses from the perspective of making sure that, you know, we're delivering for what the member is looking for. I mean, ultimately, we want to meet them where they are, because we have a super hyper-curated assortment. and making sure that they get what they need helps us to make sure that we're running a successful business and a sustainable business as well. How about you? So for Misfits Market, I manage all the groceries, so anything shelf stable.

12:46We have category managers who also manage inventory, which is a little different. Each category manager will manage an aisle, like you mentioned snacks, canned goods, and it's split in that way. And then I've also held on to a category as well, which is chocolate and candy. I think we're finding, like, fossil biases. Right. Favorites. Yeah. I want one of you to say, like, tinned fish. I know, canned fish. I do love tinned fish. Yes, scout. Scout. Nice. One reason we've chosen to keep our purchasing within category management is because of our unique buying model, which we can talk about. But it makes it easier on the supply side in order for us to get back to suppliers very quickly.

13:39That sets up a good question. So what is your unique buying model? Why is this structure important? Thanks. Yeah, so at Misfits Market, we have three kind of pillars that our mission is based on. sustainability, accessibility, and affordability. And within that, one thing we're hyper focused on is solving food waste. So excess inventory, short dates, you know, everyone here as a supplier has to hit order minimums or figure out how much to produce and we're here for when it's not perfect. And so we call that a way to access lost revenue that you otherwise wouldn't see. So to date, we've been able to help vendors with about$155 million in revenue that otherwise you wouldn't have seen and potentially have gone to the bin.

14:38So you get brand awareness, you get people to try your product and revenue you may not have seen. Well, so I asked Holly this yesterday at Kroger and how things are changing. You guys also had a recent deal. How has that, can you tell us a little bit about that and how that maybe would change how brands interact with you or Imperfect if they're already on the platform or want to be? Yeah, so at the moment, nothing changes. We are keeping things separate as we work on integration. Our cultures are so similar. We are both very hyper-focused on food waste. Another element of that is upcycling, right?

15:17So looking at your supply chain from farmer to manufacturing, and if there's edges, ends, pieces, byproducts of that process, repackaging it and offering it to us as a product that we can sell online. Imperfect has been champions of that as well, and so have we. So we have a lot of synergies that'll be pretty easy in regards to culture and integration and also like messaging to, you know, our suppliers and how we operate. So, James, you know, we just heard a little bit, which we can go into further about, you know, how food waste clearly matters to the misfit consumer. Why are consumers coming to thrive?

15:55What are they looking for when they go to that store? Yeah, I mean, we're building the world's first e-commerce platform that's focused around conscious living. So we're a mission-driven brand, mission-driven organization, and we're focused on making healthy living easy and affordable and accessible for everyone. So that really, again, comes back down to the fact that we serve members that are across the entire nation, lower 48 to be specific. We touch a lot of members who primarily live in the southeast and the Midwest who tend to live in areas where maybe their closest option might be a Walmart Supercenter, maybe a Kroger that's about 20 miles away.

16:40So not really like a trip that you're taking once a week, maybe once a month. and they might have very specific dietary restrictions or dietary needs or sort of health goals that they're going after that they just might not find these products easily around them, right? So what we want to do is make sure they're able to get these products at an affordable price. I mean, we try to price ourselves pretty competitively. We run a lot of promotion to try to help people access these products and ultimately get it to their door. I love that. I think you said something important And I think food access is like going online and being a pure play retailer like we are.

17:20It's instrumental. I mean, you think about 26 million Americans live far from access, healthy, affordable produce, meat, seafood, things that, you know, are really important for a balanced diet. And half of that 26 million are low income. and you know offering and being able to one order it online during the pandemic we all lived through it it shouldn't be a socioeconomic thing that you you can afford to eat healthy everyone deserves lots of people have gluten intolerances diabetes it affects everybody and access is just you know super top of mind yeah we talk about that a lot I mean oftentimes if uh maybe someone's not too familiar with Thrive Market.

18:05They think we do really well on the coast, like in New York and LA, SF, even big cities like Chicago, but that could not be further from the truth. I mean, our members are all over the country, and they're coming to us because they're having trouble getting it locally, right? So that's why it's so important for us to listen to our members. I have a very limited assortment it's about 5500 total across the entire entire business and we want to make sure that all 5500 are hitting it out of the park for the members I think there's sometimes the assumption that if you are targeting these other parts of the country you're looking for mainstream products, you're not looking for a new traffic chip, you just want a better for you trip.

18:55How are you guys looking for functional products? Are you looking for those more unique products? Or is it more about that better for you, healthy alternative to a conventional item? Sure, do you want me to take it? Sure, both of you can take it. Yeah, so when we want to look at the business there's obviously going to be certain brands or certain product types that you have to have. These are table stakes that you must carry in your assortment that everyone's going to be looking for. And yeah, so to speak, they're like your base. They keep the lights on, if you will. But we also want to make sure we're bringing in brands and products that, you know, not just how we feel in terms of identifying trends, but also what members may be looking for, what we kind of see out there in the market as well to make sure that we're giving excitement to the assortment, right?

19:50So if we're talking about nootropics, I mean, And I will say that as a team, we've identified one of the trends we're going after in 2023 and trying to get into is total holistic health, right? So obviously the food that you eat affects you physically, but we also feel that it affects you in your brain as well. And it's all connected. And nootropics is sort of like, you know, obviously functionally focused on brain health. And we just kind of feel that it's all sort of connected at this point. and it is an area that we are actually interested in going after. In mine right, if you're still here, Bernard, yeah, we've been chatting, so we'll put it that way.

20:32How about you? Because, I mean, you are trying to get this assortment for consumers, but you also have this food waste layered in. How much does that block the ability to have those products for consumers who don't have access? Are you able to meet those needs on a weekly basis? Yeah. So we're constantly testing new items and looking and allowing using that data to reflect what we do next. Right. So the customer votes. We expand into a new geography. We got to look at what's selling there and where can we improve. so I you know we have a core assortment of everyday items that we consistently have and then we layer in you know our opportunistic or misfit excess inventory buys on top of that but that core assortment of everyday consistent buys those are things that I think you said it well keep the light on you have to have those and then from there like where we will you know get together with a supplier and say, we believe in this.

21:34This is a great item. And it's in a category that's void. And it's truly doing something unique, either sustainability-wise, or it just tastes amazing, or whatever that uniqueness is, we have great category managers that recognize that. Or is it a value? Or something that will resonate with our customer based on what we know about them. So I think it's a very dynamic answer, but question. How do you plan for imperfectness though, right? It's an imperfect situation. Is it, you know, as they said on our CFO panel, is it food waste? Like, hey, I'm cutting bars and I always know I have a corner. But it sounds like some of it is like, you know, you can't plan for it.

22:19Like, oh, we had products that are short-coated or the label got a little messed up. How does that then work? It's incredible. We leave a couple slots open every month for those buys. And, you know, by having like this upcycle, we just launched this challenge, by the way, at Expo East, and we'll be doing the actual challenge at Expo West, look it up, it's super fun. But by creating upcycle items that not only solve for food waste, but they can also be a consistent item in the category, kind of solves for that X factor. And it helps on the vendor side solve for a problem you may not know you had, and create a revenue stream.

22:57And then for us, it creates a consistent item on the marketplace, which is great for customer retention and all those things. But to your point, too, we want to provide value and a bit of a fun shopping experience. So you will get hot deals of the week on site that are very affordable. And those are the slots and the items that we leave open for all of our supplier partners out there to throw an item in when you know you're along on something. I mean, one thing I'm thinking about too, and I'm wondering is how do your consumers shop the site and where does it fit into their monthly or weekly shop?

23:32Because just speaking honestly, like on Thrive, there are categories you don't have yet, maybe coming down the line. We're working on it. Yeah. If you want to chat about that. But, you know, how do they approach Thrive? Especially if their closest grocery store is 20 miles away. I mean, something that makes us unique is we have a set of values that members can shop by, from dietary to maybe sourcing values. It could be low sugar, it could be no sugar, it could be low salt, it could be non-GMO, it could be a women-founded business. I mean, the list is pretty wide, right? And the way we view those values is that's sort of answering your question in terms of like, how do these shoppers shop?

24:26Like they are coming in intentionally looking for something that means something to them. But is this their primary shop or more of like a supplemental shop? I mean, I would say it can't be 100 % their primary shop because we obviously don't carry every single category across the entire grocery store. I mean, we have members that come in, our best members maybe, they're placing two orders, two or three orders a month, on average probably about once a month. But the orders are anywhere from$50 to$100, right? So they're like stocking up for what they need and what they want. And again, it kind of centers around the fact that like these are going to be items that they're not going to be able to access locally, right?

25:12and they are coming here specifically because we are a destination for for what they're looking for I mean even thinking back to just how we run our assortment right we might have you know the big brands that we have out there in naturals such as like simple mills for example right but the one difference between us our assortment of simple mills versus say like a whole foods whole foods might only have let's say you know 10 of their best items I'm gonna have all of their items, right? So if you have a shopper who is dedicated gluten-free, they need it, maybe they have celiac and like they know that they can get everything they need under the sun at Thrive Market.

25:49So you mentioned you have less products. Does that mean, I mean, it sounds like you also have less brands if you're trying to bring in every product from Simple Mills, let's say. Yeah, it's art and science, right? We know members really trust certain brands, and we want to make sure that we bring in what they're looking for to sort of convey that trust back to them. but we are very supportive and excited about emerging brands that come up as long as you know we can find a way to make it make it fit for our model but also ultimately deliver to the member and how are consumers using misfits to you know is it their primary shop is it a supplemental little addition.

26:36Yeah. I think like thrive until we get to the thousands of SKUs on site in the, you know, high thousands, we just simply can't be the main shop. But I do think online shopping, you tend to interact with grocery shopping online is you fill a basket with the things that you want and then you infill elsewhere. So we do have a captive audience to get somebody to fill their basket first, right? So like, I know I want broccoli every week. I know I love portabellos, and they go through and pick everything they want. And then we may not have the exact gluten-free peanut butter filled simple meals item at that time, but they can go to the grocery store and and fill with those other items.

27:32And until we can get to that big skew count, we won't be there, but I also think that we provide kind of like a puzzle piece, we fit like a puzzle in a way that Walmart superstores are far away, they have a very static known assortment, and I think like Thrive, we provide the organic berry that you would want because it's one of the dirty dozens. We have a full, robust assortment of gluten-free things, low sugar, keto products. Like, just those stores simply don't have. So I think that this type of, you know, shopping on your phone, you fill your basket with us, and then you will have to go elsewhere.

28:13So James mentioned, you know, we want to work with emerging brands. I think the term was as long as they, you know, fit within our goals for products. What do those goals look like for both of you? What does it look like at Imperfect? What are you kind of looking for in a brand when it comes to price point, margin, that sort of things? Is there more flexibility than, say, a brick-and-mortar retailer? For us, there's definitely flexibility. It depends if it's a misfit item. If it's excess inventory short date versus a turn product, we're going to have different requirements. But really the things that resonate and one thing we try to do as a partner to vendors, we listen.

28:51What are your pains? What are your best sellers? What are your least sellers? Do you have excess packaging? What are your minimums on your co-packer? Monthly, what time do you think you'll be sending the list? We really try to be open and flexible with suppliers and working direct. I think that's really important as well. Very clean, easy business. We respond quickly. Things like that. Yeah, I mean, for us, I mean, we, our goal is to be the most competitive in pricing. I mean, obviously, if we get to the nuance, it is, it can be a challenge sometimes against bigger, bigger competitors, but. Who shall not be named.