Kraft Heinz splits in two, Starbucks' protein play and what it takes to get on Walmart's shelves

0:08Hello, 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. Hey, Melissa, how are you this week? I'm doing well. Fall is in the air unofficially. You know, we're already in pumpkin spice latte season. Everyone's back at school, but it's still 85 degrees here where I am. So, you know, you can still go have a pool day. It's the best of both worlds. Yeah, I do love the transitional weather, I have to say, even though makes it very hard to dress. But Pumpkin Spice, speaking of more on that later.

0:47So later on in this episode, Melissa talks to Jessica Rolfe and Rod Morris. They're the co-founders of Love Every, and they're going to be talking about how they landed in Walmart. So more of that later. But first up, we have a couple of food-related stories, I would say. We have Kraft Heinz's breakup. So So we're going to do the autopsy on that, Melissa and I, and then we're going to talk about Starbucks introducing their high-protein cold foam, more high-protein, everything. So yeah, first up, let's talk about Kraft Heinz, which is splitting into two companies 10 years after they merged in this huge$46 billion deal that was kind of brought together by Warren Buffett's Berkshire Hathaway and private equity firm 3G Capital.

1:42Melissa, what are your thoughts on this? I mean, obviously, we're going to parse out the trends and the headwinds that led to this, but this is obviously a pretty big breakup in the CPG world. Yeah, yeah. I think this maybe came as a shock to people who weren't closely following what was happening with Kraft Heinz. But I also think it kind of speaks to this larger trend here we're seeing where some of these big conglomerates, you know, that are like turning around battleships trying to stay relevant are finding that sometimes it's easier to break up or split what they're doing from a corporate side rather than try to reinvent themselves as a whole time and time again.

2:21Yeah. So, you know, we should clarify that they are going to be splitting into two companies, just essentially two separate businesses. The first company is going to be focusing on the shelf stable meals segment. So it's going to be the home to brands like Heinz Ketchup, Philadelphia Cream Cheese, and Kraft Mac and Cheese. So this is the segment that is actually doing well within the overall business. So for context, it would have generated$15.4 billion in net sales in 2024. And then the second company is a, quote, scaled back portfolio of North American staples, brands like Oscar Mayer, Kraft Singles, and Lunchables.

3:05And this would have had about$10.4 billion in net sales last year. So significantly smaller than the other business. But yeah, I mean, this is maybe a good time to start getting into these brands and really what they represent in like the center aisles of the American grocery store. Yeah, that's a great point. I feel like there are so many trends that we've unpacked at Modern Retail before around things like better for you and clean ingredients and healthy on the go. And when you think of some of these brands, you don't necessarily associate it with that. I think there's tons of nostalgia and reverence for Kraft macaroni and cheese.

3:45I'm fairly certain it's somewhere in my pantry right now. But can you say that they're the hippest brand out there for all parents? I'm not sure. And I think when you look at some of the more niche brands in the portfolio like Lunchables, they've had their own issues as far as just like branding and health concerns. Yeah, I mean, you know, they've had a bunch of setbacks. And like I said, you know, it just becomes really hard to innovate within once you have this sort of behemoth at this scale. For contexts like Kraft Heinz, I think their shares have slid around 60 % since this merger closed in 2015.

4:26So obviously the company as a whole is just not a very appealing stock, I guess. But yeah, maybe this is a good time to also talk about something like Lunchables is actually a perfect example because last year they had this really big recall because lead was found in the products and they actually got pulled from the school lunch programs nationally because Lunchables had this partnership with a lot of schools. So that's one example of a product that even though it is this convenient on the go format, it's not necessarily really modern enough or healthy enough, I guess, for maybe the modern parent, let's say.

5:08At the same time, you've got like the rise of GLP-1 and just overall health conscious choices. You've got like high protein, low carb trends. And so I think with all of that, something like Oscar Mayer or Kraft Singles, which, you know, technically maybe could fall into those categories, but they're, you know, these, what they're always deemed like super processed, probably like too high in sodium or not high protein enough to really fall into these. And this is kind of what brings us to the lack of innovation that we were talking about, right? I mean, so yeah, like on paper, they probably could have modernized something like Lunchables.

5:47But yeah, again, you just have this really large scale that just becomes unlikely. I was saying this to an analyst the other day, but I'm just like, I don't know. To me, I'm like, there's no reason why Mr. Beast is making a better for you Lunchable and not Lunchables themselves. You know what I mean? Right, right, right. I mean, granted, that has its own controversy. But yeah, I think this sort of better for you direction that it seems like a lot of CPGs are going into, Kraft Heinz kind of fell behind in that sense, I guess. Yeah, I think that's a really good point about, you know, there's no reason these companies shouldn't be able to deliver the kind of products that people are asking for and that people want right now.

6:31It really is just the way these operations sometimes run that you can't get R &D done in a fast, agile way that makes you able to go to market and get consumer demand when it's there. And just personally speaking as a consumer, I can't think of anything in their portfolio that's necessarily a must-have for me other than the mac and cheese. And I also can't think of anything that's super new that they've done or any really hot acquisitions that they've been able to make to help supercharge them. But this is just the latest conglomerate giant that's you know, either splitting its business or doing spinoff.

7:07If I can forecast for a second, I think PepsiCo is going to be the next one, given the Elliott management 4 billion stake that they put in this week. And, you know, I was parsing through some of the notes on that. And there's a lot of the same themes. Another thing, I mean, you know, obviously they've got Heinz Ketchup. It is like a very beloved brand. We can't say like they don't have anything, but I think as far as like modern young brands, they have been a little bit behind the eight ball when it comes to acquisitions, right? I mean, I feel like every other week we talk about this on the show, which is that these big CPGs go out and they really court these hip young brands with, you know, decent margins or really, you know, buzzy social media presence.

7:51And they're able to bring that into the fold. Whereas when I, when you actually do look at the brands under this umbrella, they, they're all like very, yeah, classic decades old, all American brands. And there's nothing wrong with that. But I think, yeah, when it comes to the innovation, it could be a little bit of a hindrance. But yeah, maybe we can talk about some of the other examples of our favorite CPG breakups of the last few years. Well, yeah, there was 2023 when Kellogg spun out its cereal business into a new company that it was calling WK Kellogg Company. And then the snacking business, which is Pringles, Cheez Hits, Pop-Tarts.

8:28That's all under what we now know as Calanova. In 2024, Unilever spun off its ice cream business. That decision was to just be able to drive growth and innovation just in that frozen treats category. And that houses brands like Ben & Jerry's and Magnum. And yeah, like I said, I think PepsiCo is going to be next. I think we're going to see lots more shaking up there. I'm excited to see what happens. But I think if you are someone who has long wondered, hey, it seems like there are only a few companies making all the products in the grocery store. I think this is a very interesting time for you because that's just going to keep changing.

9:05And, you know, is it for customers or is it for shareholders? Can it be for both? You know, that's more than we can explore on this podcast, but I think that's what I'll be looking at moving forward. Yeah. Well, I think we drove that point home. We can move on to another company trying to innovate and modernize, which is Starbucks. This one is an interesting one, because for a long time, they were seen as pioneers when it comes to food and beverage trends. But yeah, later this month, they're going to be introducing protein cold foam. And it's literally exactly what it sounds like. It's like a high protein cold foam that you could put on your iced beverages.

9:47Because you can't have enough protein, apparently. This is the an all-American story this year. Can I just say I never even thought about protein until like we started covering it as something that is added to everything. Like it never occurred to me I'm not getting enough protein. I just assume I do. Yeah, well, you know, the gag being that like most of us do get enough protein, but we can't go down the rabbit hole because any founder of a high protein brand will argue with you to the end of times about that. But, you know, So cold foam protein, I mean, it makes sense, I guess. To me, it's a little reminiscent of like, you know, protein coffee or like butter coffee.

10:25Do you remember that? I mean, it's a smorva. Yeah. So with this announcement and the rollout, we are going to also get this line of protein lattes that kind of accompany the cold foam. And so the drinks will contain anywhere between 15 and 36 grams of protein per grande beverage. So those of you doing your macros every day, you know, have fun with that one. But yeah, they're also going to come in a lot of flavors. So they've got this new banana flavor they've really been pushing. And then vanilla, chocolate, matcha, salted caramel, brown sugar. And then, of course, you have to have your, you know, unsweetened and sugar-free versions and pumpkin spice.

11:08I mean, what else? Mm-hmm. Yeah. First of all, I still have to try a banana something from Starbucks. So I'm looking forward to that. Second of all, brown sugar has been my go-to lately. On the rare occasion, I make it to a Starbucks. I'm really enjoying that flavor. Thirdly, do we feel like this is something people were asking for? Or do we feel like this is something that, you know, Starbucks is trying to get ahead of? Well, I think it's probably a little bit of both. I think Starbucks was reading the tea leaves maybe by realizing that, of course, high protein is this hot, buzzy topic right now.

11:48And also there's a lot of, I don't know if you peruse social media, but there are actually a lot of DIY hacks and recipes that people use to make high protein cold foam at home or otherwise. So yeah, I think they saw an opportunity. There's a space here that they could capture. But, and this is maybe a good time to start talking about. So this latest like trendy beverage concept is actually just one small piece of the bigger turnaround plan that Starbucks has going. It's been testing the concept for a few months. And, you know, the protein version of the cold foam is part of this program they're calling Starting Five.

12:27And it's, quote, a program that tests products in five coffee houses and gathers feedback from baristas and customers before they roll out to other stores. So yeah, I think as far as their innovation goes, this makes sense. And then the fact that Cold Foam itself has been like one of the more successful products that they've launched, it's been around since 2018. It's, you know, I feel like gone viral a few times. So it makes sense that they would want to kind of marry that with the high protein trend. Yeah. Yeah. I think from that lens, it's definitely a good bet. And like you said, just given the protein craze that's out there, you know, they're really just trying to tap into that sort of hype worthy product.

13:11But I do wonder if this is just going to become like a meme for its own sake of saying you get protein coffee from Starbucks becomes some sort of signifier or I am not really sure where I'm going with that. But I do feel like it has the potential to take on a life of its own and culture based on where people take it. From a business and brand standpoint, though, I think it's smart. I think it's really smart that they're using their coffee houses as testing R &D labs. I think you can do a lot worse when you have a footprint of their size than to use those spaces as places to test and learn and iterate.

13:45We hear all the time from brands that it's only when something is not working that you've kind of figured out what does. And so the fact that they're out there testing and figuring out what works and what doesn't tells me that they're taking this turnaround plan seriously. And there might be some really good things to come of it. You know, from my perspective, our Starbucks is always packed, especially on a Saturday afternoon. I mean, for all that we've seen, concerns about the business or it not being what it used to be, people still really like getting Starbucks. Yeah. I mean, I think they're definitely in a test and learn mode.

14:18You know, who could forget the olive oil infused coffee that came out? That was about a year ago. It didn't work. Exactly. It didn't work. And it was discontinued like in a year flat, I think was the timeline. because it just flopped basically. I mean, let's just call a spade a spade. But yeah, I mean, they're acknowledging that they do need to incorporate new trends and especially in like something like coffee drinks because they have been deemed quote unquote unhealthy and like sugar filled historically. So, hey, if you can get a high protein version of your favorite treat, drink, why not? Yeah.

14:58I think I saw one post that was funny. It was like 30 grams of protein and 300 grams of sugar. Best of both worlds. I'm like, yeah, I'm actually kind of down with that. I kind of get that. Can you have a sweet treat but feel a little less guilty doing so? Yes. I think that's an MO for a lot of brands in the CPG space these days. Yep, exactly. Well, with that, Melissa, let's talk about your featured segment today. I'm excited to listen to it in a little bit. Yeah, I'm really excited about this one too. It's a really fun interview with a couple founders from a brand that I personally am a big fan of.

15:37I spoke with Jessica Rolfe and Rod Morris. They're the co-founders of the toy brand Love Every. They have a new line of toys at Walmart and we got into the R &D process that they did to make sure that what they were putting on Walmart shelves wasn't going to cannibalize their existing sales, but also be an acquisition play for new audiences that they haven't touched yet. So it's a really great behind the scenes look at how products get on shelves for the retail curious among our listeners. But for folks who are more interested in the branding side of it, they had some really good examples to share of what they learned from their existing customers and how to kind of take those lessons and put them out to a new audience.

16:18So yeah, excited for everyone to hear from Jessica and Rod. All right. Well, sounds great. You can listen to that right after the break.

16:39If you've got little kids at home, chances are you've heard of Lovevery. The company started as a direct-to-consumer brand 10 years ago, and it's grown into one of the leaders in early childhood development. To date, Lovevery has raised$132 million and brought in$237 million in revenue last year alone. But 2025 is already shaping up to be a really big year with tons of fun announcements that I have been looking at from Lovevery. The company this year launched a resale marketplace called Preloved. It made its app available on Android and this summer announced its first ever wholesale partnership with Walmart.

17:19So today with me to get into what it's been like to develop this new product line for Walmart alongside the retail giant and what is really happening behind the scenes, I have Love Every co-founders Jessica Rolfe and Roderick Morris here on the Modern Retail Podcast. Jessica, Rod, welcome to the Modern Retail Podcast. Thank you so much for having us. Thank you for having us. I am so thrilled to talk to you. Tell me, how's Boise today? It's like back to school time right now, maybe for a lot of people, but that's kind of, it seems like that's what everybody's going through right now in Boise. I don't know.

17:55What would you say, Jess? Yeah, same thing. Yeah. First day of school for my 10-year-old yesterday. So it's always an exciting time to reset. Yes. You get that renewal energy in the air. I'm a big fan of it myself. So as I mentioned, this has been a really big year for you all, most recently with this great partnership that you've unrolled at Walmart. But I kind of want to go back a little bit. You know, I think most people know about Love Every as a subscription brand. And as I understand it, that makes up the most of your business right now. I'd love to hear a little bit about how you and your teams started talking about wholesale or if that's something that has always been in the cards.

18:37Yeah, I would say that the business is really meant to help partner with parents and children along their whole early childhood journey. So we don't want to have a one-off relationship with a parent where they just buy one thing at retail and then never see us again. We really want to be a part of their lives and a part of their child's growth and development. So when we first launched Love Every, we launched in retail. So we launched a play gym, which was three times the expense of most play gyms. It was really a holistic product that really reinvented the category from a lot of the hanging, you know, sea theme or ocean theme gyms.

19:14We made a Montessori-focused play gym, and we launched it with Amazon. But we always had the intention of developing a D2C business and having this ongoing learning program that would begin at birth and go all the way through year five and beyond. I think I would just add, you know, We've always wanted Love Every to be a global, iconic, early childhood brand. It's been a focus of ours from the beginning. The core of that has been our PlayKit subscription and building a direct relationship with consumers. But like Jessica said, from the beginning, we've worked with retailers, and we've always wanted to expand into more retailers.

19:53And the reason why is we want to meet customers where they are, where they're searching. We don't expect that we're going to be able to get everybody to know about Lovevery if we're expecting all of them to come to our website, right? We have to be where they're shopping for other things too. Yeah. And I think this is the sort of omni-channel conversation that a lot of brands are having today, whether you've been around for 10 years or two years. It's sort of how do you show up in places where customers are and how do you show up enough times that they start to get to know you before they even purchase?

20:24because some of this stuff can be pretty high consideration, especially when it comes to products for kids. I'm curious with Walmart in particular, how long have you been in conversation with them before this partnership came to be? Yeah, they approached us in 2023 and they emailed our head of wholesale and they were looking to expand their baby registry and their nursery offerings. And they were already serving so many families in all these different categories and so many people register. at Walmart. We were really excited to create a special program for Love Every at Walmart. I mean, I think, you know, it was exciting to hear from them.

21:04It was exciting to hear them tell us that they'd been seeing people in their registry searching for Love Every, searching for phrases like Montessori learning, tummy time. And, you know, to have Walmart come to us and say, hey, can you do something with us? And how are you going to solve customer problems with Walmart? It was exciting. And we got a lot of information from them when we met them for the first time. Met with the nursery and baby home essentials category team back in December of 2023. And immediately we got the sense of what they were looking for, which was how can Love Every take the same quality standards and developmental focus that they have in their play kits and their other products and put it into products that we can sell at Walmart below a$50 price point that can be accessible to our customers and our stores all around the country.

22:05And it was an exciting challenge for sure that Jessica and the innovation team took on. I love thinking about what a fun day in the office that must be when you get ahead of wholesale from Walmart landing in your inbox. That's kind of a cool day. Yeah. Yeah. It was really, it was really exciting. Very exciting. You're like, oh, it's working. It's working, right? You know, people are noticing. This is great. Yes. And it's also a challenge because we want to make sure that what we offer is going to be exciting for our base and our fan base, our big, deep, you know, kind of customer subscribers and the people that are really enrolled in it and invested in our brand.

22:43We want to make sure that it didn't feel like a one-off or like out of line for them. And so it felt like a big responsibility to get that right. Yeah. And how does this become something additive, you know, to what you're already offering? You know, I imagine, you know, given the data that Walmart probably had from its searches and what customers were already looking for, that kind of gave you an indication that, hey, there's a customer here that maybe we're not reaching yet. And then you figure out how to go through that window. You mentioned sort of the the long R &D process that went into this and getting it right.

23:17And I think that's some behind the scenes stuff that a lot of listeners might be interested in because whether or not we work at brands, I think we all love to think about where stuff comes from and how does it get there. And I think sometimes there's a consumer misconception that, oh, why don't they sell X product at Y retailer? And it's like, well, because there's a whole system in place for it to get there. So sort of walk me through what your process was like, you know, once you decided, yeah, we're going to do this. Yeah. So again, we wanted to make something really intentional and additive to our fan base.

23:50So our core subscribers, people have been buying Love Every for a long time. We wanted them to feel like this was exciting to add to their collection. We also couldn't cannibalize our sales. So we have some really wonderful items that are in our play kit program that we could have just easily taken one-off items out of those play kits and put them on shelf at retail. And that wouldn't have been good for our whole business. It also wouldn't have driven more incremental sales because a lot of our customers would have already had those products. So we had to come up with something that was not going to cannibalize our core base.

24:24It was going to feel exciting to the base, but that also felt like it was accessible and approachable and sort of, in a lot of ways, dealing with some similar developmental needs, core needs for a child. And so our team was able to create some really exciting new items. One is an object permanence box where you drop the ball in and there are these adorable ribbons that your baby needs to push their hands through or they can open a drawer to find the ball. And this is different from our ball drop box that comes in our play kits because that is a much simpler process of dropping the ball in and then seeing it reappear versus opening the drawer requires at more advanced fine motor skills.

25:01So it was something that we wanted to do that was sort of leaning into a deeper development stage, but not, again, taking away from the development that's happening in the base play kit program. We also needed to, of course, hit this accessible price point, and we needed to keep all of the quality the same. We produced the Walmart products at the same factory with the same quality standards. We didn't want to undercut anything or erode the trust that people have in our brand. So we wanted to make sure that it felt very love every and that was supportive. And then we wanted to make sure that there was a lot of growth and multiple ways to play with the play things as the child grows, because that is very much a core of our brand.

25:40We don't want just stuff that kind of is exciting for a moment and then the baby moves on. We wanted to make sure that the products have longevity. So one of the advantages that we have is that we have so much data on our customers and we have so many sources of getting feedback from them. So we have a testing lab here at our Boise office where we have children coming in and testing different prototypes. Many times it'll take maybe 10, 15 different prototypes to get the product right. And so we have a really refined process for making anything here. And then we also have all this data from our customers.