Dick's $2.4B Foot Locker bet, the Girl Scout brand empire, and behind the scenes of AG1's product research

0:09Hello, everyone. Welcome to the Modern Retail Podcast, our show that covers the ways the retail industry is changing and modernizing. I am senior reporter Gabby Barco. I'm here with my co-host Melissa Daniels. How are you this week, Melissa? I'm doing well, Gabby. We've had a busy week in retail. Yeah, we sure have. It's been, yeah, it's been quite a week just all together. But, you know, we do have some news to cover this week. But I should preview that later on, Melissa is going to be interviewing Kat Kohl of AG1 and they're going to talk about how the brand is expanding outside of its signature greens mix.

0:51But first up, we're going to do our rundown portion. So today we're going to talk about Dick's Sporting Goods finalizing their Foot Locker acquisition. It's a$2.4 billion deal. And then we're going to end on a somewhat upbeat note because I think we need it. We're going to talk about the new Girl Scout cookie flavor. I know you're excited about that one, Melissa. Oh, yes. As a former Girl Scout and decided lover of sweets, I'm very excited to get into the e-commerce and retail aspects of the Girl Scout brand. Yeah. I didn't even know you were a former Girl Scout, so I cannot wait to get into that later.

1:34But first, we got to eat our vegetables first. So we're going to talk about Dick's Sporting Goods. First blush, what are your thoughts on this acquisition? Because it was announced in May, but this week, the merger is finally done. Yeah, we've known about this one for a minute, and now it's been finalized. And I think this is one of those stories that when we look back at this era in retail, we will point to as an example of how legacy companies have tried to stay modernized. In this case, I think it's, you know, Foot Locker is the one kind of getting bailed out here, right, given some of that company's struggles.

2:12But overall, I think that the way that foot traffic and malls are kind of in this precarious state right now, I think it's a good bet for Dix to try to just get more footprint. um so yeah i mean i i don't think this is the last of the big brick and mortar chain acquisitions we will see but i definitely think it's going to be one of the ones that we point to yeah i agree and then of course you know with these like whenever two giant retailers like this merge there's always executive reshuffling happening so yeah we can maybe talk a little bit about who's actually going to be leading this giant operation because at this point uh this brings up the number of stores for Dick's to 3 ,200 locations across 20 countries.

3:00So Dick's did confirm that the parent company is going to be running all the Foot Locker brands. That includes Kids Foot Locker, Champs Sports, WSS, and Atmos. So this is a global operation, of course. Right. And as part of this change, you know, there's going to be new leaders who will be leading some of these subsidiaries. And Foot Locker CEO Mary Dillon and Foot Locker President Franklin Bracken will be leaving. Executive Chairman of Dick's Ed Stack will lead the global Foot Locker business. And I think what's going to be interesting is to see how much of the sort of Dick's playbook carries over to Foot Locker.

3:43Dick's, I think, does a really good job catering to not just a core athletic consumer, but, you know, you're sort of hobbyist as well. And Foot Locker, I think, has just been such a mall staple and a sneaker staple. I really am wondering what sort of like diversification and merchandising we're going to see, given that that has been sort of a strength for Dick's. You know, Gabby, I'm wondering if you have any thoughts about what you think the opportunities are going to be here. Well, first things first, Dick's says that the buyout will allow it to save between$100 and$125 million in, quote, cost synergies.

4:18So basically creating efficiencies across all the retailers. But, you know, I do think, yes, they are basically bringing in this sneaker giant, right? That's really what Foot Locker is known for. I know they have apparel and accessories, but it is the sneaker destination. And of course, they've got all of these other brands underneath the umbrella. Whereas Dick's, I think in the last few years, has been definitely more successful at modernizing. We use that word a lot here for good reason. You know, I think they've been able to keep, for example, like their Nike partnership is still super strong.

4:55They were almost like handpicked by Nike, right? When Nike was pulling back, for example, from wholesale. So, yeah, they did do pretty well. And then on the other hand, you know, Foot Locker had some weak Q2 sales. It was like a 2.4 % drop in sales from last year. And they're also$444 million in debt. So, yeah, this is kind of coming at a pretty good time to be getting that safety net from a parent company. Yeah. And conversely, you know, Dix is at a point where they've been doing pretty well. And, you know, it's funny because sometimes we hear about how the outdoor sector is struggling because of the pull forward that happened during COVID, as well as just people's changing leisure habits.

5:44But, you know, Dick's, I think partly because it's probably so diversified, has been able to still be really strong. Dick's, for its part, had its second quarter revenue reported at$3.65 billion, which was a 5 % increase from last year and exceeded their estimates. I don't know how many brands can say they're exceeding their estimates right now. So credit where credit is due for them. I'm really interested to see, like I said, what the merchandising changes might be on the footlocker front, though. You have so much more retail space in malls. So how do you maximize that with the traffic that you already have there?

6:23Or is there something you do, you know, from a brand partnership or a drops perspective to, you know, become the draw and become the foot traffic generator for that property? Yeah. Well, we don't have any details yet about just like what the store designs are going to look like or if they're even going to change or if there's going to be like sort of crossover branding at all right now. But yeah, I think down the line, it will be interesting to see whether they're going to like, you know, maybe create more efficient floor plans or whatnot and, you know, more of like a curated sort of design. And so, yeah, we will see.

7:03But I guess, you know, maybe we can end it on a note of, you know, we talk about mergers and acquisitions a lot on this show. And it just seems like more and more retail is just becoming smaller in the sense that, you know, there's just less companies that own everything. And these are arguably two of the biggest sporting goods retailers in the country. And of course, abroad too. But yeah, I don't know. What are your thoughts there? I mean, it's huge. The fact that it went through is, of course, pretty notable. But it seems like a pretty friendly environment for M &A right now. Well, yeah. And like you said, we talk a lot about the acquisitions and the conglomerates that are amassing in size and picking up former competitors or using acquisitions as a way to diversify or to strengthen points where their portfolios are weaker.

7:58And yeah, I think that's something we're going to continue to see across the sectors, but especially in this brick and mortar category where a lot of legacy businesses are struggling. I do think what this does is open up some opportunity for companies to really specify in niche areas, though. Because if you have this sort of big conglomerate who are kind of serving as generalists that are expanding in apparel, expanding in sneakers. Who are the companies out there that are going to be really strong DTC climbing companies? Who are going to be really strong DTC trail running companies? Who are going to be the really strong open ocean kayaking companies, which is something I only did once, but would totally do again.

8:44I just wonder if there's going to be opportunities that crop up because you get such a big kind of conglomerate scale. Do you know what I'm saying? Yeah. I mean, you know, you've got like your REIs too. So there are some smaller, yeah, sporting goods retailers, but I guess, yeah, those are a little bit, you know, they're niche and they specialize in certain categories. But yeah, I am excited to see how the two brands merge and just, you know, how, what the turnaround plan is going to be for Dick's because clearly they see this as an opportunity and I'm sure they have plans for how to create more efficiencies at Foot Locker and yeah, bring those sales back up.

9:27Okay. Well, now let's talk cookies. This is your moment, Melissa. Is it? Yeah. I mean, there's a full disclosure. I come from a long line of fakers. You know, I'm not that much to write home about when it comes to baking, but it is what I bring to the potluck. You can usually count on me for sweets. What we saw this week, and it was news that made me really happy and then stood out as something different, is that there is going to be a new Girl Scout cookie. The Girl Scouts tease their newest cookie that's inspired by the Rocky Road ice cream flavor. They're called Explore Moors. They're filled with a chocolate marshmallow and toasted almond flavored cream.

10:09Delicious. Kind of a chocolate sandwich cookie with this luscious flavored filling. And it'll be available for the 2026 cookie season at the beginning of the year. You know, I know you maybe think I was sort of crazy for being like, we should talk about Girl Scout cookies. But I think the reason I wanted to talk about this was because it's hard to maybe find a sales operation that has not only like the footprint they do, but the nostalgia, you know, and when you think about what an icon the Girl Scout cookie is and what sort of a pop culture moment Girl Scout cookies are, I think it's really fun to see them expanding and trying something new.

10:51Yeah, you know, I think they're also bringing in a little bit more of a modern twist to their flavors. Of course, they're known for their classics. But yeah, anytime there's a new flavor announced, I feel like it grabs a lot of headlines. And actually, we were having an off mic, maybe like a debate of some sort where it's like, is this a retail brand technically? It is, you know, it's a nonprofit. But I do think, you know, the Girl Scout cookie selling season in itself is, it's still a consumer facing brand. So yeah, I think it's somewhere in the middle. So that's why we kind of thought like, how do we, you know, find the retail angle?

11:31And maybe what we talk about is actually how they have been modernizing the last few years. I mean, I remember in 2022, they got on DoorDash and that was a pretty, you know, controversial move, actually. Some people did not like that because it takes the spirit away, but you know, they do have to digitize like every other brand. Right. Yeah. Well, this is what was funny that we were sort of talking about as we were kind of discussing amongst ourselves. And that's, you know, do you want to buy Girl Scout cookies from the girl who's sitting out there in front of the store and selling with her family and her friends near her?

12:09And they're, you know, just kind of asking everyone who walks by if they're interested, does someone even come to the door anymore? You know, I did door to door sales when I was a Girl Scout. I walked around my neighborhood with my pen and pencil and my chart, and I would mark off, you know, what James Smith wanted to buy. And then I'd bring her her bag four weeks later when I had the delivery and leave it on her porch. Yeah, it was hard work. It was like you were doing Instacar before we had the language. A thousand percent. It was Instafeet. I was just walking, man. No one was driving me around.

12:43But what also what I've come to love about the current era of Girl Scouts selling is this e-commerce operation they've developed, right? So they got into e-commerce in 2015. And that was just sort of them sort of starting to figure it out. But now it really has sort of a life of its own. You know, I look forward every year to my friends who have children who are Girl Scouts selling me their link so I can order cookies from them. And so they know that, you know, Auntie Melissa ordered cookies from them. And it's cool because I'm not in their neighborhood. I'm many, many miles away, but I can still feel like I'm supporting them and giving them, you know, two thumbs up on their scouting and sales journey.

13:24I also think it's really fun to just see the way the Girl Scouts are advertising these days. There's like a text marketing campaign you can be in. I just opted into that this morning so I can make sure I'm up to date on everything. Yeah. I'm like, well, what kind of like, is there going to be like drops? Like what's What's the SMS strategy? Yeah, totally. This is where it's like, this is where our job is really fun because I feel like we have the knowledge of what brands do and how brands operate. And then we layer that onto our own personal interests or things that excite us in our lives as shoppers.

13:58And that's where I think our jobs can be really funny. But yeah, there's also a Girl Scout cookie booth finder on their website. So if you are a purist and you do want to find someone in person to buy from, They're, you know, arming you with that opportunity. You just go online and put in your zip code. Another thing that's really funny about the modern Girl Scout brand, and this to me proves that they are a brand, to be clear. I firmly believe this is a brand. And that's the like crazy amount of licensing they do. Have you seen this? Yes, this is sort of their relatively new play, right? Which is that they're taking like the Barbie and the Wicked playbook, essentially, and just splashing Girl Scout flavors across different categories.

14:42So they've got Native deodorant, the deodorant brand who does a lot of food collabs. They have a licensing deal with them. They've got Coffee Mate, Lip Smackers flavored like cookies. So yeah, it just seems like that nostalgia is just coming to all different categories. And obviously, people love that, especially right now. It's like a comfort from childhood. But I did see some debates whether that dilutes the brand or not. That's up for debate, I guess. Well, you know, because it should only be, should it only be Girl Scouts of the United States of America who make products with the Girl Scout name on it?

15:23Well, they've obviously decided it's okay to license that brand. And, you know, in the past five, 10 years, we've just seen it everywhere. there. I'm just picturing like a 12 year old girl boss, like sitting around with her team, like guys, is this diluting the brand or is this going to, yeah, be good for a customer acquisition? Oh my God, that's so good. I would like to see it. Well, that's the other piece of this too, is like, I think I read on their website that it was more than 700 ,000 scouts who sell cookies every year. And that's like 700 ,000, you know, kid bosses in training, right? And like entrepreneurs who are learning what it means to sell, learning what it means to like cold call or approach people, learning what it means to follow through to, or maybe even learning what it means to have to remedy the customer experience.

16:14What if the box is coming late? What if mom can't bring you to drop you off to deliver cookies around? Like there's going to be things that happen, right? So I feel like just even as that opportunity of what it means to be an entrepreneur, the fact that this is something this brand can do for kids, I think is really cool. Yeah. I mean, you know, there's also like the social media use, which I always think is really cute. Anytime you come across like a scout who's promoting her channel or her, what do they call them? Her link, I think you called it. So yeah, it is cool. So I'm I'm excited to see in the new year how this new flavor, which I think we mentioned the name, it's called Explore Moors, which is the Rocky Road flavor.

17:00Yeah, I would like to try it. Report back to modern retail in January and we'll be sure to give you our taste test. Yeah. Also, if anybody know any scouts that I can buy from, please send them my way because I don't know anyone currently. Yeah, send us your links. All right. Well, that was a really fun chat. I'm so glad we got to get into that. And hopefully, there will be future Girl Scout coverage from the modern retail angle. But in the meantime, I'm going to introduce our featured segment this week. I interviewed AG1 CEO Kat Cole, who is someone I've really admired for how she's grown this company into a real behemoth.

17:43You know, it had$600 million in revenue last year off of one skew. It sells green drink powder. That is a super supplement. Yeah, then they made that off of one SKU. But this year, this summer, actually, they finally released different flavors. They released an updated version of AG1 called NextGen that has some different formulations to it. And they decided to launch it in Costco with their original SKU. I mean, after this conversation, I feel like I could call her Professor Cole because I got a lesson in all things supplement formulation. So So this is definitely a conversation for anyone who's interested in what's going on in the supplement category or what's happening behind the scenes at these companies that are really at the cutting edge of science.

18:28It was a fascinating interview and they really have invested tens of million dollars into what they do to make their product. So it was very cool to go behind the scenes of that. Cool. Well, we're looking forward to it. And yeah, you can listen to that right after the break.

19:02you've probably heard of AG1 before, maybe even on a podcast. But today, we're not doing an ad read. we are digging into the story behind the brand itself. AG1 is a direct-to-consumer powerhouse. Last year, it brought in more than 600 million sales. After 15 years in the game, the company, formerly known as Athletic Greens, built its reputation on a single product, the AG1 Daily Nutrition Supplement. But this year, AG1's playbook has had some novel changes. They launched their first new product, a sleep supplement called AGZ. It also reinvented its flagship formula with AG1 NextGen and launched different flavors like tropical citrus and berry.

19:48And for the first time ever, you can find AG1 on shelves through a wholesale partnership with Costco. To unpack this new chapter of growth, I am joined by AG1 CEO Kat Cole. She came on board in 2021 as COO, and she brings more than 20 years of experience leading and scaling brands. Before AG1, Kat was president and COO at Focus Brands. And these days, she also serves on the boards of Slice and Milk Bar. I am so excited to chat with you today. Kat, welcome to the Modern Retail Podcast. Thanks for having me. How's your day going so far? Living the green dream. Oh, I love it. You get to start every day with a fun rhyme.

20:29That's great. Well, now with AGZ, it's the green, brown, and pink dream, but mostly green still, mostly green. Oh, maybe we can have a nice color theory confo. Maybe we can tap into some of that later in your packaging design. But let's get right into it here, you know, and kind of set the table on what's really behind some of these big changes and launches that you've had this year. You know, know, we talked about how AG1 has been this kind of one product brand for over a decade. And it's kind of amazing that one product alone could yield you$600 million in a year. I mean, that is not common.

21:08Yeah, totally. So I feel like there had to have been really interesting behind the scenes discussions on saying, okay, you know, why is now the right time to expand? And how do we do that? So, you know, take me back to what was happening in the company that that made you decide it was time to get into more SKUs? Yeah, it's so interesting, right? This, as you said, this incredible brand and product that has reached a truly unheard of scale. I am not familiar with another single SKU because it is only one green powder that is anywhere near the scale. I think the next closest D2C supplement companies are half our size and many of them have multiple.

21:54skew. So it's very unusual. But it is truly a testament to the quality of the product over time. Like you don't get that big through just marketing because if it's not real, you constantly have so many customers who've tried but who drop out of the bottom. From 2020 on, we were growing so quickly. We were growing by multiples, not percent, year over year at scale. And when that is happening, and I joined in 2021, when that is happening, often the most important priority is scaling operations with that growth. We were manufactured only in New Zealand, even though 90 % of our business was in the U.S.

22:42So we were air freighting green powder from New Zealand to the United States, which is very expensive, but a smart play if you're looking to optimize your cash conversion cycle. Hurts margins, but good for speed of turning that inventory into revenue. And so that fact alone, let's park on that. Before I go adding new products, new SKUs, new flavors, new form factors, I probably need to be made or at least blended in the country where 90 % of the revenue is. So the priority was greater for scaling operations relative to how the business had grown. That priority was greater than the priority for more products.

23:28So we need, because that priority not only serves the legacy business, but it enables the innovation. So sadly, very sadly for me, I wanted to do AGC much sooner. I wanted to do some of these other versions and flavors much sooner. But we had an obligation to be able to meet our demand and our growth in economical, replicable, and high-quality ways that allowed us to serve literally 2, 3, 4x the number of customers, not only without compromising quality, but while leaning into our stated mission, which is elevating the standard in the industry, which meant I needed singular global sourcing. I needed to add production to the countries, in particular the U.S., but others, where we had large parts of our revenue that would add elements of control.

24:16I needed to build out the science and the regulatory team in a pretty big way. I needed to shore up the supply chain and operations team to go beyond that little business that we had coming out of New Zealand. So that's the behind the scenes. That is why we hadn't launched what had long been planned. But eventually we got the team in place. We got the quality in place. We got the operations in place. We got the blending facilities. And now it's like, all right, now is the time. And so I would argue to me, some of these launches are a little late to me, but we made the right decisions with the information and the situation that we had at the time.

24:55But it explains why we've launched so much in such a little amount of time recently. Well, thank you so much for sharing that with me. I also feel like there's this really good insight for anyone who's building a company or thinking about scaling brands. It's just because you know you have a great idea. It doesn't mean that now's the time to put it out there. Because are all the pieces behind you in place to make sure that when you are ready to launch, it will be just as successful as you know it can be? Because everything else underneath it is already running at 110%. Yeah, and I would tell, especially if it's a consumable product, I would encourage founders and teams to be very careful not to be over-influenced by SaaS, software, or AI guidance where people say, just ship it and you can figure it out.

25:51If people are putting something in their bodies, you've got to be much farther along in your certainty and in your confidence about, especially if there are research-backed benefits, if there are claims of benefits, if people need to drink something every day, the flavor, the solubility. Yes, of course you iterate over time and that never ends. you're never done. It's never perfect if you're really listening to your customers because they change over time. However, I would argue things need to be farther along the development path before they get launched and people put it in their body. It's a supplement, a nutrition product, a drink.

26:36It's not software. Totally. That's a great segue into something I'm really excited to talk to you about and hear your perspective on. And that's this really important nutritional science foundation that AG1 has, you know, really as part of your DNA. But also, you know, I'd love to hear your thoughts too on sort of how you see that landscape evolving and how you make sure your company is A, you know, at the forefront of the nutritional science and B, not getting distracted by maybe noise and shiny objects in what can be a very noisy space. If we think about food, healthy food, there aren't a lot of double-blind, randomized, placebo-controlled clinical trials that prove that broccoli is good for you.

27:25There is research and there is science behind the active ingredients in certain fruits, vegetables, proteins, right, that we know a lot about that. But there aren't a lot of double-blind, randomized, placebo-controlled trials for food. It is not required for you to trust that that grass-fed beef or that fish or that spinach are probably good for you. And so let's take that on one side, food. Then you have pharma over here where big markets, big business, billions and billions in research, FDA trials, things required, right? Because they're making disease claims and health claims. you're talking thousands or tens of thousands of people in trials often.

28:14And so you have these two extremes. Food as medicine or supplement, supplementation, nutritional supplementation, that is whole food based in many cases, but is not a pharmaceutical, lives in this space in the middle. And it is where we are using, at least in our case, an herb, a plant, a mineral, and the many bodies of research behind those ingredients at certain doses in certain environments to then say there's research that says this thing, if consumed in this way, at this quality, at this standard, at this frequency, has shown to have this benefit. And then there's products like ours that put multiple of those together.