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The Times They Are A Changin’

Opportunities With A New Playbook

©2018 The Tim Sperry Group

Tim Sperry brings 25 years of retail experience to his consulting to natural, organic and specialty companies. The bulk of that experience was in Purchasing Management at Whole Foods Market, during its rapid growth from 10 stores to over 250. Since 2006, Tim has been consulting for the Tim Sperry Group working on go to market strategies for small, medium and large companies. His long career in retail gives him insights into retail strategies and execution, especially relevant in these days of tectonic shifts in the retail landscape. He also speaks on “Navigating the Waters of Whole Foods Market” at seminars in the U.S. and abroad. In 2013 he expanded his consultancy to include “nonGMO Navigation”, a resource for companies as they enter into the world of nonGMO Verification of their products. He also sits on Boards and Advisory Boards of companies in the industry. Several Board roles involved companies that have been sold to strategic acquirers.

Tim Sperry

President & Owner

The Tim Sperry Group

TimSperry@TheTimSperryGroup.com

617-272-5173

There Was Once a Playbook…

For quite a long time emerging companies could:

– Farmer’s markets.

– Local independents.

– Get a beachhead customer (Region of WFM, Wegman’s, enough

INFRA and NCG independents).

– Leverage that into a regional distributor or DC.

– Run programs, have access to more retailers.

Rinse and repeat.

Smart Companies

Honed and refined their category management

argument.

Were mindful about going narrow and deep.

Focused on sell-through and velocity.

Learned quickly, adjusted and pivoted as they got

more experience in the market.

In 2018…

Explosion of eComm and DTC.

Amazon/Whole Foods

– Not clear how smaller, local companies engage.

– Larger suppliers still learning their way among many changes and new practices.

Most supermarkets figuring out “click and collect” and home delivery.

Voice shopping: Google Asst. and Wal-Mart, Alexa/Echo and Amazon.

Hard discounters – Lidl, Aldi

– Good quality, low prices, limited selection = easy to shop.

In 2018…

Kroger exploring partnership with Alibaba.

Home delivery with Fresh Direct, Peapod, Uber Eats, Grub Hub.

Instacart with Costco, Sam’s, Loblaw’s, Sprouts, WFM many

supermarkets – plan to reach 80% of HH in 2018.

Meal Kits est. >$15B: Blue Apron, Sun Basket, etc.

WeWork, corporate campuses – new channels.

Aldi’s inside or adjacent to some Kohl’s.

Kroger testing partnership with Ace Hardware.

H-E-B acquired Favor – on demand delivery service.

Target acquired Shipt – same day delivery for about half their stores.

Online Grocery to be $100B by 2022

FMI and Nielsen forecast online grocery sales to be $100B by 2022.

Prediction that upwards of 70% of consumers will go online to shop for groceries. Current estimates are:

– 49% of total consumers

– 61% of Millennials

– 55% of Gen X

– 41% of Baby Boomers

Last year's online sales were the equivalent of 764 grocery stores, based on store volume.

By 2025, the digital share could become comparable to nearly 3,900 stores.

– Retail Wire, Jan 30, 2018

Launching Online Case Study - Nutpods

Less than 3yo, but they are a best-selling creamer online and now fastest growing

in-stores.

Why launch online?

– Overnight, national distribution to enable Kickstarter backers to re-order.

– Market validation (positioning, price, packaging, taste, messaging) prior to

investing in store distribution.

How have they scaled?

– From Day 1, they were an Amazon Seller (vs Vendor) to control price point and

inventory levels.

– As a young brand launching at over $1 more than their competition, they needed to

establish their premium price and as a Seller, they have been able to control their

pricing and resist Amazon’s algorithms for downward pricing pressure by being a

Seller vs a Vendor.

– Similarly, they control their inventory assortment and inventory levels and benefited

from Amazon’s Net 15 terms as a Seller.

Launching Online Case Study - Nutpods

How online fits into overall growth plans:

– Built multi-million dollar business online.

– Leveraged on-line success with key retailers because they had established a

consumer base within that retailer’s footprint.

– Now expanding nationwide with retailers such as Kroger, Publix, Wegman’s.

– Fastest growing brand in their category in sales and SPP.

Challenges and Learning’s

– As new, fast growing brand stocked out several times, which hurt their momentum.

– $15 is the sweet-spot for consumer trial on-line so they created a variety pack and a 4pack to hit

that price point.

– Reviews are king as today’s consumers want the social-proof of peer reviews and with over

4,000 reviews, it created the fly-wheel effect for the brand.

– Create cash flow online with it’s better terms and GM.

– Amazon Central gives you rich data on your customers: Gender/State/Order

Frequency/Returning customer etc. which you can utilize for better, smarter strategy.

How do you make Amazon a Success?

DTC Case Study – Cali’flour Foods

- Just 2 years old

- Amazon < 30% of sales, some retail.

- Majority of business on own website

https://www.califlourfoods.com

- Use email marketing

- Google AdWords

- Social media

- Influencers

- Customer reviews

DTC Case Study – Cali’flour Foods

- Started in kitchen, then farmer’s market then a few

local stores.

- Why direct?

- Stronger connection to consumer, create tribe.

- See immediate effect and ROI of marketing

initiatives.

- Paid before ship – vs. 30 day+ terms with

retailers and distributors.

- Challenges

- Fulfillment – complex and can be costly.

- Normal operational challenges that come with

steep growth.

- Use DTC to help fund B&M expansion (brokers,

trade spending).

- Self funded – ended 2017 with $5.3M in eComm,

on track to do $16M in 2018.

Corporate Campuses and beyond

Corporate Campuses and beyond

Corporate Campuses and beyond

Routes to the Corporate Campuses

UNFI – now delivering to many of the California and Pacific

Northwest offices.

Direct – right product, right person selling, you can make

the call and the sale right into the facility. Good way to start.

Old players reinventing themselves – Canteen, known for

old line vending machines now offers Avenue C and other

means of reaching these customers.

Leanbox in Boston is delivering fresh

Regional distributors are developing direct or indirect

relationships

Clear

Skies for

some

Fog for

others

Smooth

Sailing?

Rough Seas

- uncertainty

But what holds for the future of bricks and

mortar?

Emerging from

the fog is

something big

and disruptive

It’s a whole new day!

There is now a true center of the WFM universe…….

…….for most brands

Amazon Lockers in most all storesAmazon/WFM

is reporting an

11% increase

in occasional

foot traffic,

thanks in part

to customers

using lockers.

Another Factor That Will Effect Brands

Watch, Listen, Ask Questions,

Experiment……..it’s full role has yet to be

revealed but it will be big!

Vendor Opportunities – Vendor costs

Guess who is helping to pay for these added discounts?

Driving new customers

Opportunities Are Still Many

Opportunities Are Still Many

…don’t overlook the independents in your efforts

In the United States, the number of independent bookstores has

increased by 27% since 2009. As the New York Times reported this fall, “ Retail

sales of new books, which include chains but not online retailers such as Amazon,

increased last year for the first time since 2007, according to Census Bureau

data — and are up another 6 percent this year.”

Predictions of a digital-only world of books are as misguided as predictions for the

paperless office. It’s worth understanding why……..

Books themselves are what economists call “experience goods,” items

whose value can only be determined by consuming them. Wine and

medical treatment are examples of other experience goods. This is why

Amazon features reviews so prominently on it’s book pages — in the

absence of the opportunity to experience the book, the next best thing is to

learn about the experience of other readers. That works quite well, but it

doesn’t completely replace the value of sitting in an old chair and thumbing

through the pages yourself.

Food, and more importantly, specialty

food fills many of the same emotional

roles that books do. The

independents who grasp this will stay

strong for years to come. They will

continue to do things that others

can’t……..with personality and

community!

It’s a complicated but thrilling race!

Tim Sperry

The Tim Sperry Group

22 Broad St.

Guilford, CT 06437

(617) 272-5173

TimSperry@TheTimSperryGroup.com