BRAND SECRETS AND STRATEGIES

PODCAST #63

Hello and thank you for joining us today. This is the Brand Secrets and Strategies Podcast #63

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. I appreciate your listening, your feedback, and your continued support. This show is about you and it's for you. If you like the show, share it with a friend, subscribe and leave a review on iTunes. Today's story is a little bit different. We talk about the intersection between big brands and small brands, and we talk a lot about the finance issues that brands are in into. Let's face it, retail is a contact sport and it requires a lot of capital. On today's episode, we talk about how to extend your runway, how to get more out of the capital that you have, how to satisfy investors while staying true to your mission and why that's important. We also talk about strategies to get your brand in the hands of more consumers by creative strategies that will help amplify your voice with shoppers and in the market you compete in.

All brands have a similar challenge when it comes to getting your product on retailer shelves and in the hands of more shoppers. Small natural brands need to be more nimble, and they need to be more creative. They need to leverage their tools and the resources they have available to them to build a loyal evangelistic following, and to develop a go-to market strategy, which includes selling online as well as in retail.

More importantly, brands that can leverage your selling story in all these strategies are the ones that are going to be successful. In this episode, we talk about how brands need to leverage their story with their customer, and how using the right experts including an agency can help amplify your voice. My guest today is John Grubb, formerly of SRG, Sterling-Rice Group. Here's John. John, thank you for coming on today and for making time for us. Can you start by telling us a little bit about yourself and your journey to where you're at today including SRG and some of the other stops along your career?

John: Sure, happy to. Thanks for including me in your series of podcasts.

Dan: You're welcome. Glad to have you here.

John: I have had a little about more than 30 years experience combined executive operating experience in food manufacturing, multichannel retail, as well as electronics manufacturing. Then I started after business school at being a company doing strategy consulting, and then most recently just completed about 14 years at Sterling Rice Group, which is a 35-year old brand strategy consulting and communications firm based in Boulder, Colorado almost exclusively food and beverage all across the supply chain, so work with a lot of agricultural commodity, clients like the Almond Board of California, Avocados of Mexico, the Potato Board and so forth.

Then really just about all of the major consumer products companies food and non-food, but primarily food and beverage. My work was both with the large cap CPGs and a real specialization in natural and organic functional food and nutritional products. That's the short story of my career ark. I've recently sold my stake in SRG, and starting a new chapter really in many ways is designed to be able to work with all kinds of interesting brands and entrepreneurs that are often unable to afford the price tag of a large full service firms like SRG. Just the return to my more entrepreneurial roots, and the chance again to work with those entrepreneurs and investors whose values I am aligned with and whose mission and products are exciting to make.

Dan: Appreciate you sharing that. Of course, we've known each other for quite a while. I would call you a good friend, and I love the fact that we've been able to have those really rich conversations around what's driving sales and category management, and brand function at retail, go to market, et cetera. One of the things that I've really enjoyed throughout the years is our conversations where we get deep into the weeds trying to understand the dynamic between how consumers shop, how they make decisions, and how that impacts a brand itself. I appreciate you bringing me in for couple projects.

One of the things that I have always really enjoyed about SRG is their connection to the natural channel. I know you guys have a great relationship with New Hope and Naturally Boulder. The reason I wanted to highlight that is because I know that you guys are instrumental, and what they're doing was Next, and some of the content they're putting out there. Can you talk a little bit about why that's important? I guess what I really wanted to highlight and this is the area where I saw you really leading the charge is your ability to understand what makes natural natural, where a lot of the big companies, going back to what you said a minute ago are commoditizing the natural consumer and commoditizing products. Whereas I think you guys had a really, really good grasp of what makes natural natural, and being able to really help and support that.

I think SRG was a phenomenal resource in terms of their ability to really help and support companies. So, can you talk about that intersection between what you were doing there and your relationship with New Hope, and how that all came about, and the importance of it?

John: New Hope and SRG are about the same age, both major employers in Boulder. Because of our work in the same channel, there's a natural affinity. I'm close with a great many people over there, and it was I believe seven years ago after Expo West, when it was a monster, but not quite the monster it is now. I invariably run into people at the airport in Irvine, cross-eyed with exhaustion, and overwhelmed from walking the Expo floor for a few days. People say, "What did you see that was really impressive or give me your highlights?" Half the time my mind just blank, it's just so overwhelming.

I asked Fred Linder to join me for lunch, the CEO of New Hope. I said, "You know Fred, we should distill the learnings from these Expos and publish a report, and really make sense out of all of the amazing things that are happening," but it's such a blur and you can't possibly cover the whole thing on your own. Fred thought about it for a minute and he said, "Nah, I had that idea five years ago, and why do we need you for that?" I said, "Just saying, I think it's a good idea." So, that was the end of that. Then the next week and said, "All right, let's do it."

Working primarily with Carlotta and her team, the first issue was called Digest, because the idea was to make it that digestible. We targeted a document. I think we ended up at about 35 pages. The next year was a 150 pages, and the last Next forecast was 200 pages. It turns out even in digest format, there's so much material and so many macro trends to highlight that it grew, and grew, and grew. One of the more rewarding aspects of that process in the course of working with Carlota and her editorial team and my team at SRG was essentially creating an intellectual framework to say, "Okay, how do we sort through all these, this gave rise to the notion of food products and articulating specific macro trends as a taxonomy of the natural products world."

That work has evolved over the course of seven years into now a pretty coherent framework of, you know, again, macro forces are forces. They may evolve from year to year, but they endure. So they're not just flash in the pan fads. Anyway, that's a little bit about it, it's been a wonderful collaboration with New Hope.

Dan: I'm a huge fan of New Hope. In fact at one point, they had published a 130 of my articles. The fact that they put on their own Expos, it's just such a remarkable show. To your point, it's hard to go through and talk to everyone, and meet everyone in the short amount of time that you have. So I always felt that digest, even though they're like phone books, they were so valuable, invaluable, because they provided a lot of insights especially for people that weren't able to attend the show. Then of course it also provided or produced a lot of content that they were able to rely upon afterwards.

So, that's why I wanted you to talk about this. Thank you for sharing. Now, you're doing your own thing with Summit Venture Management. You said you wanted to get back to more entrepreneurial roots. What does that look like and how's it going? Who are you working with? What kinds of brands are you working with?

John: Yeah, it's smaller food and beverage brands in the natural organic space. That's really my sweet spot. I'm doing board work, consulting work, and investing alongside equity investors as a partner and consultant on branding those strategies. That's my main squeeze.

Dan: Interesting. Of course, the benefit there of having you in that role is your background with SRG, some of the big brands Dorito and I don't remember all the different names, Starbucks, et cetera. Having that experience and understanding the world at that level and then being able to just seal it down and at the same point being able to identify those macro trends.

John: That is the sweet spot, the ability to see the best practices of large scale, but also to observe in comparison the limitation that scale brings, and the agility, time to market, and risk profile of more entrepreneurial brands. Thankfully I'm much more interested in working with a brand where I can truly influence a business outcome rather than being a tiny cog in a massive wheel. Often times, to be very honest, we'd get paid to do assignments that I don't think are particularly on target, but if you're working for a brand manager at a billion dollar brand and they say, "This is where we're going to hunt," even if I disagree with that particular hunting ground, unless the sponsorship is sufficiently senior, it's hard to influence the strategic choice.

When I'm working with a CMO or a CEO, we get to do a good job on the right problems and there's nothing less rewarding to me than doing a good job on the wrong problem, which I've done a number of times in my consulting career.

Dan: I think that's indicative of working with big brands in general. You made a comment about that, bigness is automatically badness as Tom Peters would used to say. Love that phrase and the whole idea behind it. The reason I want to bring that up is because big brands are very siloed in the way they do things, kind of what you said. I love the entrepreneurial spirit of the small brands. I love the fact that the small brands are agile and are sponges. They're looking for solutions. They don't want to just do something. They didn't want to just recreate what someone else did and then put their own name or their own flavor on it. It's true innovation.

To your point, I think that's what makes natural natural. That's what's so inspiring and makes it so much fun to work with them. You made the comment a couple days ago when we're talking that it's really a lot of fun to not be parking in the same parking space after 14 years, but yet to be able to have the ability to control or master your own destiny. Are you finding that a lot of brands are really looking for your help? What are the needs for someone of your abilities?

John: I think there's a lot of folks out in the marketplace between the veteran firms and private equity firms, and operators who have had successful X that's starting incubators and accelerators, but there's a ton of talent out there. One of the things that I love about this space and you've alluded to it already, it's certainly apparent in the Nationally Boulder network is the peer and internship, the accessibility to experience access to capital, and the willingness to operate in a friendly and cooperative environment as opposed to a closed hyper competitive environment is also ... It's reflective of an attitude of abundance that we're in a growth segment of the market.

There's room for all companies to prosper in this environment even while the big guys are absolutely desperate for growth. There's this really interesting relationship between the decaying historical symbiosis that large cap CPG and grocery retail have lived with for 75 plus years. That decline, that decay is stimulating and fertilizing the food and beverage innovation landscape outside of large caps. So there's this wonderful creative field, which is in some ways enabled by the failures and the limitations of large cap.

Since I've spent a lot of time there, it's become apparent to me that there is some fairly natural inhibitors to genuine innovation. Again, when I say natural inhibitors, when you're managing a portfolio of billion dollar brands, you don't really want to hear about a $25 or a $50-million brand that's not going to be creative to earnings, or gross margins. It's going to be a nuisance. It'll probably get lost in the system, and that's one reason that the large companies have really failed not across the board a hundred percent, but largely failed in developing a prosperous environment for entrepreneurs, an environment that rewards risk taking in entrepreneurship as opposed to protecting the core, pushing the sales numbers.

Really, the marketing function in many of these firms is quite subordinate to the sales function, and really all about near end innovation to try and protect market share rather than actually innovating in a way that would be disruptive and truly incremental.

Dan: I couldn't agree with you more. That's exactly why I wanted to ask that question, so thank you for sharing that. Coming from that working environment myself, you're right. Companies are very siloed in their approach. In fact, a couple years ago, I had an opportunity to work for one of what I thought was one of the most progressive larger brands. I don't want to embarrass them so I'm not going to mention their name. They reverse siloed in their approach, and they were all about let's focus on our brands. How do we beat the competition? How do we do this? How do we make our numbers without stepping back and thinking about, are we aligning with our values, with our customers, with who buys our products?

I think that's one of the biggest challenge that big brands have, and so to your point, I agree with you completely. Innovation is not simply sprinkling a new flavor on an old tired product, or changing the packaging or a label. I've seen a couple companies swap a label and put it in one category, they'd put another label on it, but the same exact item in another category. Consumers are getting wise to this, and those strategies of false innovation just aren't working.

Getting back to what you're saying, true innovation comes in this channel, in this industry, because these brands are more closely aligned with and more importantly, they have an intimate relationship with their consumers. They talk to each other like you and I are talking now, rather than the big brands who spend most of their energy or breath talking at us telling us why they're better. I love the comparison and the contrast that you made there.

To your point, the opportunities to mentor and work with these brands, and these small disruptive brands, they're just sponges. They want to learn, and they want to be able to take advantage of the strategies that the big brands are using to be able to make them their own and be able to up their game with it. What I mean by that, like I said, a lot of conversations are on category management, not to follow in the same footprints, but to be able to leverage those strategies about how to put their product on the shelf, and how to price it, how to merchandise it effectively. This is my niche, to help get their products on more retail shelves and in the hands of more shoppers.

Can you share some of the stories, maybe some success stories about some of the brands that you've had an opportunity to work with? Some things that maybe you've seen firsthand?

John: Yeah, but I wonder if you'd give me a little bit of historical context in setting that up, because I think it's important to understand how we got where we are and that there are good and logical reasons for grocery and CPG to have behaved the way they have. Now, it's the failure to adapt that becomes that punchline, but really going back to the early 1900s when dry grocers were essentially on every corner, and a bakery and a butcher, and a green grocer were all separate organizations. Gradually in the 20s, the notion of putting these under one roof came into being and then in the 30s, Safeway Kroger and A&P really emerged as national chains and supermarkets.

This was only relevant with the democratization of technology, in this case namely refrigerators and automobiles where the whole notion of a stack up grocery trip mission became the dominant paradigm. So, at the same time, the consolidation of the grocery and food manufacturing followed a parallel paths. Charles Merrill of Merrill Lynch assembled the Safeway stores beginning in the mid-20s. At the same time, the predecessor of Kraft Foods saw an opportunity to roll up their E-business, their original vertical, and did a public offering on Wall Street and made 55 acquisitions between the years 1923 and 1931.

Then in 1933, their first national radio sponsorship began, Kraft Foods signaling the development of non-print mass marketing. As this consolidation and the scale economies continued on both sides of the manufacturing and merchandising partnership. So to the tools of the trade and strategies such as promotional pricing and features, and displays, control of shop assortment, category polygrams, slotting fees, other marketing and merchandise techniques that inherently favored the larger players particularly when a more formal category management system was in place that generally favored the market leaders.

I want to be sure to point out the virtues of this, particularly post World War II, the consolidation brought a great deal of efficiency and economy into the marketplace. There's food safety, shelf stability, cheap food. These were virtues and really served the consumer very well. I think to your earlier point, the large companies got in the habit of telling consumers what to buy as opposed to listening to the consumers. The early indications of these consumer secular demand shifts were drowned out and the big guys really didn't want to hear about it.

I date a lot of this back around the time of the great recession when large cap CPG was still summing their noses at the natural organic segment. I could tell stories and name names there, but I won't. There were many norms that were appended during this period, but the encumbrance really chose to waited out. I was present in many of these meetings. It was like, well these lead tribes and the millennials, this is like a bad case of the flu, but it will pass. I think the recession was a little bit of a head sake, which temporarily masked these fundamental shifts led by millennial consumers surrounding that use and preferences food and beverage, shifts and household structure, later marriages, fewer marriages, and changes in an eating behavior as well as dietary preference.

The rise and proliferation of social media certainly is contributed to that. The ability for food tribes to connect with one other to understand that, "Hey, myology insensitivity or allergy sensitivity is not unique," and suddenly these tiny little fragments became meaningful food tribes and frankly the big guys either missed it or could not because of structural or cultural reasons adapt in a way that was meaningful to capture these changes.

Again, there's a natural risk conversion when you're a large cap public companies, but I do fault the leadership and certainly to the board of directors who often don't want to hear anything but the same old good news for failing to realize that these were secular changes. Now, we have this rush to develop a court for venture capital unit and acquire, and try this stratospheric valuations. That's little too late in my opinion, but there are certainly examples of companies that are doing a good job of that. The flip side is that the opportunity space that's created is just absolutely phenomenal, because suddenly there's this funding.

I did a $5-million raise for a natural products company 20 years ago. There were only three phone calls to venture firms that would even talk about consumer products. This was in 1999 and of course it was all about technology just before the crash, but there were not institutional investors who were playing in the flip space. It was low margin, and a good valuation was onetime sales on an exit whereas technology obviously is much more the valuations can be much richer.

What we have today is a funding environment. Again, it's in many ways driven by the failures of the big guys to say, "Okay, we're desperate for innovation." As a result, you have crowd funding. There's angel investors, there's accelerators, there's incubators, there's lots of venture capital firms, private equity firms, and then the private equity originated medium caps like Pinnacle and B&G Foods that basically grew up in a private equity space buying [inaudible 00:27:44] brands from the big guys and then eventually doing an IPO.

There's this really interesting ecosystem of funding, which and the benefit really accrues to entrepreneurs, because there is so much interest than, "Hey, bring me innovation and do it a lot faster than I can do internally." Again, to be fair for good reasons, for most large cap CPG companies qualifying a new ingredient is 18 months. You've got regulatory, and also food compliance, and food safety, all for the protection of their brands. If it takes you two years to get a product than shelf, you just do not have the dexterity that smaller companies are able to operate with.

Especially with the advancing, let's call it infrastructure for entrepreneurs, be that mentorship or in many cases now we have kitchens, shared kitchens where you can buy QA and QC and line time, as well as operations like the factory or the Chobani model where they actually house entrepreneurs and staff it with expertise around regulatory and QA, QC, and really operating more on a network model that are hierarchy model. It's just inherently faster and more agile than what these large institutions grew to be, and frankly could not redesign themselves institutionally in a way that could adapt.

When you have companies like Mill's, and Campbell's, and Kellogg's all gagged with their core categories and decline canned soups, sugar, cereals, candy, yogurt, these are not going to disappear, but they are not going to grow. You can't survive, and the large cap companies have ... They filed the 3G capital playbook and managed to squeeze out a lot of cost savings, Kraft Heinz being the example, cutting 1.7 billion in cost and getting a really nice pop in their stock price while they were raising earnings to share, but experiencing declining top line growth.

That's changed now and Kraft Heinz has been really punished in the stock market as have Campbell's, and Kellogg's and General Mills for their inability to delivery top line growth. Once you squeeze those cross outs, there's only some to more you can get without-

Dan: I agree with you. I appreciate your sharing that. It's main street versus wall street, and I agree with you completely. I love the analogy that Tom Peters made several years ago in one of his books. He gave the analogy that the large automobile manufacturers in Detroit were driving to work and they would look left and look right, and everyone had a large US made automobile, not paying attention to the fact that Toyota and Honda had come in on the West Coast.

The same scenario here. They're not paying attention to the consumer, and that goes back to what I was saying. Large brands tend to commoditize the natural consumer and the way we look at the product. The natural consumer wants authenticity. They look beyond the four corners of the package. They're not just going to take your word for it if you say it's new and improved. They want to know what's in it, and they do the research. They understand the products far better than the people that actually sell them. In most cases, even the brand managers.

I run into this a lot of times where the large companies are trying to figure this out, but yet to your point and I'm glad you said that, they've got a way of doing things that prohibits them from thinking out of the box. This is how we do it becaus this is the way we've always done it. It's unfortunate. That lack of innovation and creativity isn't there. I agree with you a hundred percent that the future is in small natural disruptive brands. Again, because they're tied more closely to the consumer, they're providing the value that they want.

Then also to your point, the ability to communicate their story through social media and other platforms almost realtime, that's a huge game changer. The analogy of they're still using tube TV, people that have TVs that are black and white tubes versus people that are wireless and digital and natives, and the strange comparison. My point is that like flying an old bi plane compared to some of the supersonic jets that are out there today.

John: Yeah, it's an absolutely fascinating dichotomy. Unfortunately, for big food there's a bit of being thrown under the bus, particularly by millennials who are notably less trusting than older generational cohorts. They follow on the footsteps of big banks, and congress, and even the church. This fundamental distrust has not worked in favor of large cap. I frankly think that the trade groups GMA in particular have failed to hear the changes and embody the changes, and it's all about protecting the legacy and further eroding the trust that consumers have in this age of transparency.

The whole GMO, labeling tobacco, and more recently the trade groups lobbying to prevent NAFTA trading partners from putting front of pack nutritional in cases where there may be either high fat or sugar contents, and just really, really short-term thinking. Another thing that I observed in the large cap, which prevented or inhibited the big brand's ability to really hear in a discerning way what the consumer was saying was that the historical 18-month brand management deployment cycle, just as marketers are gaining some intimacy with our target consumers. They move onto the next brand or position in service of career development, and guess who loses is the consumer and the brand that increases the likelihood of the brand stag dating.

I think the moniker of a B to C business should perhaps be appended to be a consumer to business rather than business to consumer in recognition that the consumer was prominence in this business relationship, which big food and ag seemed reluctant to accept. The consumer decides. The consumer increasingly chooses to patronize purposeful brands with a clear mission and with ingredient integrity and transparency about sourcing and manufacturing, and willing to pay up for it, much to the shock of the formerly premium brands who are now fighting the super premium brands that have come in and stole and share probably for good.

Dan: I couldn't agree with you more. In fact, I'm going to put a link to the article that you're talking about in our show notes. Thank you for sharing so much of this. It's a great article I had. It's a long lengthy article. It reminds me of something my good friend Bill Bishop would write. He was on episode six, and I know that I introduced him to you. What a great guy. What I wanted to share, the reason I brought him up is because he coined the phrase, "Personal supply chain," which is exactly what you're getting at. If a consumer can't walk into a store and buy what they want, they've got a lot of choices. They simply go elsewhere.

One of the struggles that I think is compounding this situation you're talking about is that a lot of the large retailers are still stuck in that old mindset and not thinking out of the box and not thinking about the consumer. While they're talking about driving penny profit or margin on a one item basis, they need to be thinking about instead market basket. What is that product worth? How does that product drive sales within, throughout the entire store?

More importantly, how do they meet the needs of the consumer, drive sustainable profits within their store and succeed, thrive, and grow within the marketplace? I had a really good conversation with Ben with Lucky's Market. You alluded to that and Lucky's Market in your article, but I also had a really good conversation with Mathis Martinez about the same thing. Point being is that retailers need to shift their thinking. They need to change their thinking to really focus on the consumer, not just, as I keep saying the commoditized consumer, but what makes natural natural. They need to know and understand why that consumer makes the decisions that they make at shelf.

I think that unfortunately, category management, a lot of the other sciences out there spend so much time based on historical that they're not looking forward. They're too busy looking backward. I love the fact that in your article, you framed that, and you talk about that, and you really shine a light on that. I'm going to be sure to put a link to your article on the show notes and on the podcast webpage. You want to share some additional thoughts or some additional things that you learned while putting the article together?

John: One thing, just building what you just described is overall, there are too much grocery retail facings. So obviously, online grocery is cannibalizing some store sales, I am not the least worried that grocery retail, brick and mortar grocery retail is going to disappear. It's just not going to happen. Yeah, the online titration is twice as high in the UK. The UK and the US are very, very different markets as TESCO learned with their billion dollar face plant, attempting to replicate their UK model in the Southwestern US.

I'm not worried that that grocery retail is going to go away. I think Lucky's is an interesting example of for my purposes, a much more appropriate footprint. I don't need 40,000 items. I was in a store two weeks ago, and I counted 100 facings of Pringles.

Dan: Wow.

John: I just thought, these guys have space to burn, because they can't be making money on this and just like how many pasta sauces do we need? I personally tend to do a fairly frequent shopping trips. I don't do a once a week. I'm in a store, in a grocery store four times a week, sometimes five times a week and know the footprint of a Trader Joe's, the assortment of a Trader Joe's, giving me an organic and natural item, option in a nationally brand option, that is to me a much more relevant format and assortment offering. I think that's something that Lucky's is doing a nice job with as well as both Lucky's, and more recently Lucky's but certainly Trader Joe is the leader in a very, very private label forward assortment. Private label not meaning cheap, but meaning equal or superior quality.

Lots of interesting dynamics there as well as the private online, private labor offerings that thrive and brandless for example. The notion that manufacturers can now go direct to consumer bypassing brick and mortar is really interesting. The interplay between online and brick and mortar as exemplified by the, on the one hand Amazon's purchase of wholefoods and on the other hand Walmart's, which is of jet.com, and more recently their big investment in flip card in India shows that both huge retailers are utterly convinced that both physical assets and online presence are necessary.

I think the big challenge for brick and mortar grocery retail, again, get the assortment right, get the footprint right, and get the customer experience right. I know I just don't see the online grocery is a really tough business. For center store, okay. For freshest, it's tough. I think that I enjoy, I'm selective about where I shop. I actually enjoy the shopping experience. I like it when I can reliably speak to an employee whose knowledgeable.

You'd go to a place like Pharmaco or Trader Joe's, or Costco for that matter where somebody actually knows and seems to care. If they don't know, they'll find out. That's such a fascinating dynamic that is playing out right now with implications both for the entrepreneurs and as well as what will be some shaking out in the retail space. I took a look at Kroger and Walmart's performance in the public markets and for a long time they were really outperforming the SMP-500, but they are really ... Kroger's stock is half of what it was in just 2015, slightly above where it was five years ago.

Walmart is down 20% in 2018 alone, although obviously Walmart is not just grocery and very much of a global firm. Doing some very, very interesting things. I would say an interesting example of cultural experimentation, I think that they realized that the existential threat post by Amazon and online was so great that they made a bold bet on jet.com, paid 3.5 billion for a nonprofitable and unproven business model. Then gave the keys to the kingdom to the CEO of Jet, and interestingly, I'm sure you have sat on those picnic benches in Bentonville and pitched buyers as I have, and that notoriously frugal culture.

Oh, and I'm working with Walmart. We were on a very, very strict DMs in terms of what we would spend on food. We were obliged to stay in La Quinta, forget about the Ritz-Carlton. With due respect to their culture or frugality, the CEO of jet.com I believe was earning 10 times what the CEO of Walmart was earning.

Dan: Wow.

John: Had a jet at his disposal to move between New Jersey, and Silicon Valley, and the fact that they were willing to say, "Okay, we might not know everything. Let's give this guy a little bit the role." It certainly shows that they are not going to be counted out, but just a couple of the ratio of their sales to their market cap tells the whole story. Walmart has sales of $500 billion and their market cap is $250 billion, so all half of sales. Kroger has sales of a 122 billion in the market cap of 20 billion, so one-fifth of sales. Amazon has a market cap of four times their sales. So they're about a 175 billion in sales and worth over 800 billion. That certainly tells you where the market is placing their bets.

Again, neither Amazon or Walmart are pure play grocery as Kroger is. A lot of big bets being made on who's going to win and who's going to lose. I definitely see consolidation and grocery retail. We've seen some of the underperforming chains sell and be rationalized. I'm sure that is going to continue, but brick and mortar is not going to go away. I love to pick that conversation up from Bill Bishop.

Dan: Yeah, he'd love the other conversation. We talk about that kind of stuff all the time. While I agree that brick and mortar is not going to go away, I think that the model that Lucky's has is the model that's going to win. Where I'm going with that is while I believe that every retailer does need a private label presence, it's the branded products that drive traffic into the store. Now, Trader Joe's is an anomaly, but it's the branded products that drive customers into the store. It's the branded products that are doing the true innovation - hey are indeed the natural channel.

What I love about Lucky's model is that they have a relationship with their brands where they're very symbiotic. They help celebrate each other and each other's strengths, and build community around that. I had a really good conversation with Phil Lempert, the Supermarket Guru around this too. The small stores like Lucky's are good at putting theater back into retail to make the shopping experience wonderful. What I mean by that is having a reason for a consumer to go back into the store on a regular basis, whether it'd be the butcher, the deli, or some other department that these small retailers do so very well.

Because as you said, natural does natural better than anyone. I know that a lot of the retailers are trying to figure out a way to capture more consumers with the nutrition facts, and some of the strategies that they're dealing with. The reality is that the consumers that we're talking about, the ones that we're focused on, the ones that are driving these trends are the consumers that probably know far more about the product than anyone at the store. They understand what's in the package probably far better than the other thing that Bill and I talk about a lot is the consumers buy things as very different.

They now look beyond the four corners of the package. They walk up to the shelf and wip out their smartphone and then they do a search. They try to understand or identify who's buying it, how they're buying it, get recipe information, understand what people are saying about the product and that heavily influences their buying decision. Where the old models of stock and high end sell, cheap is just not doing anything to really drive sales.

So, what advice would you have for a small brand that is trying to get into the space? With your vast knowledge of working with the big brands and the small brands, how does the small brand compete? How do they differentiate themselves? How do they communicate with that consumer who is very data savvy? Then how do they work with their retailer? What recommendations and advice do you have for them?

John: First of all, understanding who your primary target is and having a social presence with that consumer is hugely important to be able to compete on dollars, because buying your way to supremacy for a small brand is just not a really viable option. I'll answer it in a little bit reverse. The most common mistake that I am seeing with entrepreneurial brands is accepting opportunistic distribution without the ability to support it.

Dan: Absolutely.

John: So, Publix calls and wants sku's. Well, okay I'm based in Colorado and I don't really have infrastructure in Publix geography. I don't have the ability or the dollars to support it. What happens more times than not unless you just are lucky, is you get discontinued you're in the penalty box for a few years. It's a costly setback. To me, the winning strategy is to have some patience to go deep in whatever targets geography and support the heck out of it to demonstrate a great velocity trend, and to not move any faster.

Because you could push distribution, but that's a short-term strategy if the velocity doesn't follow. So, supporting that means intimacy both with the consumer and a very cooperative relationship with the retailers. Lucky is a great example. Again, that's a local one for us, but they have understood that their point of difference from Kroger and Safeway is also in this ability to be more agile, to be more responsive, because they're not as big. National distribution in a big chain is often weighty on the ability of a young brand's ability to responsibly accept.

Dan: I think I'd go one step further. One of the other challenges is that small brands are unfairly disadvantaged. They're penalized effectively for being in a large chain because of all the fees, and all the things that are thrown at them. When you look at them at the fees as a percentage of sales or what they're doing are in shelf, they can't compete at that level where the big brands have more money. More importantly, a lot of the big brands don't pay those fees. I know that I didn't as a big brand in several situations.

Going back to what you said, the other thing that I think is really challenging for these small brands, and you brought this up earlier, is that they're always looking for dollars. Instead of always trying to go out and find your next dollar to get an extra facing or to develop a new product, or develop innovation, to your point brands need to go deep. They need to focus on their core principles, on their primary capabilities before they start thinking about other things. They need to build where they have distribution. The greatest successes are in their core mission. The reason for being I guess it'd be the best way to put it, but more importantly, develop that and then go forth.

That gets back to the strategies, and I talk about this on a lot of the different podcasts, and I built this into my free Turnkey Sales Story Strategies course. Having that selling story and developing that selling story, so that when they go to the retailer, instead of being an ATM for the retailer, they're providing true value in terms of insights, actionable insights that the retailers want and need, which helps differentiate their retailer from their competition. Again, that's why these smaller retailers are standing out.

Having a strong online presence to help give them the runway and support them, I know that there's some really good strategies where you could have a product, sell a product online and develop a really good strategy around it, and then target a specific area and leverage that strategy to also help you drive sales or brick and mortar. There are a lot of creative things that small brands can do as long as they're creative, nimble, and are thinking out of the box, and not trying to recreate or not trying to copy what the big brands have done.

As you said, the strategies that worked yesterday are not working today. Any other thoughts you want to share?

John: I guess I just appreciate the chance to chat with you on this. There's much more to talk about, but happy to have a place on your podcast. We'll pick up the conversation again soon.

Dan: Thank you. I look forward to that. One thing I didn't get a chance to say is that your good friend Gary Hirshberg and I were talking. People vote with their dollars. As a parting thought, one of the reasons that things are changing is consumers want to feel good about the products that they buy. We're not going to wait for Washington or Wall Street to decide how things are going to be. These new consumers that are driving these trends at shelf. People have a lot of different choices in terms of where they buy, how they buy. Again, I really appreciate this conversation, and you pointing out some of the key differences between the big retailers, the big brands, and the small and agile in this industry that we play in. As always, I really appreciate your time. I look forward to our next conversation.

John: All right. Thanks, Dan.

Dan: I want to thank John for coming on this show today. I appreciate him taking time for us, and sharing with us his insight. I'll be sure to put a link to Summit Venture Management or you can learn more about John and read his article, the article we talked about today in the show notes and on this podcast webpage. You can get there by going to brandsecretsandstrategies.com/session63. Today's freebie is my strategic solutions to grow your brand. In this guide, I share with you an overview of category management, how brands can leverage these advanced strategies to grow sales and to get their brand and more retailer shelves and in the hands of more shoppers. You can download it instantly by texting, "Strategic Solutions" to 44222 or by getting on the podcast webpage or in the show notes. Also, don't forget to check out my free course, "Turnkey Sales Story Strategies" or dig deeper into this.

Thank you again for listening. I look forward to seeing you in the next show.

Summit Venture Management https://www.summitventuremanagement.com

This episode's FREE downloadable guide

This short guide levels the playing field between small brands and their more sophisticated competitors. It highlights the advanced strategies the big brands use called Category Management - what retailers want.

CLICK HERE TO DOWNLOAD YOUR FREE STRATEGIC GUIDE: Strategic Solutions To Grow Your Brand

Thanks again for joining us today. Make sure to stop over at brandsecretsandstrategies.com for the show notes along with more great brand building articles and resources. Check out my free course Turnkey Sales Story Strategies, your roadmap to success. You can find that on my website or at TurnkeySalesStoryStrategies.com/growsales. Please subscribe to the podcast, leave a review, and recommend it to your friends and colleagues.

Sign up today on my website so you don’t miss out on actionable insights and strategic solutions to grow your brand and save you valuable time and money.

I appreciate all the positive feedback. Keep your suggestions coming.

Until next time, this is Dan Lohman with Brand Secrets and Strategies where the focus is on empowering brands and raising the bar.