276: Hungryroot

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0:32Our individual grocery items are not priced cheaply. And yet our customers save money using hunger. And there's two things they point to. Number one, they're not wasting food anymore. And number two, they're not impulse purchasing.

0:52This is Taste. I'm your host, Matt Rodbarg.

0:59Ben McKean is the founder of Hungry Root, an online grocery retailer that has changed the way millions of Americans cook dinner and lunch and breakfast and learn to love plant-based cookie dough, which I myself love tremendously. On this episode, Ben shares his journey to launching Hungry Root, and we dig into how the modern grocery store is quite broken. We also talk about what it's like running his company for nearly a decade. I hope you enjoy this conversation.

1:33Ben McCain, welcome to Taste. How are you doing? Doing great. Thank you for having me. You're welcome. I think Dan Frommer introduced us, and he knew how much of a fan I was of HungryRoot, and I've been a longtime subscriber before the pandemic. So we made that cool introduction. So thanks, Dan. It's nice to have you in, and I want to hear about HungryRoot. I think you're doing some cool shit, man. Thank you. Well, I appreciate you being a subscriber for over three years. That's really incredible to hear. It's always great to meet in person a long-term customer. Yeah, and I think in terms of what we do here at Taste, it's relevant.

2:04And, you know, when we launched Taste in 2017, I wrote an editor's note about cooking. And at the time, you know, I was talking to the guys at Blue Apron a lot, Matt Wadiak there. And I think we had them on the pages of Taste. But, like, I like subscription boxes in the model. And we'll get into how you structure your company, which is unique. But for me, it just helps people cook more. And to me, and we publish cookbooks, it takes a lot of the friction out of getting ingredients in your kitchen and into the wok saucepan, saute pan. So, Ben, just tell me right from the jump. I'd love to get a sense of what you saw before HungryRoo and now.

2:46Like, how did you negotiate the world of home cooking when you launched? Yeah, wow. So things have changed tremendously over the eight years since I started the company. So what attracted me to Hungroot initially is the concept that food is deeply personal and deeply emotional. And yet the big food companies don't sell directly to the consumers that actually put the food in their body. They sell to grocery stores who then resell their food products. And so that to me was the broken element of the food system. In a world where the food you put into your body, it impacts you on so many different dimensions.

3:24It impacts your energy. It impacts your sense of, you know, are you being disciplined with your diet? It impacts how you, you know, influence other people. If you have a huge bowl of pasta at lunch, you might not be as energized with your coworkers afterwards, right? So there's so many interesting dimensions of how food impacts people. And yet the big food companies don't have that direct relationship with the consumer. Yeah, you use the word broken and I was going to say the same thing. and I've asked many in venture and CPG about this question, like to get your answer. Why and how is a grocery store broken?

4:01I fully agree. Well, I think it comes down to that. I think the grocery store, which is where the majority of people are buying their food, they're not actually the ones producing the food, coming up, innovating typically around what are the food items that are being sold. and so they don't represent the customer. They're not able to innovate and personalize experiences for what consumers need. And that's part of the reason that there's still a lot of unhealthy options in the grocery store despite people wanting more healthy options. The grocery stores have been slow to innovate. And we've really tried to cut that out of the supply chain and work directly with our consumers where 100 % of our revenue is direct to consumer.

4:44That's critical because we get to know our customers. Data is a huge part of our business. Personalization is a tremendous part of our business. So, you know, the foods you're going to love are not the same foods that I'm going to love. And it's that direct relationship with the customer that's built into the DNA of our business. Yeah, I mean, you go to the health side and I agree fully. I think having, you know, three to eight meals a week kind of created for you is really helpful. And it really portions out things correctly and makes you feel a little better about what you're making. I personally think of it as like an economic thing, like I think, and also an ecological thing, because I think the grocery store is wasteful.

5:23And we throw away so much of what we shop for, and that's impossible. It's just the way it works. But when you subscribe to it, it could be obviously Hungry Root or Blue Apron, Marley Spoon, all the other places that have come and gone. You know, you're not as wasteful, at least on the consumer end. But then you've got in the back end, there's no – I'm sure your warehouses are way less wasteful than going to ShopRite and looking at what's behind in their dumpsters. So how do you think about that too in terms of the ecological and economic benefits? There's so much here. So 20 to 30 percent of what Americans purchase at the grocery store, they throw out at their home.

6:0120 to 30 percent. That is a huge sustainability issue. In fact, many climate change experts argue that it's the biggest opportunity for us to combat climate change is minimizing food waste at the consumer's home. That's incredible. 20 % to 30 % means if you spend$100 at the grocery store, you're actually only consuming$75 worth of food. So you're effectively paying a 25 % premium on your food because you throw out 20%, 30%. So it's a huge problem. It's an overlooked problem. Now, why is this the case? Humans are just not very good at grocery shopping. We walk through the store. We see something that looks good.

6:44We put it in our cart. We have no plan for what to do with it, and then we throw it out because it spoils. When we go and we sort of recipe shop, you know, we think about, okay, I want to make this recipe for dinner. Well, each item is not sized for the recipe, so we have excess, and then we don't have anything to do with it, and then we throw it out. So humans are not very good at grocery shopping. Now, what is actually very good at grocery shopping is AI. And in 2019, we really embraced AI as the core value proposition of our business. And 70 % of what we sell is chosen by our AI for the customer.

7:20And as a result, they don't waste their food. That's one benefit of it, but that's a very big benefit. Yeah. I mean, machine learning, when you go to the dashboard and you definitely get your options and you can pivot away from one type of food into another, It's very seamless. I would say, too, that outside of humans being very bad at grocery shopping, food companies and retail are very good at marketing. They're very good at making grocery stores, inviting places. Not every grocery store is that way, but many are. And of course, the way food is marketed, the way food is discounted in some ways, it makes it sometimes impossible to resist.

7:56It's a great point. So our individual grocery items are not priced cheaply. And yet our customers save money using Hungered. And there's two things they point to. Number one, they're not wasting food anymore. And number two, they're not impulse purchasing. Impulse purchasing, as you mentioned, these food brands are great at getting us to purchase items that we don't actually necessarily need or want to buy. And that's a big challenge for people. Yeah. Well, let me go through your history a bit and we can go back and I want you to fill in some blanks. But in 2015, you launched or I guess that's kind of a round number.

8:32You might have been working 14, but you launched as a vegan meal kit. Right. You were doing zoodles, essentially like vegetable noodles with sauces. And it was only like five or six skews. You know, it was very limited. I remember those early days. It was like a lot of like, you know, zucchini. I was like on the zucchini train. And I think we were introduced to it by just like interesting vegan cooking. Now, you've moved on. I want you to fill in the blanks, but you've moved on. You went from 60 to 500 SKUs. And now by the end of next year, you're going to have 1 ,500 SKUs. So that to me, SKUs being products or the number, the individual unique products.

9:07So you're going to be a small grocery store, essentially. HungryGoo is pivoting into the grocery store business. So, Ben, like fill in the blanks about your evolution. I probably missed some things. And just like let's figure out where you are now, where you're going forward. Yeah, so it's great that it sounds like you've seen some of the evolution personally. But I started the business in 2015. I've never thought of the company as a meal kit. I initially thought of it as a CPG, so a sort of modern, innovative packaged food company. You know, in fact, I sort of thought about us as the all birds of food, you know, the new age Chobani.

9:42I have a tremendous amount of respect for brands like Bonza. And I thought about Hungroot as a packaged food company in the same way that Chobani or Bonza are. And so we had six SKUs. And the initial SKU set were we essentially reinvented the frozen dinner in a fresh format. So the size of the package looked about the same as a frozen dinner. It had these fresh vegetable noodles, as you mentioned, 100 % vegetable noodles. This was the days where the spiralizer was hot topic. Big time. And the problem is we didn't really like to spiralize. We liked to have someone else do it, and Hungry was all about it.

10:19We did it. And actually, initially, a lot of it was done by hand and, you know, sore forearms. Wait, you were doing it probably personally? I was, yeah. Obviously, as you start a company, you get dirty. And, you know, we did a lot of spiralizing of vegetables. You also would get these really great clean ingredient sauces and proteins, and you'd mix it all in a saute pan and have a dinner sort of ready in five minutes. That's how we started the business. And pretty quickly, it became clear that if you're going to purchase food online, you want more options than six SKUs. And it's the reason that if you go to Chobani.com, you can't buy Chobani.

10:59If you go to GeneralMills.com, it's an investor relations page. It's not an e-commerce page. and it's because consumers don't want to go to one website and purchase their vegetables and another and purchase their sauces and another and purchase their ice cream or milk or whatever it is. They want as much as possible a grocery experience. You know, that, in some ways we learned that very early and so we started to expand pretty rapidly our SKU set between 2015 and 2019 and we grew from six SKUs to 60 SKUs. At some point you decided you were not going to go vegan. You decided to break through it.

11:35We decided to break through being vegan. You know, we never – we were – we always focused tremendously on health and vegan was a byproduct of that rather than saying, you know, we really want to be a vegan brand. And so we expanded into healthy non-vegan products. But we grew from six SKUs to 60 SKUs from 2015 to 2019. We went through a couple pivots in that – through those years. But then 2019 was the big pivot. But that's when we decided to be a grocery service. And that's when we decided if we're going to be a grocery service, we got to lean into AI as the way of differentiating us and having that really personalize and shop for the customer.

12:13Right. And here you are doubling that to$1 ,500 by the end of next year. I have a couple of questions about the early days. You know, I want to I love having founders on and talking about just like the grittiness of those early days. But were there any like comical mistakes that you made early that just like come to mind and also just some big surprises? Comical. Well, definitely in retrospect, they're comical. Yeah, of course. You're just doing okay right now. At the time, they were probably pretty painful. Most of the memories that come to mind with that question are from the fulfillment center.

12:48So we were actually producing our own food out of this facility in Queens right next door to Fresh Direct. They've since moved, but right next door to Fresh Direct. And we had we started with this tiny little kitchen. And then over the course of about two to three years, we took over the entire building. And that was really actually painful. I mean, we were producing everything from fresh cut vegetables, you know, noodles. So we had, you know, lines of people spiralizing, if you can imagine how crazy that is. Not gas operated. Electric operated. we were also creating our world-famous cookie dough, which is still with us and is a great product.

13:33Oh, we'll get to that. Don't worry. And so we were mixing items. We were baking items. We were roasting items. We were chopping items. And then we also were packaging everything. And if you think about most food companies, they specialize in one form of food production, and there's a reason for that. Yeah, they're like a sauce. Like they're a sauce company, and they have like a tetra pack and a jar, and that's it. And even when they get big, so take Shobani, which has gone big. It's still they focus on derivatives of the core product, right? Right. And we didn't take that approach. And the challenges that arose from that was just tremendous complexity.

14:11And that was really challenging. So the memories, the comical memories are of us, you know, crammed into a kitchen together late nights or early mornings. and, you know, the whole place smelling like garlic or whatever it was that we were producing. Late at night in Queens, were there any products that just did not hit at all that just like you thought, oh man, this is gonna be great and this didn't hit? Oh yeah, there's been a ton. There's been a ton. It's been more the products that did hit. Yeah. Those are more the memories. Yeah, of course. Yeah, I'm sure you had like some kind of candy, like almond that didn't hit, but then obviously the cookie dough.

14:48And let's get to that. I mean, I remember I was a cookie dough subscriber fan for many years. And for whatever reason, somebody hit the X in my household and we didn't get cookie doughs for, we haven't had it in a couple of years. Oh, my gosh. I was doing research and for this interview, I'm like, oh, my God. Not just the cookie dough, but the brownie batter. So, listener, listen, this is a plant-based, correct? Yes. Plant-based cookie dough. But in terms of texture, it is unique. It is, the mouthfeel is like exceptional. How did you come up with that? So the cookie dough is an exceptional product.

15:20And it's the best cookie dough on the market. I can say that confidently. We're not in traditional retail today. We will be at some point because it's the best cookie dough on the market. So there's four SKUs. The one that's been with us since 2015 is our almond chickpea cookie dough. And there's three main ingredients. It's blended chickpeas, blended with almond butter, and chocolate chips, which sounds crazy. And, you know, we don't really necessarily market it that way because it doesn't really even sound that appetizing. Because, I mean, it's like blended chickpeas like out of the can or out of the back.

15:55It's, you know, blended chickpeas with blended almond butter and chocolate chips. Yeah, yeah. Now it obviously has, you know, stuff like vanilla and, you know, some baking soda to help it bake. You can eat it raw. It's fantastic eating raw. And you can bake it. And if you bake it, they turn into soft cookies. I recommend baking it by the way. Ben, I've never baked it. Like never got that far. Like, yo, like listen, like I never actually never got that far. A lot of our customers are the same way. You got to try baking it though. The baked cookies are just phenomenal. And so that's essentially the recipe for all of the four SKUs.

16:29So we have a black bean brownie batter, which is instead of chickpeas, it's black beans. We have a white bean with peanut butter. And they're all great. But those have been – they really represent the brand in a lot of ways because they're really delicious. They're really healthy. And they keep people with us. They keep customers ordering. No, and like black bean brownie does not ring like flow off the tongue. But, you know, you try it once and you're like you're hooked. It's – I guess like back to my original question too. And it's like my enthusiasm is a little elevated here. But I really do enjoy Hungry Root and we make the food.

17:07I mean we've found out about Kevin's from you guys. Kevin's just was sold. I mean, huge success story, Kevin's. But let me ask you about getting people to cook. I think people enjoy this style of cooking because it takes a lot of the planning out of it. And your recipe writing is very simple, too. So was that an original strategy just to make it very simple? And how are your customers talking to you about actually making the food, cooking? Great questions. Since day one, there's been three components of our value proposition, healthy, convenient, and discovery. That has not changed over the eight-year period.

17:48What's changed is how we deliver that value proposition. And so we really leaned into recipes in 2019 when we also leaned into selling grocery items. So for the listener who hasn't experienced the product, each week we sell 600 unique grocery items spanning everything from fresh produce to premium proteins to clean ingredient sauces to snacks and desserts and drinks and beverage, you know, what you would imagine getting at a grocery store. We're small, you know, 600 unique SKUs. Trader Joe's is one of the smallest selections of grocery stores and they have 4 ,000 SKUs. Yeah, and Costco's got like$40 ,000.

18:31The typical grocery store is$40 ,000. Yeah,$40 ,000, yeah. So we're small, but we are a grocery store in the sense that what we're truly selling from a food perspective are grocery items. But then we have, you know, so the whole premise is that we go and we get to know you and we essentially do your grocery shopping for you. And if someone came and they gave you just a basket full of groceries without any recipes, it's not that helpful. You know, the majority of what we use our grocery items for is to cook recipes. And so we have a really important recipe layer to the service. We recommend recipes that help you to use up all the groceries that we're sending you.

19:10That's always been really important. Now, 80 % of our recipes are cooked in under 20 minutes. So they're easy. They're simple. A couple steps, a couple ingredients. Yeah, it's a really good point. And it kind of distinguishes you from a lot of the other services that are a little more involved. I mean, this is like, to use a weird term, like semi-homemade cooking. It's definitely, and Ben, what you just said really resonates with me. It's how do you use the stuff you're buying, but not necessarily having to cook from scratch. Because I think we, at our household, we'll cook from scratch like once or twice a week, and we'll do like a recipe from a cookbook, or if I'm developing a recipe, we'll go hard.

19:46But obviously that takes like an hour. but like with Hungry Root and other competitors out there, you know, it's using these pre-cooked proteins. But also what I like about it is it allows home cooks to innovate a little bit. Like we can throw Chili Crisp into something. We can throw coconut milk into something. And I think it's interesting that you say that it's this idea of like what to do with it and giving everyone a roadmap because I feel like we need a roadmap at the grocery store level. Absolutely. Why aren't they doing that? What's going on? Well, the reason they're not doing it is because of physical constraints.

20:18So, you know, the leg up that we have or that any online grocer has is digitally you can personalize the experience. And so when you walk into the Hungry Root digital grocery store, you see items grouped together to make a recipe. That's just physically not possible in a traditional retail store. We've had guests on, I think Emily Schilt from PopUp and others, talked about the layout of a grocery store. It's just so – it's backwards. It should be based on what goes together to cook recipes, not traditional. I mean I have to ask, would you go IRL? Would you go physical? I don't think we would, no.

20:57I think that we would sell some of our really unique proprietary products in traditional grocery stores. Like as a CPG product. As a CPG product. Right. But we wouldn't open up our own stores. You know, we effectively have – we have three fulfillment warehouses where we fulfill all of our orders for the entire U.S. across the country. And they are essentially grocery stores. They're warehousing grocery inventory, but they're optimized for an at-home delivery. You know, people aren't walking around picking out items and putting them into carts. It's semi-automated. And so that's effectively our grocery store.

21:35Yeah, yeah. It's behind the scenes essentially. Exactly. Yeah. I mean, the brand is strong, though, and I would imagine there are some folks out there who would think maybe you will open a physical grocery store and use that brand equity to bring people in. But it doesn't make sense. You're disputing the grocery store. Do you go to grocery stores yourself? I do occasionally. Yeah. You know, I, uh, so I, my wife and I, we have two young kids and we live in North Carolina. Uh, I'll go into Publix and I'll get, um, milk for our kids or gallon of orange juice. Uh, sometimes, you know, Doug, dozen of eggs.

22:13Um, we use Instacart occasionally, uh, for sort of similar, similar reasons. Either, either we actually need something, you know, that day or in the next hour or or we just need, you know, sort of more bulk items. And Hungroot's not looking to solve that. What we are looking to solve and what we are solving today is being the customer's primary grocery store. So for 82 % of our customers, they are spending more at Hungroot than anywhere else for their food. And that's important because that allows us to really get to know them, their preferences, and do a better job of selecting groceries and recipes for them.

22:52For our listeners, how is your pricing tiered? How does that work exactly? So the economics of delivering to a consumer's home all comes down to average order value, meaning if you order$50 worth of food versus$150 worth of food, it costs about the same to fulfill those two orders. And so what we do is we heavily incentivize our customers to order large amounts from us. So the average customer spends$125 on a delivery. So they're really getting their core groceries for their week. And it allows us to price the offering very well because they're ordering a lot. And it's also more sustainable. Yeah, definitely more sustainable.

23:38And we talked about the waste at the grocery store level. And just also thinking like the way we cook with Hungry Roo, and it's pretty modern, I feel. It's like we like supplement with the farmer's market. It's like exactly, we want to have the proteins and have like four or five servings of proteins, interesting products. We'll get to the discovery of new products. And then we have our core, um, you know, our farmer's market items that we want to cook fresh or like whatever we're innovating. Yeah. Yeah. We're actually the same way. We'll supplement hunger with farmer's market during the summer as well.