The Simple Maxim That Made Michele's Granola A Profitable Category Leader

0:10Hey folks, I'm Ray Latif and you're listening to the number one podcast for the food and beverage industry Taste Radio. This episode features an interview with Michelle Cicalis and Oliver Pucciacone, the founder and CEO, respectively, of super premium granola brand Michelle's Granola. If you take the brand out of the farmer's market, do you have to take the farmer's market out of the brand? Not if you're Michelle's Granola, which has maintained its packaging and quality of ingredients since inception and become one of the top-selling brands in its category. Launched in 2006 by founder Michelle Chicalis, Michelle's Granola Markets small batch granola made from natural, organic, and non-GMO ingredients.

0:54The company's Maryland-based manufacturing facility produces over 35 ,000 pounds of granola and muesli weekly. Michelle's also sells a 2-Skew line of granola butter made from oats and nuts. The products are sold nationally at over 3 ,800 retailers, including Whole Foods and Wegmans, where Michelle's is the top-selling granola brand at each chain, as well as Ralph's, Kroger, and Sprouts. In the following interview, I spoke with Michelle and company CEO Oliver Bucciacone about how a focus on quality and quote premium simplicity has enabled the brand to scale while maintaining its original image and positioning.

1:31They also spoke about the patient path to distribution in conventional grocery, how they've pushed back on retailer demands for promotional pricing, and why examining every cost is key to being cash flow positive and profitable.

1:48Hey folks, it's Ray with Taste Radio. Right now I'm honored to be sitting down with the leaders of Michelle's Granola, Michelle Cicalas and Oliver Bociccone. Michelle, Oliver, great to see you. Great. Great to see you, Ray. I'm praying that I got your names correctly, or pronounced correctly, that is, because we just went over it and I still think I screwed it up. I think you did a good job. I imagine that there's a few different ways to pronounce it, but this is the way that my husband's family pronounces it. So I got on board with that. Chakalas. Well done. Now, you and your husband live in a town called Lutherville Timonium.

2:28We were chatting about this before we hopped in the mics. For folks who are thinking about visiting the area in Maryland, Lutherville Timonium is in Maryland, what are some things that they should be looking out for? Well, I mean, just to start, it's definitely a mouthful, Lutherville Timonium. It's a hyphenated name. And I was mentioning to you that around here, people tend to call it one or the other, depending on what part of town you're in. So we live in Lutherville, but the Michelle's Renola facility is headquartered in Timonium. And I had never heard of it either. I'm from the D.C. area.

2:57but Lutherville Timonium is a suburb of Baltimore City. It sits just north of the city. What I love about it is it's just naturally beautiful. There's lots of hills and trees and open spaces around. We're really close to farmland and horse country up here in Baltimore County, but we're also like five minutes north. You can be right in the heart of Baltimore City and enjoy all that the city has to offer culturally, and it's also a great food town, but you know we have the quiet conveniences of the suburbs. Where's the farmer's market in the town? There's a farmer's market at the fairgrounds. Okay.

3:34The Elfranola facility is like a stone's throw from the fairgrounds. So we are in the heart of Timonium. I did bring up farmer's markets and like a lot of brands, Michelle started out as a farmer's market brand. And when you look at the packaging today, it still feels like it could fit in any farmer's market across the country. Clearly, there's a lot of intentionality in that. I mean, I did start at a farmer's market. And when I started out at the farmer's market back in the spring of 2006, I started with the intention of selling pretty simple product that delivered on taste and quality. And I learned from the customers that I had at the markets that were coming back week over week, that that was something that was needed or missing in food retail.

4:24And so we've stuck with that same emphasis all along about on product quality and delivering on exceptional customer service. And that is working for us and has worked for our brand. And I think that when customers go out and buy the product, if it looks to them like something that they can buy at a farmer's market, we hope that it also tastes like something that they would find at their local farmer's market. I also think another thing that we learned at the markets and we sold at farmers markets for over 15 years was that product quality matters, but also that emotional connection to the business and to the maker.

5:01And our customers are savvy, health conscious, planet loving consumers. And so we want to make sure that our packaging and what we're offering inside of our packaging is meeting all of those emotional needs and, you know, the desires that consumers have when they're paying$8 for a bag of granola and making sure that they're getting all of those expectations out of the experience. And so for us, what we did at the farmer's market delivered on that and what we're doing at grocery retailers across the country is, you know, continuing to deliver on that. This is year 17 of Michelle's Granola. And Michelle, you were running the company for the first 14 years.

5:46Oliver, you came along three years ago. I believe you joined the company in October of 2020. And I was looking at some of your past roles and kind of wondering how you became the CEO of a granola company. What drew you to this business? What drew you to the food and beverage? Well, in particular, to the food industry. Michelle, do you want to do the context and then I'll jump in? Yeah. I'd love to paint the picture of where I was and where the business was when I first met Oliver because, Ray, I wasn't looking for a CEO when I met Oliver. But back in 2018, 2019, the business was in an interesting place.

6:25We had just gotten Whole Foods Global. We'd been selling into Whole Foods in the mid-Atlantic and then acquired a second territory and region, I should say, in 2014. But in 2018, we went Whole Foods Global. So we were kind of on this precipice of moving from a regionally loved and well-known brand in the mid-Atlantic into national distribution and more coast-to-coast presence. And the business was operating with a really healthy margin. I would say that we were in overall a really good and exciting place. But at the same time, personally, as owner-operator, I noticed that I was beginning to feel a little bit stuck, that I knew that we had a tremendous amount of growth opportunities in front of us, but I was not exactly sure how much I wanted the business to continue to grow and in what direction.

7:19I was struggling with things like identifying the right next best opportunities for us. But I did know in my heart that I wanted to continue to grow. So pace was definitely a question. And then looking internally at my team, I had a really tremendous dedicated team of people who were helping the company grow and stay true to its values. But I also recognized that we had some gaps in our skill set and experience. And so I started to really get more serious in my conversations within my network about finding some mentors who could help guide me through these next steps of growth and really being able to answer some of the questions that I had with more like strategic certainty.

8:04And I could feel my team wanting those answers, too, you know, wanting to begin to answer to a budget or to a strategic plan that was that was documented. as well as continuing to walk through the doors that were opening for us. But it was this additional support, I think, that we felt like we needed to shore up who we were and the direction that we were heading in. And so a good friend introduced me to Oliver as a mentor. And we started working together in a consulting capacity. We met once a week for about a year. And we were working together on building out a financial model and strategic growth plan for Michelle's Granola.

8:44And so we discovered a lot together, both about each other and our working styles and our values and our skill sets, as well as discovering about opportunities for Michelle's granola to continue to grow. and when COVID hit, so this was like halfway through our working partnership, I was trying to figure out how to keep my team safe and keep our operation open. And Oliver was the first person I called. And that was a light bulb moment for me because I realized that we had developed trust in our relationship too. And I knew that he was the person who could help guide me through difficult challenges that we were likely to continue to face as a growing brand.

9:23And so sometime that summer of 2020, I started to think, would Oliver potentially leave the comfort of his stay at home dad role and pushy consulting gig and come on board with Michelle's Granola and help us in a more full time committed capacity? And I swear it was like at the same time he said, he would consider bringing me on as the CEO. So that's a little background and context in terms of where I was as founder and owner and operator of the company and how Oliver and I met. Yeah, it felt really natural, right? Like it just felt like kind of the process just kind of occurred. And I don't think either of us set out looking for it to become what it became, right?

10:02It just kind of worked out to be a great working relationship. For me, my career has been in a lot of different industries, but manufacturing is at its core, whatever it happens to be, right? So even when I was doing consulting for PricewaterhouseCoopers, my companies that I worked with were manufacturing companies. And so I learned so much about the power of lean transformation and lean enterprise systems and the power of building process. And then going back to the Marine Corps, I already talked about it, right, is teach, coach, mentor, empower your people, give them the tools to succeed and then set them loose.

10:35Some things are just ubiquitous, right? It doesn't matter what you're producing. I've worked in a company that produced hundreds of thousands of doors a week to a company that produced four or five pieces of equipment in a year. and at its core it's about building good sustainable processes training your people and setting them up to succeed i think it helps in this particular case as i got to know michelle i got to know the company i really love the company i think that our mission and the product is exemplary it's great it's something that i believe in i choose to purchase it even though you know i get a free bag every week i buy more you know and that always helps right i think one of the hard lessons I learned over the course of my career is might be fairly straightforward for a lot of people, but is love what you do.

11:21And I do truly love what I do here. You know, Michelle mentioned I was kind of a stay at home consultant. I was taking consultant gigs as they came along, but I did a turnaround in 2018 that didn't quite turn. You know, the last thing I did was I had to close a facility in Brazil. A whole lot of people lost their job. And I had this moment where I was just like, this isn't who I wanted to be when I grew up. And Michelle and my kids are about the same age. And I just said, I'm going to, I'm going to take a break, spend time with my kids. I'm going to, I'm going to drive them around in the minivan and do all that stuff.

11:51And it helped me get a little bit more perspective about really what's important in our lives and the things that we do on a day-to-day basis. So yeah, I think my anniversary is in about a week, right, Michelle? My three year, my official three year. Yeah. It's been three years since you took the role on formally. Yeah. And I think the fun part is there's certainly, there's been a learning curve, Right. So like from the defense world to industrial, non-incpt, like there's been a bit of a learning curve about learning the industry, particularly the lingo. Right. I think, you know, our mutual friend, Brendan Murphy, still makes fun of me because I call it rooftops instead of stores.

12:26You know, a number of places where we're points of distribution. But I think I'm finally getting the hang of it after about three years. Well, Oliver, I wouldn't worry too, too much about knowing all the lingo all at once. I feel like it takes people about 10 years to really understand exactly how the food and beverage industry works. And even then, it seems like the grizzled veterans are the ones who really have a handle on it. But that being said, the people that you're selling to consumers of today, it seems like are looking for premium products with ingredients that they understand, a nutrition facts panel with a list of ingredients that they can pronounce and that they are familiar with.

13:08And I think back to our first conversation, a term that you brought up that is premium simplicity. And I love it because I really feel like it encompasses what consumers, again, are looking for today. Michelle, can you talk about how that term, premium simplicity, reflects the mission and values of Michelle's granola? Yeah, I love that term too, Oliver. Speaking of industry lingo, I mean, Oliver has helped define who we are as a brand going forward. And it's caused me to reflect on our founding values and why I started this business in the first place. As we think about who we are and how we're going to maintain that as we grow.

13:52But for me, premium simplicity is all about just the most delicious food is the simplest. It comes from the cleanest, simplest, most wholesome ingredients. And when I started making granola, it was things that I had in my home pantry. And the recipe has not changed, Ray, since that very first farmer's market sale until today. We have managed to scale a process where we're incorporating the same ingredients and processing them in a very similar way. So it definitely informs everything about what we do from a day-to-day operational standpoint, but also our overarching strategy. In fact, two pillars of our 2024 strategy are product quality and customer service and thinking back to our early days and how we are going to continue to emphasize those things and deliver the very best product quality and exceptional customer service that we can going forward.

14:52So I think it's like at the center of everything that we talk about. I think we realize that what we do, the product we make is what we have to offer. So it always takes center stage. One of the things that we kind of say to each other all the time and we try to use when we're talking to other folks is we want to bring real food, make it real people into our customers' kitchens and routines, right? We have premium ingredients. and I really, one of my favorite things is we are who we are, right? You pick us up, you read the flavor. Oh, cinnamon raisin. Okay, cool. I flip it over. It's oats, it's brown sugar, it's raisins, you know, it's real ingredients, real premium ingredients that we pay for that we put together in a handmade and caring way that just creates this delicious product that you can't get enough of.

15:43When I think about Michelle's granola, immediately I think of a Whole Foods or Sprouts or a specialty grocery store chain. But when you are getting into the Kroger's and the targets of the world, it does require a different kind of mindset. When does that process start and how do you prepare for that next evolution? I think we've been really lucky in that a lot of retailers are starting, they started to come to us about two and a half, three years ago. So we were doing fantastic at Whole Foods. and our first major retailer, conventional retailer, was Giant of Landover, which is the giant in the mid-Atlantic region.

16:18And they came to us and they wanted to bring us on shelf and feature us as a local company. And we've had a fantastic relationship with their category managers. And they've been a fantastic partner in helping to put us in front of consumers and working with us on charges and everything else that goes along with giving them the conventional. The beauty of them is that we're able to go direct. Nothing is distribution. They're a major part of how we go to market, but we're able to go direct to Giant of Landover and the other 80 USA companies. And it allows us to be a little bit more flexible with pricing, allows us to get a shelf price that perhaps is a bit more attractive to the conventional customer.

16:55The thing that we've really done in the last three years to drive some of that growth is saying yes and having those conversations and then being willing to really kind of push back when we get that, hey, we want 16 weeks at 25 % off or whatever the request is. and working with those retailers to help them understand that we think our shelf price is very reflective of the product that we have. And so that our discounting strategy is different than a lot of the other companies out there. So it's kind of this just, I referenced the changing business model. Well, that's the evolution that we've had is having these kind of open conversations with our CEMs, understanding what they need on the conventional side and how that differs from say a Whole Foods, where Whole Foods over the years has been a huge supporter in helping us grow and kind of working with us and helping us see different things and kind of taking that mentoring role, the conventional stores are much more like, hey, let's get this going.

17:46Let's get it out there. Let's figure out how this does. Well, that leads to my next question about pricing. I think the typical price for a bag of Michelle's granola is about$8. Is that accurate? I mean, it depends on where you buy it, but that's pretty about average. Yeah. Okay. So in conventional, at a Whole Foods, I think$8 for a bag of granola, the average customer there would see that as a reasonable price. In conventional, it might be a little bit of an uphill battle explaining why you should be paying that price for a bag of granola. And I can see and I can understand why a retail buyer giant might say, okay, we need to have promotional pricing for an extended period of time to get consumers aware of and interested in your product.

18:33But the everyday price of$8, I mean, how do you get conventional customers comfortable with that? So much of our work, particularly in conventional, is about helping consumers get a taste of the product first. Tasting is believing. And, you know, earlier you asked us about scaling small and all that. And we talk about the premium ingredients we use. The first bite you have of the granola, you immediately see it. It is delicious. It is fantastic. And we have an incredibly high rebuy rate, right? So a new customer, Oliver goes out, he has a coupon for whatever it is, buys a bag, tries it. I am incredibly likely to go and buy a full price bag and continue to be a consumer of the product based on the data that we've gathered.

19:18We believe that it's priced based on the ingredients that we have in the product and the value that is provided to the consumer. That's not to say that velocities in conventional are as high as velocities in natural. They are different. They're different paths to market and they're a little bit lower in conventional than they are in natural. An interesting part of our story is the pace of our growth. We have grown very slowly over the 18 years almost since I started. And we didn't start in conventional until a few years ago. So we had kind of 15 years of proven velocity and natural before we even started to dabble in conventional.

19:57Oliver mentioned Giant of Landover. This is in our home region where we have a really solid brand reputation. And I think we're very fortunate that we're having the experience of kind of starting in conventional. And Giant is not our only conventional retailer, but starting in a region where consumers are already looking for us. And we heard time and time again, I love traveling to Whole Foods to buy your products, but I wish it was in Giant where I'm buying, you know, 80 percent of my groceries. So it was just, you know, an obvious next opportunity for us. And we were excited when Giant said that it was the right time.

20:32I think something that's contributed to our slow growth is that in this industry, you don't call all the shots. You have to wait for the retailers to be ready for you on their timeline. So we were really excited when Giant came to us and said, I think it's time. And they have been fully behind us since we got on shelf with them. But I think we are learning some interesting lessons. And there are some important realities and differences between natural and conventional. but this is the way that, you know, our consumers are shopping and conventional. And so our products, we want to make sure that our products are there too.

21:04And to bring it back to pricing strategy, when you think about our DNA plan and how we use discounts and allowances, we try to be very, very careful to protect that shelf price, right? We don't want to unintentionally devalue the product by being on promotion too often. So we work hard to make sure that that shelf price is the everyday price that consumers know, like this is a fair price for this granola. Yes, they're going to be on sale on occasion, but it's not going to be a brand that is consistently trying to be at$5.99 or whatever it happens to be. If we're lucky enough for them to read Food & Wine magazine, Food & Wine features us as one of the best granolas in the country.

21:39And we are at the lowest price of any of those products. So what I think we are trying to sell ourselves on is a fair price for a really high quality product. And I'm glad that we are not priced out of conventional retailers. So I think we're really hitting it right where we need to be for us to be able to sustainably produce and offer a high quality product, but also be accessible to the everyday consumer. Sometimes pack size enables greater accessibility to consumers. Have you ever thought about reducing your pack size to introduce to be an introductory kind of product to conventional consumers?

22:16so we do actually have what we call the mvp which is the mini variety pack that we sell on our website we've not yet brought that into stores but it's certainly a conversation that we would have to get it out there what's interesting is people use it in different ways right so like there's oliver who wants to try out the product but then maybe there's michelle who's buying it or ray who's buying it every week and throwing it in your your work bag and you should have any snack at work So there's different profiles that are using that. Long way of saying not opposed to putting that in stores if it would do well.

22:48But it sounds like you're not confident at this point that it may work. I think that one of the things that we do really, really well is we stay focused on what's in front of us, particularly in the wholesale channel. And what's in front of us is there are still people coming to us and saying, we want to put your product on shelves. And so avoiding adding unnecessary complexity to our manufacturing operation is part of our success, right? So as you scale, complexity can multiply before you know it. And so by keeping our skew count of what's going into wholesale very straightforward, it allows us to be very reactive to what the stores need.

23:26Does that make sense? Yeah, absolutely. Oliver, you had talked about the importance of demos. I hear this a lot from entrepreneurs and operators who say, you know, once a consumer gets to try our product, they will become customers. They will become consistent consumers of our product. It is expensive to do demos. It's expensive to get people to try products, especially if you have a pretty big retail footprint, 4 ,000 doors. You're constantly trying to get, you know, food into people's mouths. It's interesting because I had seen this post on LinkedIn. the CEO of a company called the Coconut Cult, who is connected to a brand called, well, he is the co-founder of a brand called Once Upon a Farm, the CEO of which is John Foraker.

24:11John Foraker, a famous or well-known person in our industry as being the CEO of Annie's before it was acquired. He had talked about why demos are less important for his company. And what's more important is getting the product and positioning right. And he had said, if you get the product and positioning right, velocities will come afterwards. And it sounds like in a lot of ways that has worked for Michelle's, but you're still saying demos are a critical part of what we do. I guess, what's the balance there? How do you weigh product and positioning and making sure that is set and well-defined in conventional and demos as well?

24:51What's the balance there? What you're causing me to think of is during COVID, demos weren't a thing. Right. They're just available. The only way you could do a demo was essentially distribute, buy one, get one, freeze or coupons for a full price bag. And the number one question that we've been asking ourselves for the last three years is how do we convince or how do we get the consumer to take the risk and buy an$8 bag of granola one way or the other? One way is our authentic packaging, the way we present ourselves. How are we on shelf? Right. And so working with retailers to make sure that we're presented properly.

25:24But at the end of the day, when you have a product like ours, where tasting is believing, because let me take a step back. Differentiation in the granola world isn't necessarily all it's not visual. Right. So packaging is one thing. People can see our granola through our bag. They see that it's nice and chunky. They can see the inclusions. But at the end of the day, until they actually taste it, that's where the differentiation really comes in. So, yeah, I think the question isn't our demo is effective. The question is, how do we continue to get consumers to try the product one way or the other, whether it's through couponing or full price coupons through some of the there's there's different partners you can like social nature that you can work with to sign people up to demo or actually paying to do in-store demos.

26:09You know, as as they're coming back, we're finding every time we do a demo, we get lift in a region. And then, of course, it follows back. But there is a sustained change to the baseline. Right. It's not going to be huge, but maybe it's five percent. We're finding that for us, demos are effective because of that very much tasting is believing and helping consumers see the differentiated product. Are you outsourcing demos or is a lot of that based on an in-house strategy and hiring people that you know will best represent the brand? I'm chuckling because as we're nationwide, we're absolutely outsourcing.