How ButcherBox uses a loyalty program to drive more meat sales

0:08Hello, and welcome to the Modern Retail Podcast, where we discuss the ways the retail industry is changing and modernizing. I'm your host, senior reporter Gabby Barco. I'm here with senior reporter Julia Waldo this week, who is filling in for Melissa. How are you, Julia? I'm great. Thanks, Gabby. How are you? I'm good. I'm really excited to chat today. I feel like we have a couple of really fun stories. We're talking about some holiday stuff. We're going to talk about Amazon Whole Foods, all of that saga. But yeah, thank you for coming on. Well, later on, you'll hear Melissa speak to Reba Hatcher of ButcherBox, and they're going to be talking about the company's loyalty program.

0:53It's about a year old, so they're checking in on that. But first up, let's get into the news stories of the week that caught our attention. Julia, what are your thoughts on this Wall Street Journal article that talks about sort of the Amazonification of Whole Foods. And we will explain a little bit more about what that entails. But essentially, the integration is getting deeper and deeper, it seems. Yeah, it kind of feels like just yesterday to me that Amazon bought Whole Foods, but I realized it has been eight years, which is a long time. You know, I guess it bought it in 2017 for$13.7 billion.

1:35So, you know, not a small bit of change, but yeah, I mean, the integration I think has been really interesting. I mean, I remember when I was going to Whole Foods in like 2018 and I started seeing, you know, stickers about how if you are a Prime member, you could save a certain percent on certain items. And that, you know, up until that point, I hadn't even really thought about the integration of Whole Foods and Amazon. And then that really kind of hit me in the face with it, I think, because the tags were bright yellow, but also they just really were trying to stress how the two of them were coming together.

2:11But yeah, I mean, with this article from the Wall Street Journal that's come out and some other reporting recently, it sounds like Amazon with Whole Foods is really trying to make Whole Foods a little bit more mass market and kind of national name brand friendly. Yeah. So basically Whole Foods did, or Amazon, the parent company, did come out and essentially confirm that they have this new store concept where it's not inside Whole Foods, but it's sort of like attached or I guess within the vicinity, depending on the store, where they've created like a separate kiosk of where people can shop mass market brands.

2:56So for example, in Chicago, the flagship store, they kind of like cleared up the coffee shop and the seating area and they turned it into this kiosk called Amazon Grocery and they sell products like Kraft Mac and Cheese and Chips Ahoy. Something similar is happening in the Philly suburbs where they have, actually it's like Shopbots is what they're calling them. So they have like these robots in the back that are fetching Tide Pods and Pepsi for the shoppers that are like looking for them. I guess for brand purists, there's been a little bit of backlash because it goes against the spirit of what Whole Foods stands for, which is like natural organic products, non-GMO, et cetera.

3:43You know, because a lot of these other mass market brands sell on Amazon and they are obviously in demand, as they know, probably. They want to bring them somehow into their physical footprint, which is something Amazon has been trying to do. We talk a lot about this on the show. It's that Amazon has been sort of trying to hack the grocery category for a while now. And Whole Foods was always sort of this like sacred entity, I feel like, where they gave the discounts and it is used as like an Amazon returns hub, for example. But they never really infiltrated like the corporate structure or the assortment until now.

4:30Yeah, it's interesting because I believe in December, actually, Whole Foods corporate staff minus, you know, store workers, they're going to officially become Amazon employees, which is, you know, a big change. But yeah, Whole Foods under Amazon, it's interesting because I was reading a little bit about it more in that Wall Street Journal article that you mentioned. And Whole Foods says that its sales under the Amazon takeover have grown by about 40%. So when you divide that by eight years, it's about 5 % each year since 2017. And apparently that's actually less than it was before when it was growing in the double digits.

5:08So I guess, you know, Amazon is really hoping that now by putting all of their, you know, mass market star power behind some of these products with Whole Foods, that maybe they can really kickstart that growth a little bit more. But as you said, yeah, I feel like people come to Whole Foods for a very specific reason. They want the organic products. They want non-GMO products. They want to take advantage of this really strong brand equity that Whole Foods has built up. And so I don't necessarily know how many people are going to be going there and getting almond milk, but then they're like, oh, let me also get this energy drink or something.

5:44I don't really know. It'll be interesting to see how it plays out. Yeah, we had some analysts weigh in on that. But I think as far as trying to diversify the assortment and go wider. Yeah, I mean, on the one hand, it does make sense that they're trying to broaden the appeal because there's also this numerator number where Amazon's grocery market share has not gone above 4 % of overall grocery. So that's a pretty small number for like the biggest retail brand in the world, I guess. So yeah, I can see it. Also, some analysts did sort of weigh in and argue for it and against it, I guess. You had like Neil Saunders of Global Data say that people do go to Whole Foods for, yeah, quality ingredients, organic, all of that.

6:38And a lot of customers, myself included, you know, I'm not shopping for everything at Whole Foods. Like usually it's like the produce and like seafood, meat, you know, things that you really like care about the ingredient quality of. And maybe something like paper towel. Most people are maybe going to like a Walmart or Target or, you know, any other mass retailer. So I think what's happening is that Amazon knows this and they want to maybe create like a one-stop shop where you could shop like Amazon competitive prices and products around the corner. Maybe not necessarily in the same aisles as, you know, where you're buying like poppy or, you know, non-GMO snacks or lollipops, which is sometimes what I do.

7:29So anyway, you know, you got to convince yourself you're getting the healthy version of things. Okay. So I guess with that, I wanted to ask you whether you think, is this the right thing for the customer? Because I can kind of see both sides. But at the end of the day, I think this is just another way that Amazon is really showing that like it is serious about this ambition to get into grocery and eventually figure it out because obviously they have the stronghold online with these products. They just have to figure out how to parlay that into physical retail. Yeah, absolutely. I too can see it from both sides.

8:10If you're somebody who is definitely wanting to shop all of your products in one place and you do have, let's say, people in your family that you're shopping for and some people in your family are looking for organic veggies and other people are looking for Doritos or Chips Ahoy, now you can and get everything in one place. And that is definitely easier, I feel like, if you are somebody who's kind of shopping for multiple demographics or customer needs. But yeah, I mean, I know that there are concerns about whether this will kind of, you know, eat into the reputation that Whole Foods has built as a place that is very, you know, kind of crunchy granola and, you know, very like hippie-ish and just kind of more like health food centric.

8:55And, you know, I was reading a little bit about like how when Whole Foods first started, it was very much like a neighborhood feel. And it was very much like, you know, you'd come in and the first Whole Foods, which was I think in Texas in the 1980s, like they didn't even have aisle numbers. Like people would just go around and help you find whatever you wanted. So it was very like personal. And I know that Amazon for a lot of people has a different connotation where it's like, this is like a huge big box player like Jeff Bezos is obviously one of the richest people in the world. So I think, you know, for some people who maybe have been going to Whole Foods because they like the kind of smaller feel of it or the more personal touch of it, even though, as we said, it's already been under Amazon.

9:41I wonder if, you know, the fact that this is now going to be more obvious that it's under Amazon via these mass market products is going to make people kind of think twice about going there as often. Yeah, I mean, it's not all bad, right? Like they have, Amazon has been able to create a lot of efficiencies, cut some shelf prices, logistics have improved. I think this is, yeah, kind of more of a perception play maybe, like you said, but we shall see. I think obviously they're still doing some testing on how this is going to play out, but we'll see whether you will see some Pepsi products coming to your local Whole Foods.

10:24All right. Well, from there, let's talk about our next topic, which is advent calendars. I've also heard them called holiday calendars. I guess that's like the new term people are using, but it feels like every brand under the sun has one. So let's talk about some of our favorite examples. As we're, you know, getting closer to the December time, a lot of companies have put out their calendars and some of them, you know, let's just say they're not all these little chocolates behind tiny doors anymore. Yeah, it's true. I feel like the chocolates have kind of, I mean, they're still there obviously, but like they've kind of moved over.

11:05Now it's like you can get 25 pairs of Skims underwear if that's what you're into, like one per day of December or like, you know, for Burger King, they have 12 days of burger themed gifts for like the 12 days of Christmas, including like a mini candle and a Coca-Cola key chain. So we're really hitting all of the areas. I think it's like whatever your kind of shopping interest is either leading up to Christmas or like the 12 days, including an after Christmas, like there is something for you. Are there like any that have kind of stood out to you this year? Yeah, I mean, I think we've reported on it a little bit, but there's also the beauty ones.

11:44Like you said, you know, they're not just treats anymore. Now you're getting like legit products behind them. I mean, if anybody wants to get me the Dior advent calendar, I believe it's like$750. It's got a lot of beauty products. Yeah, there's that one. But I also kind of like the sort of, you know, kitschy ones, like the Red Bull one. I don't know about that one. I mean, I'm kind of interested in it, but it's essentially a 24 pack of different flavor and formulas of Red Bull. Now, I don't know, should you be drinking Red Bull every day for most of December? That's not for me to say, but this is kind of how they're positioning it.

12:27And then, And yeah, there's also like this week I spoke to a pet brand that have little pet treats because if you're having a treat, your pet wants a treat is seems to be the theme here. But yeah, I mean, you know, outside of the fun sort of like marketing aspect, which is that a lot of people, a lot of brands feel like they can bring in people or at least buzz or excitement into the brand through these, you know, they do get a lot of viral moments and press. I mean, we're here talking about them right now. But as a business move, I guess I'm always wondering whether, you know, they are lucrative.

13:06And I feel like, yes, because they keep coming out with them. But yeah, it's an interesting time to be pushing them, especially because, you know, it is kind of a, you know, volatile time right now. I think like one marketer put it to me is like, people just really want some escape. And maybe even if it's one moment per day and throughout December, you just want a little tree and just to forget about all the bad things happening in the world. It's positioned that way, but then obviously they are a moneymaker at the same time. Totally. Yeah. I feel like it's a good way to build hype for all the days in December or you know, are leading up to Christmas or the 12 days afterward.

13:50You know, yeah, like you as a customer, if you are receiving the advent calendar, like you're probably going to be associating like positive memories with that brand, right? Because every day you wake up and you're opening a new window and you get to find something fun for them. But I feel like also, you know, I know you mentioned like the kind of economically challenging time right now, like a lot of these advent calendars that we're seeing, they are at various price points. Like I know you mentioned the really, really expensive ones, like$700. But it's interesting because I was talking to Kraft Natural Cheese.

14:22They actually have a new one this year. They've never done an advent calendar before. It's 12 days of cheese-themed gifts. Supposedly the retail value is$250, but they're just giving it out for free. How does that work? Yeah. They're doing like an IRL pop-up where basically you come to Chicago. They have a pop-up there. They are going to have a life-size version of the calendar, apparently. Different parts of the room, I guess, reflect the different gifts. One of their gifts is a plush of their string cheese mascot, Stringy. And I guess it's in limited supply, but supposedly what they told me when I asked them about this is that you do get this stuff for free by coming to the pop-up.

15:11So that's like an interesting way, I guess, for them as a brand to kind of maybe, you know, convert new fans in a way that is to the customer, you know, very accessible in terms of price. But yeah, you have ones that are, you know, for$50, you have ones that are$25. Like you really have ones all over the map. Like the Skims one is$450, which I will not be buying because that's just too much for me. But if you one is an option. For panties. Yeah, yeah. Yeah. Yeah, of course, you know, it feels like every other product, like it does kind of run the gamut. But the other thing is this sort of like blind box phenomena that we've been seeing.

15:53I feel like maybe you're going to allude to something like La Boo Boo's, you know, where it's like, oh, you don't know what you're going to get. it feels like these are like lab made to go viral or like to unbox, you know, on social media. So I think the other thing, something with craft is I'm sure they're hoping that people will be posting about it and, you know, just kind of drive brand equity that way. What about this sort of like surprise and delight moment that I think you maybe want to talk about a little bit more? Yeah, it's so fun because I feel like, you know, with La Boo Boo and with these other kind of big moments where, you know, you have some idea of what you're going to get in terms of the product or the packaging, but until you open it, you don't really know.

16:39And there's all this excitement that builds up. I think that really carries over well to Advent calendars. And, you know, people buying these Advent calendars, if you're buying the same Advent calendar as someone else, like, you know, the items inside are going to be the same. But I think the kind of excitement of, you know, on each day, you don't know what you're going to get, even if it is the same as somebody else, I think is just kind of carrying on that anticipation. And people, I think, as you said, are really looking for like these small kind of moments of enjoyment and happiness. And I think just, you know, that kind of rush of like adrenaline or dopamine that you get when you open the little advent window and you get to see it.

17:19Like, I think that's something that people have become accustomed to wanting because of La Boo Boo's and things like that this year. And so I think it's just going to maybe be the expectation now that a lot of brands and retailers are kind of taking advantage of that blind box hype. And I think advent calendars are like a really easy way for a company to do that. Do you have, okay, a question for you. Do you have like a preference between a 24, I'm sorry, a 25 day advent calendar or a 12 day advent calendar. Yeah, I guess it's 24 because the Christmas day doesn't count, but I don't know if I have a preference.

17:58I guess it depends on the product. So I was actually, I should disclose, I was gifted the Bon Maman, the jam one, which I feel like that's like one of the earlier examples of a viral one. Yeah. So I'm already a little stressed out about eating jam for 24 days throughout December. So I might have to share some, maybe I'll give you some of the flavors that I'm not super into. That's an example of something that I feel like every year they sell out, they make a limited quantity. It's almost seen as a drop, right? Where you could only get it during this time of year and people really post about them.

18:42I mean, I have friends that really like show exactly what they're getting, they're opening every day. So it's obviously, it seems like it's working. And then the other thing I wanted to mention is I also am seeing it like adapted to other holidays. I think we were talking about like there were these like Halloween countdown calendars, which are basically a Halloween version or, you know, some other holidays. I feel like we're kind of losing the plot a little bit with that, but I guess, what do I know? Maybe the brands are seeing the numbers pan out. Yeah. It's so funny. Yeah. Cause I know there's also like such a joke about like the second Halloween is over, like everybody's doing merchandise for Christmas, but it's like, okay, we're bringing the Christmas advent calendar, like into Halloween.

19:28Now it's like continuing to creep up, you know, it kind of makes you think about where does it end? You know, like if we're now having advent calendars for, you know, the December holidays and Halloween. okay, are we going to have like the days leading up to, you know, Valentine's Day or like the 4th of July or I don't know, like when does it end? Like, could you kind of see this fitting other holidays or do you think it's just, it's best to stick with the basics? Yeah, I guess I can see a, I've seen examples of Valentine's Day, like 14 days or something counting down. So that could maybe work, but we'll see.

20:04Yeah, yeah. There's always some way to kind of spin like a seasonal moment. I think like brands always want to jump on that. Yeah, brands gonna brand. Okay, well, Julia, thank you so much for joining me this week. This was so fun. I always love when you come on. Thank you for having me. This was so much fun. Yeah, hopefully next time we can talk a little bit more about our favorite jelly or jam flavors. Yes, you'll have to report back. I'd love to call dibs on guava if you have that one. I will save that one for you. I promise. Yes. Okay. Well, after the break, you can listen to Melissa talk to Reba Hatcher of ButcherBox, the chief revenue officer there.

20:47And they're going to talk about the loyalty program. So listen up after the break. Just a quick programming note. The Modern Retail Podcast will be on hiatus next week. So no new episode, but we will be back on November 22nd.

21:13ButcherBox has steadily built one of the biggest D2C subscription food brands around, counting more than 420 ,000 customers and surpassing$550 million in revenue. But behind those numbers is a decade of growth and strategic pivots in a crowded grocery space. ButcherBox has stood apart as a certified B Corp that aims to provide transparency with its sourcing for items like pasture-raised, grass-fed beef. But upselling is a hard ask in subscription and getting people to say subscribed is hard. Avoiding churn is hard. So this being ButcherBox's 10th anniversary, the company is looking at what's next.

21:53That includes a customer loyalty program that it rolled out last year and new ways of promoting deals to its customers. To get into the behind the scenes of how ButcherBox is standing up its loyalty program and thinking about new ways of growth, we are joined by Chief Revenue Officer Reba Hatcher. Reba, welcome to the Modern Retail Podcast. Thank you so much for having me, Melissa. Thank you for being here. I'm so excited to get into it. We have a lot to talk about today because you all have been busy. There is a lot going on behind the scenes at ButcherBox. You know, we mentioned that this is one year into you having a loyalty program.

22:34But as I understand it, this was a long time in the making. You didn't just wake up one day and stand up a loyalty program. No, we did not. It did not happen overnight. And it's been, I would say, a four-year journey for ButcherBox and really a 10-year journey. ButcherBox started as a company that has always listened to its customers. is one of our core values is being customer obsessed. And so getting to this point was kind of inevitable on our journey. And loyalty programs right now are kind of all the rage. And so I think we're in this interesting space of like, anyone can start a loyalty program, but the question is, are you ready to do so?

23:14And it might sound a little backwards, but I think the space is a little overcrowded. You know, ours needs to offer a ton of value to our customers. And first, you have to understand your customers in order to know where they might find value. Yeah, absolutely. So take me back to like four years ago, I guess, when you all started talking about this. Was there sort of a certain impetus that said we need a loyalty program for, you know, purposes of data or purposes of churn, purposes of rewards? Like, what was sort of the, I guess, the goal of getting into this? We had about 300 ,000 customers when we first started thinking about a loyalty program and we were thinking about it from this monolith space.

23:58So we're thinking about everyone as the same customer. And when you get to that size, you can't think of them all as the same because their needs are different. And we worked with consultants at this company called Gale. And then we broke down our customers into what we called their segments based on distinct customer behaviors. So how much they were ordering, how often they were ordering, what they were ordering, and broke that down and revolutionized the way that we talked about customers at ButcherBox. And so by being able to do that, we could get to know them another level before even rolling out a loyalty program.

24:30So that was four years ago. And then once we got into it, we realized there was a real opportunity for loyalty, but we needed it to be based on what would incentivize the customer to both have kind of like a dual layer program. So we wanted to base it on the points that you get are based on spend. And then your tier is based on the amount that you order. And so it goes back to like, what moves a customer to be a great customer and not just doing points and not just doing tiers, but really combining something. And when you get through all of that, you imagine you're like, okay, like this is a great program, but for us, you can't stop there because that still looks like and feels like many other loyalty programs that are out there on the market.

25:09And so we had to build in what the other layers of perks would look like based on customers and the feedback that we've been getting. So we listened to a lot of customer feedback as we had been doing with our core value of customer obsessed. And so we, I would say, became famous in one way because we offered Bacon for Life as our intro offer. So you get free bacon in every single box, which is awesome and a lot of fun. But you can imagine for customers that had been here for eight years, 10 years long, you know, you might get a little bored of the Bacon for Life in your offer. And so So one of the first things we rolled out in that loyalty program was our top level executive chefs can swap out their offer for something else.

25:51So they could go to salmon for a year. And so allowing them to try out other things on that journey takes into account what we heard from customers, allowing them to switch it up. And it being one of the best parts of ButcherBox is having that variety and being able to do so. So I think it goes back to knowing our customers, building that out, and then figuring out what the differentiators were for ButcherBox and what we could offer customers based on what we heard. Yeah, I want to go back to the sort of structure here because I think it is really interesting, especially when you talk about this in context of what loyalty programs were all a part of at so many brands and retailers we frequent.

26:28it. It's like you spend a dollar, you get 10 points, you get a zillion points or whatever it is. And when you reach a quadrillion points, you can trade it in, right? Like they don't always seem straightforward. But with yours, I think it's interesting that it isn't just redeeming for a credit. There are these sort of more experiential perks that you can kind of get, like swapping the product. Yeah, I think the experiential parts are what we feel like brings the personality to it. I didn't want something where you could easily just copy two lines and decide that you were going to make the same loyalty program.

27:00If we're going to dig a moat around what we consider being the best high-quality meat and seafood company online, then we had to do things that feel like they have the personality of ButcherBox. So that listening part to our customers is what makes ButcherBox different. We hope that access to high-quality meat and seafood eventually becomes something that every company has and can offer. but the things that we do that are different should always be that we listen to our customers and can figure out that next lever and play around with it. Like these are not always going to be the same perks. So, you know, over the past year, we launched with, you know, swapping your offer, but over the past year, we've developed new perks.