This Is How To Think Like An Insurgent Brand

0:10Hi, 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 some sweet trends and oversees observations. Then, we hear from Charlotte Apps, a VP for the Consumer Products Practice at Bain. Charlotte and I discuss the consulting company's recent research into insurgent brands. Joining us today are reporters, Luca Southerd. Hi-de-ho, everyone. And Adrienne DeLuca. How are you doing today, Carol? Doing great. Guys, I don't know if you've been following the news in Candyland, but there's been a lot going on.

0:49I have to say, I feel like a lot of it has been driven by social media, with TikTok content highlighting a bunch of new confection trends. You know, Carol, I was not aware this was a huge trend until you mentioned it to me last week. And then as I dove in, you were right. People on TikTok are making ice cream fruit roll-up concoctions. Someone was saying it's supposed to mimic mochi, I guess. But everyone who was reviewing this recipe was like... Is it really a recipe, Adrian? Okay. It's two ingredients. It's ice cream and it's a fruit roll-up. Yeah. So do you just take ice cream and wrap it in a fruit roll-up?

1:31Yes, you do. Because that just seems like a bad idea. It's a horrible idea. They have said you have to remove the wrapper, Lucas. This was a big issue. I'm so glad someone clarified that we're not eating the wrapper. Take it all back. It's a great idea now. Perfect. Well, anyways, it ends up in this giant weird mess of like ice cream and like hard sticky fruit roll up. Reviews are mixed on this one, but it seems to still be, you know, gaining some momentum online. I'm confused. I think just people need to stop messing with things and just like, you know, let ice cream be ice cream. Let Fruit Roll-Ups be Fruit Roll-Ups.

2:08The two do not need to make a baby and have some sort of like bastard child of like, you know, frozen treats. I'm in agreement, Lucas. I know this has been a trend for a while. Adrian Lucas, you might be a little late in discovering this. But it's been in the news recently because several Israeli travelers were trying to smuggle fruit roll-ups into the country or out of the country. And over 650 pounds of the sweet treats were confiscated at the border. On top of this fruit roll-up trend, there's also the freeze-dried candy movement. Though a lot of this is sold through cottage operations and small businesses.

2:50last week you know natural food brands so good expanded their platform of freeze-dried fruit and smoothie cups to include freeze-dried candy now see this was something that i did look up i have to admit freeze-dried candy i do find as a somewhat intriguing thing as someone myself who loves candy and has been known to consume too much of it especially like the really the really bad kinds of candy, like gummy worms and sour things and just dips and powders and all that. I would try some freeze-dried gummy worms, gummy bears, gummy anything really, gummy snakes. Well, So Good is doing freeze-dried mini marshmallows, something they're calling rainbow bites that look like Skittles.

3:40There's some gummies in there, maybe some freeze-dried hard candies. So, Lucas, there's something for every sweet tooth. I'm confused, Lucas. So if it's gummy and you're freeze-drying it, I've been informed that it really changes the texture here and it kind of explodes. Yeah. Is it still gummy? Well, so I watched one video that was like a time-lapse of them freeze-drying gummies, and you see them kind of like bubble and expand, almost like they're being cooked. But then when they come out, they're like powdery. Powdery. It's someone I read a story, a short story online about the trend and it was they described it as very similar to like I read a tome about freeze dried candies.

4:27She was describing it as like similar to like like like space ice cream, astronaut ice cream. I feel like this trend had to have started in like a high school chemistry class or something by accident. like this is just such like an odd I mean it's better than them than like high school kids like eating what like Tide tablets or something Tide Pods yeah Tide Pods that was I mean I thought you were gonna say yeah I ate one it did not go well no but there was a Tide Pod party in college that I did attend where people were eating them that is definitely not a not product necklaces of Tide Pods and people were just biting them off Yeah.

5:07It was like Tide Pods and Greek gods, I think was the theme, which is just horrible now that I'm remembering. Yeah, I think I think actually a little bit less of you now that I know that you attend this party, Adrienne. I think I do too of myself. I've lost just a little bit of respect for you. I've lost a solid chunk. I'm going to block that back out. I can't even unpack that trauma right now. Going back to the freeze-dried candy, I'm just going to pretend that that conversation never happened. going back to freeze dried candy. I'm just so surprised that no one's tried to commercialize that or the fruit roll up trend yet.

5:46You know, certainly we saw Belgian boys jumping onto a TikTok food trend doing their pancake cereal. I'm waiting for some brand in the natural product space to do a better for you version of these. You know, Tyler, if you're listening from Joyride, please get on this. Let's do some freeze-dried, sugar-free, all-natural gummy bears and worms. But otherwise, I don't know how long it's going to take before we see this on the shelves of Whole Foods. I wouldn't hold your breath. In other candy news, I don't know if you guys saw, but the candy desk for the Senate just changed hands recently. I saw an article that the new desk keeper, Senator Todd Young, is offering craft endangered species chocolate and Mr.

6:37Fudge's confectionary, among other brands, out of his desk. When's he going to get some freeze-dried candy there? Maybe some fruit roll-ups. I'm way more on board with these options. Chocolate, I'm seeing chocolate and fudge, confection. That's my segment of candy preference. When you go to the Senate, Adrienne, you can stop by and compliment him. I can't wait. I have an appointment next week. so I was looking into the candy desk because I didn't know anything about this and I guess it started in like the 60s and yeah it was 65 a senator uh George Murphy of California started keeping hard candies in his desk and it kind of like became this like informal thing that he would just like give candies and then whoever sat in that desk would give candies to whoever one of them.

7:26Like if you're like odd trick or treating sort of kind of one house, I guess. But yeah, for like old senators, you know, like people in suits and stuff. And then it became formalized in 79 by Senator Robert Byrd. And it's very interesting to me because Robert Byrd is a very, very conservative or was a very, very conservative legislator and might be the only thing that I actually firmly support that he did was make this kind of informal candy desk like a part of tradition of Senate. And now, yeah, like every at the beginning of every Senate, they like elect a new candy candy desk. Czar, basically, and I kind of like the idea.

8:08I think it's kind of it makes it it makes the idea of the Senate floor not seem so strict and buttoned up and just a bunch of old people fight and fighting with each other. It's bipartisan, too. We can all agree on candy. I wonder how long it took them to get it formalized and passed. Well, and so the other thing is you serve candy from the state you represent. Oh. Oh, I didn't know that. Oh, I didn't. I missed that part. Are specific states known for specific candies, though? Well, all the brands I named, I guess, have plants or employ people in Indiana. okay well that that actually makes the tradition even more uh interesting to me but like so like if you're from like vermont is it like just like maple syrup maple candies yeah just all maple all the time like and and you know that must be kind of disappointing for people who aren't into maple or something yeah or if you're like rhode island it's all like saltwater taffy or something if you're not a taffy person you're just like well this is gonna be two years that i'm just not gonna need from the candy desk.

9:16That is a good way to get someone to stop talking on the floor though. The current candy desk also has toxic waste, hazardously sour candy. Are those like warheads? That does not sound like something that an 80 year old senator is going to be grabbing as he walks by the desk. Well, it's also got rock crystal candy sticks, jumbo jelly beans and assorted gummy products. So we've got a range of tastes here. I'll just say this. If I was in charge of the candy desk, I would make sure that they installed a cotton candy machine there. So I would just be whipping cotton candy during session. It would certainly smell good.

10:01Yeah. And it'd be kind of fun. I'm just imagining myself, I'd wear a cool apron, a nice hat. I would really take to the candy desk, grow my mustache really long and curl it around. They'd be like, guys, we have to get rid of this guy. He's not voting. He's just making it con. Please vote this guy out. Both parties, just vote him out. Impeach him. Part of the reason why I was thinking about candy this week was because I now have it on the brain, Adrienne after talking to you about your trip to England last week and your new favorite candy bar that you've discovered. Well, Carol, I'm glad I've made an impression on you.

10:41I discovered my new favorite candy last week. It's a bar by this brand called HIP, which stands for happiness in plants, which I'm, as we all know, very vegetarian, vegan leaning. And this was an oat milk based chocolate bar. It was like ethically sourced chocolate, compostable wrappers, cardboard packaging. There was no plastic anywhere to be seen. It had all those things that I just, I love to see in any product. Very on brand for you though. They nailed, they nailed your demographic. Oh, entirely. The Adrian demographic. That was made for me. Spot on. Yeah. On our Fit Joy podcast, Norman said, find your core consumer and speak directly to them.

11:26Hip, I'm right here. Adrian, were you just skulking around the candy departments or did you visit other grocery stores? Yes, we had not sure weirdos who travel and go visit a good grocery store or maybe, you know, some restaurant trends that you spotted. Carol, you know, I love a good grocery store. It's one of my favorite retail establishments. So, of course, I went in one. I did see an overwhelming amount of just, you know, plant-based foods anyways, whether that was in restaurants or grocery stores. I also saw my first vegan 3D printed steak in the flesh. No pun intended. Oh my God, I didn't even realize.

12:13So yes, actually no pun intended. that was being served up at a steak shack situation in Camden Market. Wait, so you ate one, right? No. Or you just saw it? Come on. Come on. You know my taste preferences? That's not where I'm headed. I'm excited. Those things are coming out into the world and put right on a menu. You should have FedExed it to us at the national office. I was thinking about you. I literally ran over and took a picture and I was like, I have to send this to Lucas. But I had no service the whole time. And by the time I got it, I forgot. But I'm telling you now. So that counts. I still wish you should have FedExed it to me.

12:55I would have eaten it cold. Probably would have been really gross. And that would have been the worst way to first try a 3D printed steak. But, you know. I agree. I'm saving you disappointment. Can you imagine taking that through customs when they ask, like, do you have any animal products or fruit or vegetables? on you. How do you answer that question for a 3D printed steak? I mean, it's better than a 600 pounds of fruit roll ups or something. Exactly. Adrian, while you were away, though, you missed at least what I consider some very exciting news. Cholula hot sauce is expanding beyond hot sauce for the first time.

13:33Now, I don't know if they're gonna have to change the brand name. Like, let's Just skip over that for right now. But they're going into sauces and seasonings. Frankly, I think this is a really smart move by McCormick. They've talked a lot about how they want to be the flavor and seasoning company. When they acquired Cholula for$800 million in cash in 2020, they kind of hinted that they saw the ability to platform out this brand. And Cholula had already seen really solid food service growth. And that was what the prior team had invested a lot of efforts into. And now I think it makes a lot of sense for McCormick to say, where else in D2C and brick and mortar can we bring this brand?

14:20As excited as I am for this, and I agree, I think it's a good idea. I have to say that I am by nature more of like a Tapatio kind of guy or even a Valentina. I love Bajolula, but if you're going to go for hot sauce brands, you know, Tapatio is really where I'm going to grab first. Now, they've also done some crossovers, though, right? There certainly has been a lot of crossover. We had Cholula tequila, I think, that came out. There's been some hot sauce flavored pork rinds. McCormick's seen a lot of success with this. You know, they have Old Bay. They have Frank's Red Hot. I don't know if you guys saw the Old Bay Goldfish Crackers.

14:57You know, these are products that maybe don't have the highest turns. And Lucas, like you just alluded to, people are really loyal to their favorite hot sauce. You know, you might dabble with another brand, but you're probably going to come back to that classic staple that's always in your fridge. And by expanding to other parts of the store, to something like salsa, which you're eating on a more social basis. You're introducing friends to a new flavor. You're buying it more often, potentially. That's a great way to bring new consumers into the brand family. And maybe eventually they convert over to that classic hot sauce product, or they're willing to follow it into that next category.

15:40I agree, Carol, because like you said, how often are you buying a new bottle of hot sauce? I mean, I don't have a sweet tooth like you, Adrienne. True, you're savory. We've talked about this. I'm savory. so I have a shelf in my fridge of hot sauces maybe that's the southerner in me coming out but I totally believe in having hot sauce for different eating occasions but how often are you repurchasing said hot sauce all the time I will say I always have Cholula and I always have Frank's in my house you are right everything else in my fridge is like in and out it's it's it's a constantly churning, revolving door of hot sauce.

16:26It's like the featured product of the week or month or however quickly you eat or drink that. I didn't know this about you, I didn't know you had such a hot tooth. I don't know what your affinity to hot things is. There has to be a term for it. Speaking of growth plans for brands, moving on from Cholula, This ties in great to our featured interview. This week, I spoke with Charlotte Apps. She is a VP in the consumer practice group at Bain, which is a management consulting firm. Now, her team just released their list of insurgent brands. It's the seventh annual list. It's one of the first times they've published the list in full.

17:11and when I saw the array of companies that were on this list, I wanted to learn more about how they were selected, how they're approaching growth, and how much impact they're actually having on the market. So let's see what Charlotte had to say. Hi, Charlotte. Thanks so much for joining us today. Thank you, Carol. It's really great to be here with you and thanks for having me. So you recently released the firm's seventh list of insurgent brands. When I looked up the definition of insurgent, the dictionary told me a rebel or rising in active revolt. Now, I'm not sure, but I expect that when it comes to brands might mean a slightly different thing.

17:54So what is an insurgent brand? So we've defined being insurgent brands to have a very specific definition. So it's brands that have been growing at least 10 times their category growth over the last five years. So certainly disruptive, certainly capturing the outside share of growth. We've also set a floor for how big these brands are. So we wanted to look at brands that were at least$25 million in revenue in track channels, so in conventional trade. And the reason we did that is because we wanted to look at brands that had really started establishing themselves in the market. We wanted to be looking at the winners that had some staying power.

18:31And then the third piece of the definition is around the ownership of the brand. We wanted to look at brands that were independent or had only recently been acquired by CPGs and therefore weren't necessarily benefiting from large CPG scale. We see some consistency in the type of brands or the kind of average profile of the brands. And so typically, these are brands that are 40 to 50 million dollars on average in size. They are growing typically about 20 times their category on average. So of course, you have some that are growing less, some that are growing more. But certainly they are more premium products.

19:04And so typically they are reaching about three times private label in their categories. There's a lot to unpack around that. I know we'll delve into a lot of that over the course of this conversation. I'm just curious, though, why do you think$40 million to$50 million is kind of that sweet spot that you see in terms of average size? I think when you start putting a parameter of growth of at least 10 times, you're going to see that that kind of sweet spot around$50 million is probably where some brands will maybe start tapering off. And 10 times growth is a really big multiple for brands to sustain as they scale.

19:43And so when we look at the 40 % of brands that fall off our list each year, to be honest, it's kind of two main reasons. One, a lot of these get acquired. And so the minute they start kind of tipping into a little bit of the larger sizes, and they become very attractive assets for large CPGs, and then others will start kind of tapering off in growth just because sustaining it 10 times is really, really hard as you start scaling. How much of this, though, is sustainable growth or are brands churning off because they can't keep at it and maybe end up going out of business? To be honest, very few of our brands that we've been tracking have seen declining sales.

20:25In fact, I would say less than 10%. The majority have continued to grow at two or more times their category growth. In fact, 50 % of our insurgents that have reached$100 million have actually sustained growth at more than 20 % on an ongoing basis. There's certainly a lot of discussion about making smart choices when it comes to growth that will enable the business to maintain that pace. Have you seen the pace of growth changing at all in terms of how fast brands are moving up in their top line revenue? Is it taking them longer to hit insurgent brands' size? So interestingly, we've actually seen insurgent brands be able to scale increasingly fast, whereas historically it might have taken them eight, nine, 10 years to start getting into$25 million range.

21:23We're now seeing these brands scaling increasingly fast. In fact, around 10 % of our 2023 insurgent brands scaled to$100 million in sales in less than five years. And actually some insurgents like Prime managed to do that in a single year, while others like White Claw and Truly have done that in two. So we're really seeing an acceleration due to some of the digital means that these brands have and their ability to tap into consumers more quickly. Does that mean that a lot of insurgent brands are omni-channel brands, or do you see some that are focused more heavily on brick and mortar? So it's very mixed.

22:01Many of them do start off in D2T. When you look at brands like Quest initially a long time ago, but more recently, Dr. Squatch, for example, is a great example. Catalina Crunch as well. These are brands that started off creating that insurgent DNA online, creating that following, creating that consumer advocacy online before being able to actually successfully enter the conventional channels. When I was looking through the data you guys shared with me, there was a lot of interesting reflection around portfolio growth and how insurgent brands tend to address going into new SKUs or new parts of the store.

22:40Are there any trends you spotted there? I think we see two different ways in which insurgent brands scale. You certainly have insurgents that are in categories that give them enough headroom for growth from a household penetration perspective, particularly in beverages, where they are able to really drive sustained growth in their core category and don't really need to expand beyond their core in order to continue to drive sustained growth. Others have, as you say, taken more of this platform approach. Kodiak Cakes is a great example. Kind as well. Quest. These are brands that maybe didn't find that they had as much headroom of growth left in the categories they were in and has sought to extend their brand into categories that were close adjacencies, categories in which they felt their consumer, they were going to find their same consumer in those categories, and categories in which they were going to be able to reapply that insurgent growth model.

23:44Some folks might hear the word insurgent, though, and think that these are small brands. But what kind of impact are they actually having on the market? Is it an outsized impact for their size? These brands are really having outsized impact. You're right. They are small and typically they account for about 2 % of the market share in the categories in which they exist. That said, over the last two years, we'd seen them capture 10 % of the incremental share of growth. In prior years, when we look at 2016 to 2020, they were capturing 20 % of the incremental growth. And so, you know, the impact these brands can have is really tremendous.

24:27For sure, we've seen in the last two years some slowdown because of the macroeconomic environment. COVID was very hard for these brands. Their supply chains didn't necessarily meet the demand spikes that we saw. And so there were some challenges there. And then the past year, a lot of the growth has come from large CPGs increasing prices, and we haven't seen insurgents quite increase their prices at the same pace. But they've been growing their volumes tremendously, whereas the rest of the market has actually slowed. And so that really positions them well looking forward to kind of come back and continue to capture outside share growth.

25:03Another thing that struck me when I looked at this list was the way brands were approaching disruption. And it seemed like there were brands who were trying to take a stale category that's maybe large and reinvent it, but there also were brands who were trying to be a first mover and create an entirely new category or subcategory of products. Have you seen one tactic tend to pay off more in being an insurgent brand? So we found that categories that are more fragmented, more expandable in terms of consumer spend, and categories in which consumers tend to have broader baskets of brands that they buy, be more prone to disruption by insurgent brands.

25:48They're just a greater opportunity for insurgent brands to disrupt. That said, we've really seen insurgents be able to disrupt and drive growth across all categories, regardless of their growth profile. And so something interesting that we found is there are just as many insurgents appearing in categories that are growing 10 % per annum as there are in categories that are only growing 1 % or 2%. And so really the ability of insurgents to disrupt is less about the categories that they're in, and it's more about the growth model that they're applying and how they are disrupting. As you mentioned, these brands are across categories, but you also said earlier that a lot of them or most of them have a premium price point.

26:30So does that mean that a brand that is not premium has a chance of ever being an insurgent brand? And how premium are we talking here? So premiumness is typically a characteristic of an insurgent brand, primarily because these brands offer differentiated value propositions, often because they are providing an added functional benefit or a convenience that, frankly, the consumer is willing to pay for, but as a result, drives a premium positioning. They are also kind of smaller brands that are looking to tap into kind of very niche propositions. And as a result, they're going to play at the higher end of the spectrum.

27:10That doesn't mean that business models don't exist for insurgents to tap into the lower end of the pricing scale. And we've certainly seen that in the past with brands like ELF, whose business model has been exactly that, disrupt the existing status quo and come to the market with a almost as good, if not as good product in terms of quality, but be able to cut out the middleman or have a slightly different approach to the business model in order to be able to provide lower price points for consumers. I like what you said about appealing to a really specific shopper, because I think that's where brands feel pressure is that they have to be something to everyone.

27:51And it was something we actually discussed on our last podcast, the founder has a grain-free pretzel line. And he's like, you know what? I realized I don't have to make a pretzel that everybody wants to eat. So interesting that you say that, because when we look at, you know, we looked, we talked a little bit about how insurgents can exist across categories and that it's really about their, their, their growth model that allows them to grow. And we talk about five elements of that, that growth model, which is really kind of what the insurgent DNA is that allows them to disrupt. And that DNA, the first element of that is very much having this consumer purpose at the core.

28:31And it is often founder led. And we talk a lot about that. When you look at brands like Vital Protein and others, these are brands that started because the founder themselves had this unmet need. And so the founder themselves being the consumer creates a brand that really speaks to a core set of consumers. As brands grow, though, you know, there is a need sometimes to expand beyond that initial base group of consumers. How does an insurgent brand tend to approach that in a way that maintains those early adopters, but still allows them to broaden their reach? Because you have to grow, right? Absolutely.