BRAND SECRETS AND STRATEGIES

PODCAST #62

Hello and thank you for joining us today. This is the Brand Secrets and Strategies Podcast #62

Welcome to the Brand Secrets and Strategies podcast where the focus is on empowering brands and raising the bar.

I’m your host Dan Lohman. This weekly show is dedicated to getting your brand on the shelf and keeping it there.

Get ready to learn actionable insights and strategic solutions to grow your brand and save you valuable time and money.

LETS ROLL UP OUR SLEEVES AND GET STARTED!

Dan: Welcome. Today, I have the privilege of sharing with you a conversation that I had with a legacy natural brand that has adopted some strategic principles that I talk about a lot on this podcast. Let me explain. If you've been listening for a while, you know that I mentor and work with a lot of brands in the natural channel, that includes retailers as well. The majority of questions I receive are regarding how do you implement the strategies big brands use and stay true to your mission? How do you become more strategic? How do you compete head-to-head toe to toe with the big brands without becoming like them? The underlying concern is how do you stay focused on main street as opposed to being focused on wall street, where some brands unfortunately, switch their focus from their mission statement to their income statement? In other words, they focus more on the bottom line and the corporate profits than on the core mission the brand was usually started with.

Today's story is about a legacy brand that accelerated their mission by leveraging the advanced strategies that we talked about on this podcast in my course and in all of my content. As a result, they've been able to go head-to-head, toe to toe with the most sophisticated brands in their category. They are looked to as a category leader. In this episode, you're going to hear how the brand leverages their capabilities at shelf to help retailers' gross sales in their categories. This is what every retailer wants and needs — savvy brands willing and able to step up and take a leadership role in their category, to help them drive sales within their store, beginning with focusing on the customers' needs first and foremost and by giving shoppers what they really want, quality healthy products. Here's Todd, with Lundberg Farms.

Todd, thank you so much for joining us today. Can you start by talking a little bit about yourself and your journey to Lundberg Farms and where you're at today?

Todd: I'm happy to be on your show, Daniel. Thanks so much. I run sales and marketing for Lundberg Family Farms. Company's been around since 1937, started by Albert and Francis Lundberg, and then therefore sons were able to continue to grow it before organic was actually certified. They were very instrumental in the certified organic farming in California and the creation of the label, as along with the USDA Organic label. And then the third generation, their children and cousins, took over the company and has continued on forward. And now here in 2018, we have the fourth and even fifth generations coming into the company and it's still a family farming operation. It's been great to be a part of it. I've been there about nine years now. It's been fun having it grow while remaining connected to our consumers and following them to all the different channels that are growing nowadays. So much change in the industry, but that's what keeps it exciting.

Dan: There is.

Todd: Everyone wants to be part of natural organic and we're lucky to be at the core of it.

Dan: Well, and I appreciate your coming on today. Could you back up and start with some of the different things that you've done before? The reason I wanted to ask that Todd, is how did those experiences help you with where you're at today? For example, global brand manager with Starbucks and Theo Chocolates, and so on. How are you able to use those positions to help you at Lundberg Farms?

Todd: Great question. I was very lucky in my career to be growing up in Seattle. Seattle having such immense opportunities with places like Microsoft being born there, Amazon being born there, Starbucks being born there. Out of college, I had a little video production company and was doing a lot of corporate training films as we used to call them, but training videos for different companies like Microsoft and Starbucks, and the farm wasn't around yet, but just starting. I was doing so much work for Starbucks that ended up selling the video production company and going to work for Starbucks when it was still around, say under 300 stores.

It was a great experience to join when it was small, and got to work very closely with the senior leadership. They were just really beginning to invest in marketing and bring aboard some great marketing experts, who were really good mentors and people to learn from. One thing they instilled in us who became brand managers there, three of us ritual brand managers, was to think holistically. Not just use that as a term, but to go out and start off worrying about how coffee has grown and the origin countries. And then following the process along to how the coffee is washed and dried, turned into green coffee, how that coffee is exported, how it's imported, how then it's roasted at the roasting plants to the different levels and the different varieties to bring out the different flavors. And then going into the stores and working in the stores and seeing how the coffee is prepared, how you interact with the consumers, and then you're able to bring it back to the company itself and you can talk to the consumer in a whole different way.

Dan: Love that.

Todd: Part of it's based on kind of the Toyota management system too. Where Toyota being a Japanese Corporation, early was thought of as holistic also. That if someone was lucky enough to begin their career at the Toyota Corporation in Japan, they graduate with their master's degree and they have to go work on a car lot and learn how to sell the car. They have to go work in a factory for a few years, or learn how to make the cars before they're ever able to go and work in the corporate offices. Don't know if that's still the fact today, but that's how it used to be. Starbucks really learned from that was able to grow. Don't know Starbucks until the event today, but it was a great learning experience.

Dan: Absolutely.

Todd: Whatever I've done in my career path, I've tried to bring that thinking of a holistic worldview to it or systems theory in a way how everything is connected. And yes, your consumer is just going to be purchasing your product and consuming it, but they want so much more out of it. They want traceability. They want to know where it's coming from. They want to know if that product is helping someone. That's great, because you're feeding the soul as well as feeding the belly.

Dan: I love that. Thanks.

Todd: Yeah. Bringing that forward to Lundberg Family Farms, to answer your question, it's been a great experience too, because you're right there on the Farms. Can't get more traceable than that.

Dan: That is true.

Todd: When I'm at the offices, which are on the farm, look out the window and there's the acreage, there is rice growing in the fields. And now that we're growing quinoa in Washington State, Oregon and California, that's not right outside our windows, but I get to travel to those farms and be able to see the experience of quinoa growing. We don't have the luxury of just picking up the phone and when we need more of an ingredient like rice and quinoa was saying, "Hello exporter or importer, can you get us some more?" We have to plan it, plant it, and grow it. And so, it's very holistic to connect all those dots together to get to the consumer.

Dan: I really appreciate your sharing that. That's exactly why I wanted to have you on. I read a book and high school several years ago called Theory Z. It was talking about the way that the Japanese do business. I think it was built on I believe Philip Drucker, I'm not 100% sure. But I believe he's the one that went over to Japan after World War II, and helped them develop the strategies that they're currently using today. I love the fact that you as an employee for a Japanese company, as you said, you basically wear every hat within the business, within whatever niche or wherever you're working in, so that you really understand the consumer. And again, this is the manners and wanted to have you on.

I've had the privilege of going to your plan and actually doing some work for you. But more importantly, having a chance to see your plant and see the fields around it. The culture there, the way people interact and the way that your employees support one another. It is such a unique community. I love the fact that you've built that model into, from my perspective, the way that you guys do business overall. Can you talk about that?

Todd: Sure. Of course. I'm just part of the team. I would love take credit that I built that, but it was built in put in place before I joined. The Lundberg Family, it's more than just a brand. it really is a family and they put their principles front end forward. They put them first. Luckily, they're very good principles. It's a company that's in a rural area, and rural area agricultural companies specifically, they really do have to nurture their employees. So, doesn't turn into some sort of migrant workforce. Even in a white collar migrant workforce, there's always somewhere else someone can drive off to, to go work.

But they recognize the fact that there's only a handful of companies that are like them in the area. And so, you want to be able to bring employees in the beginning of their career, middle of the career, even towards the end of the career and still nurture them along the path, so they're able to integrate in the company well, that they understand what the mission, the values are, and they understand what the principles are.

It's not just giving back in the local community, but you're making sure you're giving back in other communities that the products are sold in. That's what helps us move forward. Because being a family owned independent company, not owned by any of the big corporations, we have to do business a bit differently. It really all starts with the human capital that we have. The people who have working for us. If they didn't fully believe in what our mission was, then we would have a hard time getting our goals and being successful. It's still a business, we still need to grow and we still need to be profitable, but there is a way to do that with your principles intact. Which is why they have good longevity of the company and why people enjoy working for them.

Dan: I've got to admit, when I was there, I was pleased to see how loyal people were, how genuine they were. Everyone there acted as though I had been their friend for years and years and years, even though they had just met me. They bent over backwards to be very inclusive and to show me around, and to invite me to understand what the community is.

I guess what I'm getting out there is that to be able to have your employees become loyal evangelists helps make your job, like you said, a lot easier. Because instead of continually requiring or rehiring, to be able to have an employee base that wants to be there, that can't wait to get there, all the people that would show up early because it couldn't wait to get started. It was such a unique atmosphere. I really want to applaud you guys for what you've been able to do there. And the family, that whole spirit is such a big part of what you guys do. From everyone from when you first walk in the door through your general store, all the way through everyone you meet. Again, I appreciate your hospitality and the opportunity to see that firsthand.

The building you guys have created, and the community that you guys have built around I think is also really unique. Can you talk a little bit about that? The reason I wanted to get to that is when I was in some of the surrounding towns, everybody knew who Lundberg Farms was, and everyone had really kind, really genuine comments to make about how great the company was, how they support the community going back to that community that you've built in what you were saying earlier.

Todd: Well, sure. It's, again, a rural community. So, you want to be good neighbors, you want to be good to your neighbors. You're all living within the same environment, and you're all interconnected. And so, you all want to be successful and applaud and support others with their success, too. So, there's almond farmers, there's quite a few other rice farmers who are part of a rice community. And even though we have different brands that compete against each other in the area, it's a mutual appreciation society because farming is hard, and there's a lot of work that has to go into it. Into tending the land and making sure that nature flourishes. At the same time, it's Northern California, so you are always in the shadow of drought and you need to make sure that you are farming environmentally.

Even though the numbers were on the cutting edge of that all those years ago and still are, other farmers would reach out to them because they would see, "Wow, they're growing a certain way, maybe I'm able to grow rice in that certain way too, would you teach me?" And so, there's a lot of knowledge sharing and information flow that happens. The same thing's happening beyond just farming. We invest a lot in our data analysis, our data research. We try to help other companies along that path too, because that's where retailers nowadays have gone to. They want to see the data, they want to see the numbers. They want to see your consumers, they want to see trends and different analysis that you have put together.

And so, we really do try to be part of that retailer community and manufacturing community, not just in our area, but as a whole within the West and the different organizations that are there such as the Organic Trade Association, natural products, different expos. And of course, we try to help startups too. They might use some of our rice as an ingredient, or quinoa as an ingredient. Or heck, they might be competition in the future. But still, it's that mutual appreciation that it's hard to get into the industry, it's hard to keep products afloat, and the rising tide raises all ships, which is a good way to think of things. So, you want to be a good neighbor.

As for our building, and I'm glad you have so many nice things to say, and it's great that people did welcome you within community. It's 35 miles give or take, that people have to commute to our building, because we're in the middle of farmland. When I joined the company nine years ago. It was a collection of portables and old building that they found elsewhere. Old one-story buildings they found elsewhere, put on a truck and brought it over and popped down the ground in plumbed it up and wired it up.

The family recognized that the future moves forward, they needed some modern facilities. They needed something that was actually pretty environmental. Because these portables and these other building scavenged, you couldn't say we're too environmental to begin with. They weren't built well. It gets to be 100 and something degrees in the summertime there. So, to keep them cool was not cost efficient, nor that environmental. And then it does get cold there in the winter too, and so tough to heat. They recognized that they needed buildings that were going to be environmental efficient and a pleasure to be in, because we were going to have younger and younger employees joining us in the future, and especially millennials get used to a certain type of environment.

It was many years in the making. It's based off of a kind of a farmhouse/longhouse with deep eaves, the hanging over the edge because they'll block out some of the sunlight. But a lot of natural light up above that comes in but makes it where sun does not filter in too much to bring in the heat. And so, it stays cool in the summertime, and stays relatively warm in the wintertime, and was very sick wall construction. Built it to LEED Platinum Standards, and it's in the process being certified, which is really great too. We've had that now up and running for a few years. Being in rural area, every once in a blue moon we lose phone service, or we lose our WiFi. But thankfully, AT&T has quickly to get out there and dispatch and six things for us.

But it's sometimes the reminder of, oh yes, we're in the middle of rice fields. Because once you're inside that building. You could easily to forget it easily think that you're working for a fortune 500 company, surrounded by other office buildings. But then when you walk outside, you recognize no, there's where we have some parking and a lot of fields in our factory of course, too, that it's connected to make our rice cakes or snacks, pack our side dishes, and of course, mill our rice.

Dan: It was very inviting. Your building is just amazing. It really is a testament to what you guys are doing. I love the fact that you've worked so hard to build it around sustainability. And again, it's so inviting and the lighting, it's just comfortable. To your point, it was kind of strange to come in off the field where you literally drive through a one-horse town where there's a little restaurant there that probably see it's what, 10 or 15 people. I'm just kidding. Maybe 20 people, and-

Todd: Yeah. The Richfield Café.

Dan: Yeah, exactly. Hi, to them. And then you get to your plant and you do look like you're in a big city. I don't mean that in a negative light. I just meant that it looks very modern and very inviting and very friendly. So, I'm thrilled that you guys are doing that. It was so much fun to drive through the different pastures every day to see what was going on. Like I said, the community was amazing. It's a beautiful country. But with all the droughts, I do worry about you guys.

When you're talking about some of the things that you've invested in, you said that you invest in startups and you help them. I think that's great. Can you give us or share some stories about some of the success stories you've had with helping brands get up and running?

Todd: Sure. Just so we're clear, we don't necessarily invest in startups. We more I guess invest time in startups, where people reach out to us recognizing that we've been around a long time. How did you do that? How did you come to be?

The cost of time, now ... I'm sure if our CFO is going to listen to this, he's getting his pencil out and is going to give me a call later on and say, "Well, let's figure that out." But for me, it's relationship building. It keeps us a company that is over 80 years old on the cutting edge, that we can reach out and talk to companies that are just starting off and that are looking for help. That are looking to have someone help mentor them and guide them through the ins and outs of manufacturing organic certification, fair trade certification, non-GMO verification, data research on and on and on through the sales cycle and getting a product on the shelf.

Brand has been around a long time, but still someone had to have recommended Lundberg Family Farm products to some retailers sometime, which meant someone took an interest in them. And so, it's good for us to take an interest in someone else to help them along. Haven't really made investments and other areas. Again, it's being a family run company, we look at profitability and try to manage things as efficiently as possible. We don't take some risks that some of the startups take. But at the same time, we remain innovative. We do invest a lot in product development on our end. And so, connecting with some of these startups is a great way for us to to see what kind of things are coming, and to help out.

Personally, I sometimes do get involved with startups. It's kind of a weekend activity. Keeps my chops also sharp, to be able to help folks that are non-competitive in our space. That may be a completely different area than where Lundberg participates, and helping them with branding, marketing, and then of course, the connection to retailers. And luckily have the choice to be able to look at companies that I would also have a passion for the product as opposed to just pushing widgets. And so, then I'm able to bring that information back to my team and say, "This is what's going on out there. We should be looking at these sorts of spaces. Because we're able to take our principles and we can overlay them in these areas."

What's happening a lot in the food world, it's happening pretty much I think, in every party of industry in the US in different parts of the world, is there's investment startups, startups get to a certain point, and then they're sold. If they're successful enough, they're fold. When they sell, the dynamic changes. There are certain retailers that want to support the startups, and when they're sold to the larger corporations and the dynamic changes, those retailers can begin to look for well, what's the next new thing? Or they'll sometimes scramble back to well, who are the independent companies that still support the same principles that the retailer does? Not that the larger companies don't. There's a lot of good large companies out there with their hearts in the right place, too. But when you're publicly traded, you are answering to a different set of investors, the public or institutional investors.

Being family owned, it's a different dynamic, to use that term yet again, or a different beast, so to speak, where you're answering to a different set of shareholders, family and people who are invested in the company. Long term investments who feel that they are shepherding the company into the future, so their children and their children's children will be able to also continue to benefit but then Shepherd the company into the future. That's a great experience. I've had experience in both family companies and the Fortune 100 companies, and at the heart, the very center, it's about profitability, it's about connecting to the consumer, it's about being efficient. And for somethings diverge, is well, if it costs more to care for the land, seems the family company is able to do that a lot easier than some of the publicly traded companies. But they're learning. It's what we're there for.

Dan: That's what I was going to say and thank you for sharing that. I think that's so important. I mean, it keeps you hungry, keeps you focused. I talk a lot about this Todd, on different podcasts. I agree with you completely. The fact that small brands have a story to share with the retailers, consumers want brands to help share that story with their consumer. Consumers are now buying products and are looking beyond the four corners of the package, meaning that it's that story that you have. And so, if you're able to help remain focused, mission driven, et cetera, by staying connected, by helping supporting and mentoring small brands and others within the community even if they're not necessarily Lundberg Farm I think that that's fantastic.

Because at the end of the day, like you said, we've been talking about this a lot, it's all about community. And the fact that you're able to stay true to your passion and true to your mission and true to who you are, I think is so very, very important because consumers want that, they're looking forward to that. They want to feel good about the products they purchase, and they want to feel good about supporting the companies that have the brands that resonate with them. And to your point, instead of answering to Wall Street and trying to focus on what is the profit motive, the penny profit per item, instead focusing on how do you nurture that consumer?

I think it gets back to what you're sharing with Starbucks initially, where you're learning about how everything along the process, throughout the process, caters to and connects with the consumer and then being able to take that message and bake it back into what you're doing on an everyday basis. That's why I wanted to celebrate you, is because I think Lundberg does an excellent job of communicating that value through everything they do. So, thank you for sharing that.

One of the things you mentioned is that you have invest heavily in data resources, data measurement. I want to thank Jeff Bougher for what he's done for you guys. He's done an amazing job of providing resources for you. I want to commend you as a company, you are far ahead of most companies in terms of understanding the data, understanding how to use it. One of the tools that he showed me that was really impressive is how he can get down to the promotional efficiencies and understand that, and how that drives consumer sales. Where I wanted to go with that is taking the storytelling that you were sharing earlier, taking that connection to the end consumer and being able to leverage that against the numbers and understand what truly what's truly driving sales, focusing on the end consumer. That's where every company needs to be. Can you talk a little bit about that?

Todd: Definitely. Thanks for calling Jeff out. Jeff Bougher is a great resource for us. Of course, those of you listening, no, you can't poach him.

Dan: No, he wouldn't leave because he's so loyal.

Todd: Jeff grew up in the area. And again, Lundberg was very lucky enough about investing in the community, that there are people who, they leave the farm. They're going to leave rural area, they're going to go to the larger cities. Jeff was in Chicago for quite a few years working for some very big corporations. When he decided to come home, which we have other employees decide to do the same thing, they move back to the area and they look around and again there's a handful of brands that they can choose from that are really good brands. Blue Diamond, if they want to fit in the food industry. Blue Diamond, Sierra of Nevada Brewery, they're both in the area. Large companies, good investments.

Also, the co-op one is family owned, and then also Family Farms. And so, we're very lucky to get resources like Jeff return to the area, who are bringing back and amazing amount of experience and knowledge that we get to utilize as opposed to if we had posted the position, hired recruiter and fanned out across the country to try to hire someone. We may have been able to hit the rate of pay, we may have been able to have the right position, but to convince them to move to the rural area, sometimes it's tough to do. We're very lucky that there are folks who already choose to move to a rural area and have that quality of life that they may have grown up in and remember so fondly. So, we're like you there.

When I had joined Lundberg about nine years ago, run by Nielsen SnapShots, or SPINS, which is a subset of the natural organic world and SnapShots. So, it's a once a year look in your category, and it's static. It's an Excel spreadsheet. You might be able to manipulate a little bit, but it really just gave you dollars, units, a little bit of velocity and yourself and a bunch of other brands. And you can basically do ranking reports with those. That's what a lot of companies do. And good for them. It's better than no research whatsoever.

Dan: Absolutely.

Todd: But because of my background when I came in, I realized that wow, the conventional food world or companies like Starbucks, they were run by data. They were run by this research, and there's a large databases that you do have to invest in. You have to have people to run them. And you're able to get down to the point of, as you'd mentioned, promo effectiveness. Because as I mentioned our CFO earlier, he wants to know. He's like, "How are you spending the money? Is this worth it?"

Our sales people. If they're not given the data, they're given a promotional rate, and they'll go spend that promotion rate. Good for them. That's what they're going to do. But the idea if I put this item on sale versus this other item, am I going to sell more? Am I going to get incremental volume or did I just teach people to pantry stock and buy four pounds of rice when they only needed one pound, and they're not going to purchase us for four months. Because if they're only buying one pound a month and they bought four pounds, wow, was this the right spend?

It may have worked good to spike the number for quarter or the month, but savvy retailers, they already were investing in Nielsen. They're already invested in SPINS. They were already running data analysis. I would watch us kind of go into sales meetings sometimes with our brokers, and the retailer would have more information we did. So again, nine years ago we began investing and building a market research division within marketing, and we now create presentations. So, retailer X will ask us to come in to a category review. And back in the day let's say three quarters of the presentation was who we are, what we do, how great we are. Which again, that's fantastic. But if that buyer already knew you guys pretty well, there wouldn't be that much more talk about.

About a quarter of the information at to the deck would be data. Now about three quarters of information in our presentations is data. And then the quarter rest of the quarter of it is who we are, what we do, and how great we are and how we're connected to the consumer and the marketing plan. But that data we go in with, it was a bit of a sea change for a couple of years. Getting buyers used to the fact we were coming in with more information than they had, possibly on the category or the categories that we were in. We were acting like some of our very large competitors in the conventional marketplace. So, a small natural organic brand kind of punching way above its weight. We knew was a bit of a risk but we had to take it, because we had to show that we understood where the future was going to be in the space, what the consumer was looking for, how we were developing products to meet them, how we're hitting the price points correctly, and we're organic. So, organic already is a bit of a higher price.

We domestically grow organic rice versus importing. So, then again, it's a bit of a higher price, and we have to justify some of those prices. We showed that the consumer will still purchase it, and that there are other brands that are charging higher that may not be worth that. But they're kind of taking a higher price because they can. We have a certain price because this is what it needs to be sold for. There's a good value there for the consumer, a good value for us as a brand, and a great value also for the retailer because their margin is going to be in there someplace too.

Then we had a start showing data that was going to show the different channels. Of course, you're not showing what competitors are going to return, we're never going to do that. But they're always interested in, well, what's the club space like? What is the private label space like? What's out there? What's online? That started the handful years ago? What's online? What's online? Now that's the first question. What's the online space like for you? And you need to show them overall what your brand is doing in these areas. And now, we had to overlay the same data analysis into social media.

We have different sorts of software and programs and agencies we work with that are able to listen into the cyberspace world and be able to pull all the different mentions that we have for our brand or the family or organic rice, or organic quinoa, and we're able to show the retailer also this is what the consumer is talking about, this is what the consumer is looking for. This consumer mentioning you, retailer X, and how great you are or maybe how not great you are and where you can improve, where we can improve. We're not just looking for the good stuff or listening for the good stuff. We're also looking and listening for the bad stuff. Maybe we dropped the ball someplace that we can do better.

One of our principals says continuous improvement and we do live by that. We recognize that we need to continuously improve, become more efficient manufacturing wise, become more efficient in our personnel. At the same time, make sure that we are connecting the consumers where they're looking for us, making the products that they are looking for. If they think something is too spicy, too much salt, too much sugar, not enough salt, not enough sugar, we're listening very closely and very intently and then making adaptation to be able to deliver on what they're looking for.

So, that whole idea of having different data analysis run through your company and it's very important. and it can it can inform how your business planning is put together. It begins inform what products you create, and it begins to inform how you're speaking and where you're speaking to your consumer. But it's been a great experience. I'm just very lucky that the company already had a lot of these resources built in certain ways and then bringing them together. And then of course, the standing on the shoulders of what they had already built as a brand makes my job that much easier when it comes to having the brand connect with consumers.

Dan: Really appreciate your sharing it. As you know, that's the intersection I play in, and that's where my focus is. That's one of the primary reasons for this podcast, all the content I produce, my free Turnkey Sales Story Strategies course. The whole idea behind it is by educating brands on how to leverage these insights. So, thank you for sharing that.

To unpack that a little bit, you touched on a lot of different areas. Let me drill down a little bit. Most of the companies as you said and I agree unfortunately, they show up in a retailer appointment and say. "Look, I ranked number five in the category, aren't I doing great?" The reality is the retailer already knows that. They need insights, insights as you stated Todd, that they don't have access to. So, to be able to provide real insights, actionable insights, to be able to understand how the consumer buys and shops a category, when the consumer shops the category, what are they putting in the basket with Lundberg Farms. Rice? What are the decisions that they're making on shelf? How do they make those decisions? And if you promote at this level versus that level, how does it impact your business?

The fact that you guys have harnessed that and you're doing so very, very well on it is really amazing. Honestly, I don't know of many other natural organic brands that have made the same commitment to this area to data insights as you have. So, I really want to commend you and celebrate you. One of the things that I don't think a lot of people understand is the complexity of understanding a promotion. As I said, Jeff is doing an amazing job with it. So, understanding your promotional effectiveness, it's most promotional dollars are wasted. The estimate's between 70 to 90%. Now, while everyone's still trying to catch their breath, this is what I mean.

A promotion is designed to get new product trials. It's not designed to get a consumer is already planning on buying the product to repurchase it again. There are other better ways of doing that. Some of the problems are, as you stated, not knowing where the products and distribution, not knowing if you have having out of stocks. So, promoting while you've got an out of stock. Some of those coordination issues, as you're talking about by helping your sales team avoid some of that, can you speak to some of the the benefits that you've seen as a company by leveraging these strategies? How has it helped you? And then going back to what you were talking about earlier, you guys plan and produce stuff based upon what you're going to sell. And if you over plan or under plan, that means out of stocks, that means unhappy customers. How does that all tie in together?

Todd: Planning, planning, planning. We have a five-year strategic plan and we have our annual business plan, and then our annual business plan has broken up of course, into quarters like everyone does, and we reforecast basically four times a year now because of that. It keeps rolling forward.

When we put promotions in place, they are communicated throughout the organization. That's the major change we made the past few years again it's thinking holistically. It's recognizing that even someone out in the field, you have to think of how this is going to impact manufacturing. You're going to have to think of how this impacts farming. Because again, we can't just pick up the phone and say, "Hey we need more rice." If we empty a bin and were sweeping it dry, we grow 19 different varieties. If I run out of one of those varieties, I can't just take the product off the shelf. I can't just out of stock it for six months. Retailers are going to and say, "Sorry about that," and our competition is going to say, "Thank you for the space." They're going to jump in and promise that retailer we will never go out of stock like Lundberg did.

Out of stocks are definitely top of mind and its top of mind of the retailers too. It's taking them in all honesty, quite a few years to recognize that, but I would say the last year was the year of the out of stock that retailers really woke up to it and began to say, "We're going to find people if they do not get this in stock. Because you're taking money out of our pockets with our small margins that we have." Speaking from the retailer's point of view. That if there's a blank space on the shelf, that's a last purchase. That consumer was going to purchase your product and it's not there, we're going to ding you for it. We're going to ding you not for your wholesale price, we're dinging you what the retail was on them.

Dan: Wow.

Todd: They should. They really should. Though then again, most of us companies we don't self-distribute. Our distribution goes into someone else's distribution channel. And so, it's really working with those big distributors. When they're finding KeHE the ones who really drive, pun intended on that one, really drive the product to the stores. And for the natural organics industry, and they've had to really make changes in their model and making sure they remain in stock in their warehouses.

As a manufacturer, you don't want to overstock that distributor. Because if product was out of code, you're going to be paying for it if they have too much. But you don't want them to under stock because then they will start shorting those retailers and pick and choose. So, we've had experiences the past where we had certain items on sale and we wiped out inventory, we wiped out our capacity. Just maxed it out to where our manufacturing is like, "We're going to run seven days a week. This is you know, 24/7. This is against our principles. Because we need time to rest the machinery, we need time to clean. We need time to do everything that we need to do stay within our SQF Level 2, which is our food safety, food manufacturing protocols that we're mandated to do. And so, you need to make sure that everything goes back to a supply chain management production system, and we have to speak back to that.

But we've had times where we've wiped out whole thing's, whole brace of our product, where we were at a stock for a couple months on end of and on. That was thankfully years ago, but we learned from it. Thankfully, we learned from it before the retailers began waking up to the fact that all these companies, everyone was in the same boat when it came to manufacturing. We all want to stay one piece beyond what we need the capacity wise, but not over invest in capacity, because you don't want the machinery just sitting there idle for 20, 30, 40% of the time.

That's the big shell game that goes on in the manufacturing world, is where's that sweet spot for you to have excess capacity for surge, but not enough to where you just sit idle? Again, using research, we really are able to dial that in. And if we do promotion, we are able to calculate what that lift will be. If we even do the magical Bogo, for those of you don't know what that is, I know all of you do, I'm sure. Buy one get one, or something is going to be 50% off for two of them, you're going to really drive sales and put a pressure on your capacity.

And so, our products are shelf life, thankfully. And so, we're able to put it into production planning, give that information and manufacturing. Hopefully, we had done some of these long enough in advance that we had planted and harvested and dried the rights all correctly to be able to meet what this promo is 6, 7, 8 months down the road. Then by the time when you start manufacturing it so that it has no shelf life to be able to get to the retailer, get to the consumer and you sell through, through hard promotion that we're producing early enough to be able to stockpile, so to speak enough product to be able to move through that large volume.

And again, only if the numbers dictate it. Because we run the return on investment, the ROI analysis before promotion ever happens. We're going to see what that lift is going to be. We're going to see if we're getting incremental. Again, it's all models. We have to trust the models that we've built and learn from it. If the reality doesn't work out that way, then we're able to adapt the model for a next time we're out.

We're in five different categories of the stores. So, we constantly have promotions going on. Large ones, small ones, medium ones. By running those numbers and modeling it, we're able to give the correct information or as close as we can, correct information to our supply chain and manufacturing through production demand planing, which is far beyond what we used to do which was we jokingly called guesstimates. Well, this is a guesstimate. People were serious. They weren't joking. But I was like, "This is joking when we're saying guesstimate is a gap, and we need to get better at this. We're not going to be exact, but we need to have 80% confidence in what some of these numbers are or the forecast is just going to move from one end to the other. Similarly, the board will not have confidence and the person running sales, which would be me. I want them to have confidence in me."

So, we want to be able to have the numbers the true as best they can. We've retrained our sales team. There's no reason to sandbag numbers one direction or the other. We change the way incentive programs work, so it's more realistic and it doesn't incentivize people to do things that put the company, the brand, or production at risk. Now these were changed a while ago, but it took some time to think through and recognize that traditional incentive programs in most companies actually can incentivize poor behavior.

Dan: Yes.

Todd: It's an unintended consequence. It's, "Hey, you need to move a few truckloads at the end of the month." We never say that to our folks. We never say truckloads to hit our numbers. If we miss our numbers, we miss our numbers. Now, we're research why we're missing our numbers, we're going to try to figure out how to fix things. But we're not going to take the brand nor the company to the edge of disaster to hit a number. And again, that's the benefit of the family company is they recognize that. They recognize we're shepherding this correctly as opposed to just trying to hit something, spike the ball in the end zone using the football analogy and then leave.

I've actually seen that within my career that people do that. I've seen people join companies, monkey with the numbers quite a bit and then leave because they're going to go work for another company. The thing about the family company is the family members can't ... Well, they could leave. But they're not going to leave. They're in, they're going to make this work and they're going to have it continue. They're going to labor over what those numbers are, they're going to labor over what is being delivered, and they put the trust in those of us who are not family members that were doing the same thing, as opposed to, "I'm just going to goof some number up so I look great, my resume looks nice and padded, I get a big fat bonus and I quit and someone else has to pick up all the pieces." That is not how we work.

The numbers pack this up for us and we're confident in it. If the numbers were wrong, well, we were wrong too. But then we learn from what was wrong with that model and make the adjustments, and then next year we do better.

Dan: I appreciate your sharing that. A lot of people that really don't take the time to really understand this. And with the model that you have, where you have to actually figure out what you're going to plant, how much you're going to produce. And then you've got sort of a closed loop system. Like you said, you just can't call up somebody and say, "I need 100 truckloads or whatever just to make them the product." The fact that you're building in that loyalty. I know of a lot of companies, unfortunately, that incentivize employees for basically, like you said, bad behavior.

I used to know someone used to really pump up his sales. He'd deliver a truckload of product into a bunch of stores right before the end of the month of the quarter when he got his bonus. And then somehow, he played a shell game, was able to shift it to someplace else. That's not how you do business. The fact that you've got that very honest way of going about business, you've got the integrity, is so very important.

Let me unpack a little bit of that. Garbage in, garbage out. The numbers have got to be good. The numbers that are provided and most of the resources that you're getting are only as good as the people that you have doing the analysis. Again, kudos to Jeff and his team for being able to support you and for you to being able to realize that. So, being able to understand the ROI piece is so very very important and to avoid out of stocks. I have always said that an out of stock is the brand's fault. Doesn't matter about the distributor, the retailer whatever. Consumers that want to hear excuses.

To your point, if they showed up to buy Lundberg Farm rice and a retailer doesn't have it, they're going to look at the brand and say, "Well the brand can't produce. The brand can't support me." That's a poor reflection on you and embarrassed as the retailer. So, it is incumbent upon all brands, all brands listening to this to know your numbers. Thank you for saying that. But not only just know your numbers in terms of how do you keep product on the shelf, but as you said, that balancing act. How do you balance product that is perishable? Like you said, you've got a longer shelf life that most products, but how do you do that? The way to do that is to invest in these strategies that you've shared.

Thank you for sharing all that info, shining a light on it. Because like you said, that's my key focus is on educating brands and retailers how to work together to solve some of these very solvable problems, so that the consumer at the end of the day gets what they want when they show up. Back to what you were talking about Starbucks. If Starbucks ran out of coffee, that would create a lot of problems. If up the street from me, Raley's ran out of Lundberg's rice, that's going to reflect badly on you, especially since you're in your neighborhood. Thank you for sharing that. Do you have other insights that you want to share, or any other recommendations for a small brand starting up, or anything else that you'd like to share with the audience?

Todd: Sure. Since we're talking about data, for small brands and startups and folks who think, "Wow, well Lundberg's got a lot of money, they can do whatever they want." It's like net worth, so pretty fiscally responsible that the data is out there, if you need to find it. Your brokers, they should have a lot of data. Your retailers do. Almost all major retailers now have their own portals, or they have it under some name where it's a system where you just have to learn what that system is, get your login password and get in there and begin to look at the data. It might only be yours and you want to your competition, but it's still very much worth understanding what your brand is doing within that retailer. That's very cost effective.

Your distributors. If you are using KeHE or Unify, they also have very large data sets that you are able to tap into. Now again, you have to manipulate it yourself. But you get your password, you get your login and go to town. It's worth having one of your first hires usually outside of sales. If you're a marketing person, your first hire should probably be someone who understand marketing research. This is running focus focus groups, which that will come in the future. This isn't doing generalize market research. This is really data analysis for lack of a better term. So, a market researcher is running data analysis.

You want someone who really is in Wall Street nowadays or working for Fortune 500 companies. They're quantitative analysis people understand how to run the data. We've been finding folks locally. So, as you mentioned Jeff, he is our market research manager. We could then put someone out there, we want a quantitative analysis person for the job search out. We're not going to find a lot of people in the rural area that may have that background, but there are tons of companies. Accounting companies, automotive dealerships, it's like we can always find someone who has an accounting background and someone who has an analysis background, and we can bring them in and train them on how to look at quantitative analysis in the food world. For startup companies, you can do the same thing. There are people like Daniel out there who are really great in mentoring and helping.

Plus, we put together a program for you that you were able to build upon if you can't hire someone full time, at the very least get your SnapShots from Nielsen possibly SPINS if you're in that world. But you want to be able to see what you're doing versus your competition. Of course, ask the retailer what they want. It's always tough to do that and to recognize that that no matter how big your brand is, your primary customer first and foremost is going to be that retailer. They're a gatekeeper. You may have something that is going to speak to the consumer and consumer's going to buy. Wow, do people still say buy like hotcakes? I love that term, like hotcakes. Everything's a hotcake. But something's just going to fly off the shelf.

But you only have one gatekeeper, a buyer. That buyer may have had a really bad day and you're the last person to see them, and you're going to have to be able to connect with them to find out what they want. Because you may be presenting something for sure is going to fit their need. But they may not be seeing it through the data. They may not be seeing it through the part of the presentation that shows how great you are. You just have to have that conversation. And it's very enlightening when they do open up and share what they are really looking for and what their frustrations are.

A lot of those frustrations are out of stocks, just mentioned, a lot of frustrations is sometimes lack of innovation. That when they see something like coconut, there are a couple great companies that are doing great coconut items, and then everyone else jumps into does coconut and the last thing they want to see is another coconut item coming through. Even though your data is saying coconut's on fire, I have to do coconuts, you some apps to have to look through the data and take it with a grain of salt or buy the coconut in this instance and say, "You know this is covered. This area's completely covered. We do not need to enter this area because we the world does not need one more coconut chip brand. There are some really good people doing it. No matter what we found, let's not touch this. And that's very tough to do also.

Again, working with that retail when they're asking for what they want, a lot of times looking for you to be able to say, "Here's what the trends are that are coming that we see. You might not see them yet. But we're seeing some of these." And we make mistakes on those trends. We've gone down the sprouted road a couple times now. It was a great experiment. But the information trying to explain to people and the consumer what sprouted grains are and what they mean for you, it's very tough to do. And so, we weren't through experience and experiment. Even if the consumer and the retailer's asking for it, deliver what they want. But if it doesn't work, know when to be able to back off the product line too.

That's always a learning curve for us because you work so hard and the product, you put it out there, and you recognize that you need to either make a change or even delist it. You have to be strong enough to recognize that when you have new products coming through, you're probably going to delist some items also. So, the last word I like to say for all the startups out there is, beware of skew proliferation. Meaning that you might start off with eight great skews, you wake up one day, and you have 200 great skews. When you look at your numbers, the majority of them, it's still 20% of your skews are pulling that 80% of your business. It's an old adage, but it still works.

To constantly be going through and doing skew rationalization as you're creating new products, that's what balances things out. The retail respects it, as opposed to always go in and saying, "Give me more space on the shelf." It's, "Let me help you manage your space, and I'm doing that through the data." But thank you again for the conversation. I really appreciate it.

Dan: No, thank you. I was going to say no is an answer too. a lot of people forget that. Yeah. I really appreciate that. I appreciate you focusing on the quantitative analysis, which I would call a category manager, or as I would actually call it, true category management, where you're really laser focused on how does a consumer by their product.

I wanted to throw one more tip in there. For those companies that commit to providing to being a resource to the retailer. Some companies, some retailers will actually partner with you and give you their internal data. This is free. I've had the privilege of being able to leverage this resource several times as a category captain for various products. This can give you instant access into everything that the retailer sees. And you don't need to spend a billion dollars.

In addition to that, as you was talking about other resources, there's a thing called Google. There are a lot of other resources out there that you can use to start developing your capabilities. The key is to start. As I always say, if you want to be at the level of the big brands, meaning be that sophisticated compete at that level, you need to be at that level. The way you get at that level is by starting down this path. Again, that's what this podcast is all about, the content, et cetera.

Todd, I really appreciate you coming on today. Thank you for sharing your valuable time and insights. We didn't give a chance to talk about sustainability. If you've got a couple extra moment, do you want to talk about that? About some of the things that you're doing with the Sustainable Food Trade Association?

Todd: Of course. It's very important for us as an organic company to be able to communicate what our sustainability efforts are, and being transparent about them. Being members of the Sustainable Food Trade Organization is really important. The SFDA, we're able to publish a document each year that they help put together and they have standards on that is reporting and it's third party validated, what the sustainability efforts of the company are. Just in the past few years, we've completed our Zero Waste transition was a really big effort to do. yeah, it's a really big effort. You start recognizing that, it has you to begin to view things very differently when it comes to what you're bringing onto your facility.

It's not just how can we figure out how to make sure everything goes through the recycle stream and all, it's sometimes how to not have the waste to begin with and working with your own vendors, just as we are vendors to other people. It's trying to recognize, wow, can we put things in more recyclable packaging, or can we bulk up a lot more so we use less packaging to bring down that footprint when it comes to it?

Measuring our carbon footprint has been pretty important. We're we're adding on ... I forget the percentage now, but quite a few more solar panels. We have some new facilities and we put solar panels on top of them to be able to make sure that we are staying ahead as best as possible for energy self-generation, which is a mandate within the city of California. And so, we always want to stay ahead of the state mandate because who wants to hit just the bare minimum? Want to be bigger than that. Though it is so great to be in a state that has companies doing that.

We're always experimenting with some of our byproducts streams. Rice hulls as an example is could energy generation be created from the combustion of rice hulls if it's done with a clean combustion or convert to bio char, which is a carbon sink that then can be put in the ground and actually helps fertilize. So, there's quite a few different things that we're working on. But we've published our part of the year, it's up on our website at lundberg.com. It's transparent for all to see.

Dan: I'm going to look it. Actually, I'm looking at it right now. That's why I wanted to mention it. I appreciate you taking a little extra time and sharing that with us. One of the things that I really want to celebrate is the fact that you guys are going beyond and above. The fact that you guys are doing more and being more for the community, not only your community but for the industry. Again, I thank you for your time and I look forward to our next conversation.

Todd: Thank you very much. Have a great rest of the day.

Dan: Thanks, Todd. Appreciate it.

I want to thank Tom for making time for us and for sharing is valuable insights into the importance of these advanced strategies. You can learn more about Lundberg Farms on the website. I'll be sure to include a link on the show notes and on this podcast webpage. Today's freebie is my guide, top 10 strategies to both sustainable sales and profits. You can get it instantly on the podcast web page, or by texting, “10 strategies” to 44222.

The show notes and this podcast web page can be found at brandsecretsandstrategies.com/session62 As always, I really appreciate your listening. This show is about you and it's for you. I'd love to hear your thoughts. I'd love to know what topics you'd like to see me cover on this podcast. If you like the podcast, share it with a friend. Subscribe and leave a review on iTunes. As always, thank you for listening. I look forward to seeing you in the next show.

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