BRAND SECRETS AND STRATEGIES

PODCAST #93

Hello and thank you for joining us today. This is the Brand Secrets and Strategies Podcast #93

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's story is about a small innovative organic brand that's working hard to change the way that retailers think about organic snacks. In fact, one of the best parts of the story that you're really going to like, is how they're bridging the gap from the perimeter of the store where people first walk in to the center of the store, where your products probably reside. The produce section is where consumers first start beginning experimenting with organic. It's where consumers that are new to organic begin to develop that trust and that relationship with those products. More importantly, produce is the gateway into the center of the store.

Produce is also where a lot of retailers try to differentiate themselves from the competition. It's where they want to stand out from the crowd. Most retailers stake their identity on their produce section, who they are, the value that they offer to their consumers, et cetera. Fresh, healthy, organic produce that consumers can trust, that they can rely on for good, high quality every day of the week. This is one of the primary reasons why their produce section is the first thing you see as soon as you walk into the store.

In addition, produce is the one category within every retail store that helps them defend against the online threat. Consumers don't yet trust online retailers to select their produce. They want to do it themselves. What's great about today's stories, we share a lot of stories and a lot of anecdotes about how Made in Nature's working hard to redefine the category and help the retailer understand the value of being able to leverage their product to drive sales into center store. That in addition to helping the retailers understand that the way consumers eat foods today are very different. We snack a lot more than we ever have before. Instead of three squares a day, most consumers eat one or two meals and then backfill their day with a lot of different snacks. These snacking occasions create a unique opportunity for retailers to drive traffic into the store and help differentiate them by providing a healthy variety of snacks that consumers want. Here's Doug with Made in Nature. Doug, thank you for making time for us today. Could you start by telling us a little bit about yourself and your journey to Made in Nature?

Doug: Sure. First of all, thank you for having me on the line. Pleased to be here. I am a long time ago a reformed private equity and venture capital investor. I did that through the '90s and in 1999, I left running a fund to form a business with my brother to own and operate businesses. One of the very first things we did was to go into the food business, brand new food business. Since 2003, we've owned Made in Nature, and when we bought Made in Nature, it was a very small company with a big brand name. It was one of the oldest organic and natural food brands in the US having been started in 1989 and it was started as a full line of organic fresh produce, starting in the Pacific Northwest and moving down into California.

It was really before there was USDA Organic. They call themselves organic based on the agricultural practices they were following and the brand grew significantly, obviously in the natural food channel. So really what happens in 1992, the company came to the attention of Dole Foods, and Dole thought, "What a great idea it would be to drop this burgeoning little organic food company into their global distribution and sourcing network." They bought the company and strategically it seemed like a good idea, until of course they had to go in and explain to retailers why they needed to have organic fresh produce in their fresh produce departments.

By the time this Dole sales people were selling the virtues of Made in Nature's organic aspects, good for you, good for your customers, good for the environment, et cetera, et cetera, invariably the retailers said, "Well, wait a second here. So if this is the good one, this Made in Nature thing, what are you doing to the Dole product?"

Doug: So they were immediately in a position of having to defend ... it sounds like the tail wagging the dog, gets sort of a pimple on the end of the tail wagging the dog and they had to defend their core business. So what happened was Dole shut down everything fresh and Made in Nature and shrunk it down at the time to being just an organic dried fruit company. Sold it back to the founder, Gerald Prolman in 1993 I believe. Over the course of the next decade, Gerald grew the business or regrew the business, had some challenges with the commodity batch and things like that. But ultimately we bought the business in 2003 from Rabobank who had ended up, through a circuitous route, owning both Made in Nature and the Del Monte brand for dried fruit and nuts.

We bought both of those business from them and Made in Nature was then again, a very small company focused exclusively on California based dried fruit, organic of course. So the brand has always only been associated with organic foods. We bought it and it had a great reputation just because it had been around for a long period of time, or a well recognized brand. May have been partly because it had been around since the advent of organic food and partly because of what we call nature's confusion, or nature confusion, where people confuse Made in Nature with Back to Nature and Nature's Path, and Nature Made and all of those other things. There was fundamentally a good brand recognition in a positive recognition associated with the Made in Nature brand.

Until we started from that base, in 2003 rebuilding the company's presence in the natural food channel, and then diversifying outside of California based dried fruits into more international interesting dried fruits. Part of the motivation for that was that we came to the realization that dried fruit in North America, unlike the rest of the world, were seen primarily as a baking ingredient. If you want to find where raisins or prunes or cranberries are sold in a traditional grocer, it would be in the baking aisle. The rest of the world looked at dried fruit as a snack item, so that people eat in Europe and in Asia, they might eat dried apricots or dried dates or mango or whatever, similar to the way North American consumers would eat cheese and Oreos and so forth. It was just a natural part of their snacking pattern.

So we took it on as our mission to try and get North American consumers to view dried fruit as something more than something that they would use to bake into their muffin. The way to do that was to hopefully introduce different kinds of dried fruits from different parts of the world to the North American consumer, where they could hardly confuse them with being something you would bake in a cake. So we went first to Costa Rica and found dried organic pineapple and dried organic banana. Then we went to Mexico and we brought in organic mango. Then to Turkey for organic apricots and organic Smyrna figs, and mulberries and organic cherries, and to Tunisia for organic dates and Sri Lanka for organic coconut and so forth, and tried to bring these products to the North American market and introduce them as a snacking item.

We changed our packaging from looking like an ingredient package that you would find in the baking aisle and tried to make it look much more like it was, which is an attractive snack. Then that was really the start of our journey. Then we started to combine these organic fruits together in ways where you might have eaten these products if you were in the Middle East. So we created a Mediterranean fusion of figs and apricots and dates and mulberries with a touch of cayenne pepper. So you had the sweet and the spicy.

Dan: I like that.

Doug: It would be impossible for the North American consumer to think, "That's something I should use to make a muffin." It was clearly a snack, and we did the same thing with tropical fruits, and then we introduced nuts and organic nuts and seeds to our blends, and again, made these clean ingredient, nothing but real food products that were clearly snacking items and eventually came figgy pops and toasted coconut chips, and our more recent vegetable items, kale and veggie pops and so forth, that all start using the same premise of organic nuts, fruits, seeds, vegetables, and spices, and can be combined in different ways to give people a different snacking experience.

That's really the history of how we got to where we are today. We've sort of stuck to the game we've always been in, and we've been extremely fortunate that the market has come to us. We didn't need to reinvent ourselves and take sugar out of things. We don't use sugar. We didn't need to try and create a clean ingredient approach. It was where we always were. So as people's eating patterns change, it's put us in a very fortunate position to be able to deliver a wide variety of snacks to people who want to eat healthier.

Dan: Great. I appreciate your sharing all that. That's a lot of information. I'll backup, I want to dig more into this. One of the things, I'm looking at your LinkedIn profile, is that it says you're also the co-chairman of Sunsweet Fresh. What is that and what's the relationship there, if anything, because I know it's a similar category, similarly play?

Doug: Yeah. Well, Sunsweet Fresh is ... we're the licensee of the Sunsweet brand for all things fresh. That was the first company that my brother and I started when we decided to leave the private equity world, and it's California based and it was focused on, at the time when we started, bringing sort of new ripening technologies to traditional things like stone fruit. This was the preconditioning program and so forth. Our partner in that deal was a fellow by the name of Bill Haase, he's a fellow by the name of Bill Haase, who was a former CEO of Sunsweet Growers, which is the prune cooperative. Also prior to that was the president of the Americas for Del Monte Fresh. He brought with him not only a love of the Sunsweet brand, but also the knowledge of the fresh produce category, and that was a company that we started at that point and frankly it was how we, I believe, how we got the opportunity to buy the Del Monte brand for dried fruit and nuts, and ultimately Made in Nature.

So the businesses are unrelated, and frankly the Sunsweet Fresh business is not active right now because we've sort of moved that business into another territory, but they're connected in terms of them again, being agriculturally based in this case out of California.

Dan: Appreciate your sharing all that, because that helps me connect the dots between helping me understand how and why you guys exist, how you're connecting the different categories and how you grew and learned more about this business. So let me backup. You start as a venture capitalist and one of the reasons I wanted to ask about that is that one of the big focuses for natural brand center, organic brands, is the idea that you've got to continually raise money. Now, I believe that a CEO should not be a perpetual fundraiser first of all, but to be able to do it and do it right. So you've got the skills and where I'm going with this is how did you leverage your skillset, your understanding of how to raise money, how to use money, to be able to leverage that, to be able to support the business. Then we'll start getting into the business in a minute, but how did you take those learnings and then help build a successful business around it having the inside track?

Doug: Well, I guess there's times when I think it does make sense. Sometimes it's necessary, but sometimes it doesn't make sense to raise capital because by having a venture capitalist or a private equity investor alongside you, they bring a different perspective to things. They bring some discipline, and a way of approaching businesses that might be different than the pure entrepreneurs do. Other cases, it's better to, if you can, try and do that without outside funding. The one cost I guess of dealing with a private equity or venture capitalist is that they have a timeframe that is sometimes driven by their investors. So if their investors are looking to ... they've pre-raised money in the form of a fund and they're looking ... those investors in that fund are looking to get a return in five to seven years, then it means that your strategic plan is influenced heavily by the reality and the necessity of the private equity fund.

In the case of Made in Nature, because there was such fundamental changes that needed to happen for the business, we chose not to raise outside capital. So Made in Nature is one of the businesses that we have invested in and we own entirely ourselves. I think that as the organic and natural foods channels have dramatically moved and changed over the course of the last few years, it's been the right decision for us. We could take advantage of opportunities quickly. We could take risk, and we could be looking for the long game in a changing marketplace.

Other companies in the organic and natural food spaces have ended up having to create a strategy that is focused on growing the top line because it's represented an opportunity to exit within a certain timeframe, or perhaps it kept them from diversifying because they wanted to go deep in a narrow line, and I think you'll find in, at least in the organic snacking category, that's what you find it populated by.

There are aspects of the private equity and venture capital model that I miss in that we don't have that capital, but I do like the discipline. I like the way of thinking. I like the fact that a good private equity or venture capitalist is really not trying to tell the company what to do. They're just asking questions that make the experts in the company think about their business in different ways. I think that is a very, very valuable asset for any company to have. But in the case of Made in Nature, we have chosen not to go down that route this time.

Dan: I appreciate your sharing that, and that's exactly why I wanted to go down this path is because I find that a lot of venture capitalists really don't understand the food business. It's a black hole, and they're trying to understand how do they get their evaluation, how do they focus on the top line growth like you said, and it undermines, like you said, the company's ability to be focused and driven and diversify and do all the different things that you've got to do in a business where you've got to be extremely flexible. So thank you for sharing that, and I love the idea that you're talking about how you've got to be able ... the venture capitalist needs to be able to ask questions rather than, pardon me for saying this, but somewhat dictate terms, and that's one of the challenges, one of the dynamics that I run into with a lot of brands that I speak with, is how do you navigate those waters so that you don't become more beholden to Main Street as opposed to Wall Street, or Wall Street as opposed to Main Street. Anyhow, thank you for sharing that.

You bought the business, and I love the fact that you were talking about how Doerle had to struggle with saying, "Well, this is the good stuff," and then a lot of retailers were pushing back and so that's why they diversify. This is one of the biggest challenges that I run into with big brands, is they tend to commoditize the consumer and the products, and they don't understand what makes natural natural. Where I'm going with this is that I give a lot of talks, and a lot of times I'll ask the question, what's better? Non-GMO, organic, natural, et cetera, and the audience, including people in the industry, have a very, very difficult time communicating what organic means or what non-GMO means, et cetera. My point being is that, if we as a community, as an industry, can't define it or can't explain it to ourselves, it makes it that much more difficult to communicate that to the customer, and that's where I'm going with this.

As you buy these brands and bought this brand, and you're starting to get it up and running, what did you do to help communicate more effectively what the benefits of organic were? Thinking about the fact that you're actually more of a trailblazer, you're doing something unique and different. Doug, what did you do to help the retailers understand the benefit of organic versus other products?

Doug: Well, I think that's a fantastic question. The one clear thing that I'm sure you and your listeners appreciate is that organic is an objective standard as opposed to natural. I think there was a tremendous amount of distrust that was created by everybody claiming their products were natural. So by sitting there and saying, "Okay. These organic standards are determined by the USDA," is there are very strict rules within which one has to work. There's independent certifiers, and that independent and objective measurements that goes all the way back to the field. Arguing along the way as to why retailers needed to have organic alternatives within their store, this is what they call like a 10-year overnight success.

For a long time, the natural channel got it a long time ago of course, and their customer was buying products at their stores because that is what they wanted. They were self-selecting, but for a long time, if you called up a traditional conventional supermarket chain, they wouldn't take your call, because why would they displace Lay's potato chips or Oreos or Coke with organic products. Those ones, they're selling real estate, and those items turn very, very quickly and does their consumer, does the person who shops at their store really value the organic symbol, the consumer? Do they know what it is or it's just a big risk they're going to take to take out M&M's and put in figgy pops.

So for a long, long time, organic foods were confined to the natural food channel where consumers went to those stores because that's what they were looking for. I think the big catalyst that changed everything was when Costco decided it wanted to become the dominant player in organic food. As soon as they decided to do that, they made an all in commitment to organic. As you know, Costco rarely keeps multiple skews of any product. So when they were going to put in an organic lettuce, guess what? That was the only lettuce that people could buy there. So the Costco consumer was given the choice of, "You want lettuce today? Well, you're going to buy organic, you're going to try organic and trust us, we're Costco, we select well for you. That's our brand."

So as soon as Costco decided to do that, we were very, very fortunate in that we were in the right place at the right time and built a very broad relationship with Costco. But as they grew in organics, then conventional retailers started to realize that they were now not only losing customers to the natural channel, the whole foods and sprouts of the world and then vitamin cottages, but now they were losing customers to Costco because when people went to Costco to buy their organic meat and dairy and fresh produce, they also bought their paper towels there, and they brought their shampoo there, and they bought all these other things.

So all of a sudden, conventional supermarket chains realized they needed to have organic skews in their stores as well. They needed it as a defensive measure as opposed to an offensive measure, and they, as you know, didn't give up selling potato chips or Coke or whatever, but they did very selectively include organic products inside of their selection. For a long time, what they did in order to lead their consumer, or the consumer looking for those products, to know where in the store to find these products, they created a store within a store.

So there was a natural food section, and now as consumers have been trained to understand what organic means and non-GMO means and so forth, because of the proliferation of places where you can buy them, you're starting to see more and more of the integration of organic skews, where they're sitting on the shelf next to their conventional alternatives. That gives the consumer what I consider to be the biggest opportunity for the natural food business, which is it gives the consumer the opportunity to turn the bag around and look at the label and look at the ingredients, and realize not only is this certified organic, or it's non-GMO, but it doesn't have any of the crap in it. I don't know, maybe I'm not allowed to say that on a podcast, but it doesn't have many of the terrible things in there, unpronounceable ingredients that, or flavorings that have been added or all of these artificial things, and the consumer is in a position by having them side by side to compare and figure out whether or not it's worth it to them to feed their family a cleaner ingredient package, even if it costs a little more.

Dan: This is exactly what I've been talking about all these years and this is exactly almost the same language I've been using about literally, retailers don't make anything. Generically speaking, they sell real estate in the form of the space that your product takes up on their shelf, and the point behind that is that what they need, what they're interested in is a few more customers in their store and a reasonable profit. So I love the fact that you connected all the dots, and by the way, I once was the grocery manager at Price Club, before they became Costco. Well, and it was interesting is we did not have natural organic products when I started there, but I was ... this has always been a huge focus and a passion of mine.

So I remember I brought in a, what I believe is probably one of the first energy bars. A company in Longmont made something look like a baked roll, and it was fantastic, and I brought it in and it was a very, very dense, it looked like a pastry treat, but it was an energy bar, and it was fantastic. Anyhow, trying to bring another natural organic products and starts over, but the point is that this is exactly the kind of stuff that I've been telling people that ... So thank you for sharing all that, check's in the mail.

It's so important for people to hear this because the notion ... first of all, there's a group of people that believe that natural organic is a brand new thing. It's a fad. It's like, "No, no, no." This is what our grandparents grew up with, one. Then two, if consumers don't have a choice, then let me repeat, let me change it. A lot of the big retailers spend most of their time trying to sell us the stuff that they have on their shelf rather than asking us what we want to buy, and by providing the consumer with a choice that they can make based on what's best for their friends or family, et cetera, that's how you drive category sales.

So to your point, store within a store, dumbest idea I've ever heard, but yet to have the products side by side so that if you pick up the product and you look at it and you can see, you evaluate it, and by the way, consumers now look beyond the four corners of the package. You do the research online, et cetera, to understand what that means, what the ingredients mean, but if they can make a decision based on what's best for them, then that's how you drive loyalty. That's how you drive sales in every category. So thank you for sharing that.

Again, this is so critically important that anyone listening understands. Then the next thing I wanted to get to is that you're no longer a commodity, and I really would like to have a conversation with you around that, and this is what I'm getting at Doug, is that a lot of the big brands and retailers think of products as a commodity, they commoditize them after shopper then after products, et cetera. The reality is, is that your product's worth far more to the retailer at the end of the day, because the consumer that buys organic dried fruit, is probably more apt to buy a lot of organic products across the rest of the store.

Doug: For sure.

Dan: Therefore, your market basket's worth more. Do you bake that into your selling story? If so, how do you do that? What do you do to support that?

Doug: Obviously, one of the things that's much, much more available now than it ever has been before is data. It is pretty clear that the person who will pick up one organic product, their basket is going to be bigger than anybody else's. So if somebody, one of the arguments we will say is, to a retailer is, look, if you're going to have, just talking about our dried fruit items right now, you've got to have at least some organic dried fruit skews in your store because if you don't, you're going to miss out on that consumer. So if you are going to have some more organic dried fruits skews on your shelf, you might as well have it with the brand that's the biggest and the most established in the space, that has some brand recognition, because in this particular case, it is not commoditized. We can stand out, there's a big push as you probably know for private label in virtually every retailer that's out there, and it's hard to commoditize organic products.

There's generally speaking a supply and demand relationship. So we're often asked whether or not we would do private label, and generally we'll say, "Well, we'll do it where the supply of that product exceeds the demand. But if what you're asking for is a product where there's relatively scarce demand relative to supply, then why would we take it away from our branded consumer and offer it to a private label consumer?"

Dan: I appreciate your saying that. I don't think a lot of people think about that. One of the things that branded products offer is trust. One of the challenges I have with private label, there's definitely a need for private level, let me clarify that, but the reality is that, a lot of the products that are private label don't have that authenticity, that commitment to transparency, et cetera, that branded products have. I think that is a challenge for them in this space. Like you said, natural organic products. That's one of the reasons why I'm such a proponent for having branded products on the shelf.

Now, the other issue is that having a private label product instead of a branded product, there's nothing to compare it to. So you've got to have, in my opinion, the branded product first so that the private label can play off of that. I think that's another mistake a lot of retailers make in terms of they want the private label product trying to build out the category and yet there's nothing to compare it to. So that's a whole nother conversation.

Doug: It is. It basically depends on the retailer. If you're talking about a retailer that has five different items or five different brands of the same item, including a private label brand, then you've got a different challenge than if you are your former employer Price Club, or now Costco, where they say, "Look, if you would like to have a bag of mango, our brand, whether it's a Kirkland Signature brand or the Costco brand itself, you're going to trust that we're going to not put a second quality product on the shelf." What it does is if somebody who's inclined to have mango, they will try the private label brand. It's a different challenge if you're at Safeway or Kroger and it's beside four branded ones that you know and trust, and the private label, what it is, and then you have to make the conscious decision to buy the private label brand even though the brands that you recognize and trust are sitting there right beside them.

Dan: Right. Well, and they make that choice at the shelf. I don't think a lot of brands think about in terms of as you're building your selling story against private label, because let's face it, it's another brand on the shelf, is that private label might provide great margins to the retailer, but rarely if ever do they support it, the menus, the menu fees, the programs, the merchandising, so on and so forth. The retailer has to pay for that out of their pocket. So there's an opportunity for brands to be able to leverage their message to be able to drive consumers into the store. Thus again, making the market basket better or higher for that brand. Your thoughts?

Doug: No, absolutely. I couldn't agree more, well said.

Dan: Thank you. One of the things you said is data. At the bottom of every podcast episode in the show notes, I put a link to an article that I wrote for the 2016 Category Management Handbook. You might get a kick out of this. So, this is several years ago obviously, but Nielsen gave me a lot of data to look at, almost every category for different attributes, including natural, organic, gluten free, et cetera. The gist of the story is this, that most products, most categories are up a little bit, but when you remove that component, that's natural, organic, almost every category's down or declining. My point is this, that small sliver of natural organic products are what are responsible for the sustainable sales across every category, across every channel.

Now, the reason this is important is because retailers need to embrace the fact that it's these disruptive brands like yours that are driving the sales across every category. Again, you need to build this into your selling story so they don't try to commoditize you or look at you as an ATM machine, but more importantly, look at you as a value added resource to help them drive sales in the category. Where I'm going with that is that what's unique about your category that you play in is that produce is what drives sales to the center of the store. More importantly, produce is where consumers begin to experiment with natural organic products.

So for your ability to make that bridge or that connection between natural, organic, and then more importantly, be able to make that bridge between this perimeter of the store to the center of the store, puts you in a unique position where you can help develop and drive sales to other categories within the store. Any thoughts or suggestions around that? Let me ask you, what do you do to leverage that?

Doug: Well, I think one of the ... some fundamental changes that have occurred obviously over the course of the last couple of decades as it relates to the organic and natural foods, one was that it used to be a choice. Do you want to eat healthier or do you want something that tastes good? There were people who were diehard organic food eaters and so forth, were prepared to compromise on flavor or taste in order to know that they were eating something that was grown ethically and environmentally correctly and so forth. I think that the industry itself has evolved to the point where it's no longer a choice, you can have both. You can eat healthier and it can taste good. There's two demographic dynamics that are happening or socioeconomic things.

One is the baby boomers are getting to ... the front end of the baby boomers are starting to get to the point where they are extremely focused on their mortality, and so they are prepared to eat cleaner and eat healthier. Their kids are through with school, they've paid off their mortgage, they've got more disposable income and more assets, and because their parents lived longer, by the time they inherited from their parents, they didn't need to use that money to pay off their mortgage. They have assets and they're prepared to spend it on good quality food.

The second piece is that millennials have been raised eating better food and they're now a generation that spends a higher percentage of their disposable income on food than any other generation before, because they are eating better, and they're eating cleaner, and that's all they know. So you've got this dynamic of to where all the wealth is in the country right now, where all the disposable income is, is what's driving these category in the store, and that's why you're seeing the growth there. As you say, that's dragging along with it the overall growth within the category. So much more of the growth is in the cleaner end, clean ingredient end, of the supermarket, and the others are sort of getting dragged along with it. Or in some cases it's coming at that expense, but the net is an increase in dollars spent and return on that real estate.

Dan: Well said. In fact, this is another thing I talk about a lot when I get up on stage, is the fact that boomers are the ones that are driving the trends. We hear about millennials this, millennials that, and that's all well and good, and certainly we need to be paying attention to them. But as you said, and I like the way you put that, is that those two generations are tied together, and you can't ignore one at the expense of the other. I guess that's really what I wanted to focus on is that, and this is where I think the industry needs to pay more attention to, is stop looking at one generation and think that's going to be the future, that's going to be the saving grace. It's all the generations and what do each one of them bring to the pi. Like you said, in the boomers, this is the way they grew up. I'm a boomer and this is the kind of food that I ate when I was a kid. So I remember what it was like.

By the way, one of the things that I think a lot of people fail to realize is that when you stop eating a lot of processed foods, things that come from nature are sweeter, and you don't need all that sugar. So is that something else you bake into your story?

Doug: Absolutely. I think that that is our mantra at the end of the day, is that the nature can provide a much, if you get the chance, can provide a much richer, better tasting, as natural, obviously a misused word, but than can be made in a lab. You have to give it a chance and you can combine, one can combine these fruits and vegetables and nuts and seeds and spices in such a myriad types of ways and create very, very different eating experiences. At the end of the day, it's almost without exception, those eating experiences will be better than if you buy a lot of processed food and try processed food.

Dan: To go one step further, if you are what you eat and if you believe that, then what you eat matters. If you eat the products that fuel your body, that give you the energy and the clarity of thought, et cetera, then those are going to help you get through the day more. What I love about that argument is that spending a little bit more at shelf to buy a product that better fills your nutritional needs is actually going to save you money down the road. Whereas if you buy highly processed foods, it numbs your taste, it numbs your ability to smell, it gives you the highs and the lows, but it doesn't give you that sustainable energy. This is one of the things that I think we as an industry need to do a much better job of communicating because again, may be a few extra pennies at shelf, but in the long run, it's going to save money.

In fact, I was talking to Gary Hirshberg about this and his point was, we vote with our dollars. His point was, and I'm kind of paraphrasing, would you rather spend the money to buy good food, to keep yourself healthy, and help prevent issues, medical issues, et cetera, or would you rather pay a doctor to clean up or fix the problems that you created because you didn't eat properly to begin with? Do you talk about a lot of that in your marketing?

Doug: Well, I guess I don't know that most consumers, boomers probably are now, but most consumers are actually thinking that far ahead. They're thinking, "What do I want to eat now?" What we talk about is the wasted snack where after you've finished eating your Krispy Kreme doughnut, it tasted pretty good at the time, but afterwards you kind of feel bad about having eaten it. You don't feel satiated and you just kind of, you wish you hadn't done it.

One of the big trends that's happening as you know, is that people have changed from eating three square meals a day and maybe a snack in between, to eating maybe one or one and a half solid meals, and then grazing all the rest of the time. They might eat an average four or five little snacks over the course of a day, and so therefore there's 25 to 30 snacking occasions over the course of a week.

Well, our mantra is never waste a snack. Never have one of those things where after you've finished, you go, "Oh my God, do I ever regret eating that." If you're going to have 25 snacking occasions in the week, I don't care how much you love a particular product, you're not going to eat 25 of them. You're going to have times when you crave a salty snack, another time where you crave an energy boost, or you just want to reward yourself and indulge and so forth. We have to make sure that we can solve or we can provide a solution to every one of those cravings without wasting a snack, without having the person after they've eaten it, go, "God, I wish I hadn't eaten that." That's what we're all about.

Dan: Great mindset. I know exactly what you're talking about. There are a lot of times where I'll think, "Gosh, I loved that as a kid," or something like that, and I'll have something and then I'll be kicking myself afterwards, or I'll be going for a bike ride, and I just don't have the fuel in the tank to get it up the hill real quick. So yeah, absolutely important. Snacking occasions, 25 to 30 snacking occasions. I'm glad you're focused on it, because I don't think a lot of people really understand that this dynamic, the way that consumers eat today is radically different than the way they used to eat before. So thank you for getting into that. So let's talk about that. How have you identified these trends and then what do you do to help close these gaps?

Doug: Well, I think it means that, again, the data speaks pretty loudly. You see, and one of the things that's different I guess maybe from a few years ago where you were looking at Nielsen data or otherwise, is there is so much data that's available from organizations like Oracle and others that actually it's not sort of what's off the shelf. It's actually what does that consumer buy and what else does that consumer like to buy, and what's their eating pattern, what else is in the basket and all of those kinds of things. It can make you feel a little uncomfortable, privacy issues, but there is so much data out there about how people's buying patterns are changing. The data speaks loud and clear that people just don't sit down and eat a solid lunch. They don't sit down and often five days a week they probably don't even eat a solid dinner.

What is the snack, that is a moving target because sometimes it could just be a mini meal. It could just be I had a bowl of greens or something, and sometimes it's just fuel for people just to push through a tough time and other times it's very proactive in thinking, "I'm going out for a big bike ride. I need to power up." But the data is out there and the more that we do focus groups and other things and realize that consumers are, they're fickle, and this is especially true in the case of millennials. Their attention span, the idea that somebody would eat a Snickers bar every day, it's just not even in the choice set anymore.

It doesn't mean that they won't occasionally want to have a Snickers bar, but it's not going to be the go to snack all the time. They want variety and they want innovation. They want different not only flavors but mouth feel. Sometimes they want to have something that's crunchier and other times something completely different. So it's important within at least the umbrella of Made in Nature, that we recognize that as much as we think our kale chips are fantastic, nobody's going to 25 of them over the course of a week.

Dan: It'd be nice though. Yeah.

Doug: They wouldn't.

Dan: You wouldn't complain. No, absolutely, and that's one of the things I wanted to get to. So thank you again for sharing that, is that you need to be able to diversify and to your point, yeah, Snickers had a great commercial years ago. They still show up occasionally about how it's that meal time go to solve that hunger issue, but yet the reality is that consumers want something different. I grew up on peanut butter and jelly sandwiches for lunch every single day, and one, the peanut butter and jelly, that got kind of old. So the ability to try different things and different flavors, and to your point, different mouth feels, to be able to offer something like that, it creates a unique opportunity or a palette for you to be able to really drive sales to different areas or folks who have different interests. So as you're developing products, what strategies do you use when you're thinking in terms of innovation? What is your focus?

Doug: I think we often, we'll look at a bunch of different things from a sort of inputs. One is where do we see a gap in terms of the way people like to snack? So sometimes that might be, we've just come up with veggie pops, we felt that we needed the next generation of a salty snack that was highly nutritious. So that was the genesis of, "Okay, how do we provide something that's a salty snack that is power packed with eight grams of protein, four grams of fiber?" and so forth, and try and address a need in the marketplace, an alternative to potato chips for instance, but a healthier one.

Sometimes it'll be driven by geography. So when we are sourcing products from around the world, we might say, "Okay, how do you use this product? How do you eat it? What is it combined with? What flavors go together in this space?" and so forth. So sometimes it's driven by this from the sourcing strategy and bringing new flavors to the North American consumer. Sometimes it's just experimentation in the kitchen. We want to have something that's got a little more crunch to it, or we want to have something that's got a more complex mouth feel, and it's ... So sometimes it's sort of internally driven. It's often externally driven. We always go to our customers and say, "Hey, you're buying these products from us, what would you like to see? Where do you see trends? What are your consumers asking for? What do you know?" Often it's reverse inquiry that will generate ideas for innovation.

Dan: I love it. That is so important, and this is one of the things I keep telling brands. One of the things that makes natural natural is that we have a closer relationship with our customers. We listen to what they want and we develop and innovate based upon their needs, what they're asking us to provide, and because we're doing that, that helps fuel our growth, et cetera. So the fact that you have a strategy that is aligned with asking your core customers what they want, that's ideally what every brand should be looking at. So what does that look like? Then how do you develop and support that relationship with your customers?

Doug: It's two pronged. It might start with working with the retailer themselves, the buyer, the retailer, and say, "Where do you see trends? What are your customers asking for?" and so forth. Then again, in the digital world, the ability to engage directly with your consumer is so much better than it used to be. You have 200 and something thousand facebook followers, well, engage them. Ask them for ideas. Ask them what they've seen. Look at what's happening in Pinterest and a lot of ideas that people are cooking at home or building themselves at home, how do you translate that into a much more accessible product to a broader customer base because not everybody has the time or the inclination or the capability to be able to do that themselves. How do you take that to the generation 2.0. If there's an idea that somebody's been working with and posting on social media or elsewhere?

It's a two pronged approach. One is with our customers who are dealing with our consumers, and the second is directly with the consumers themselves. Some retailers, it's a great argument for organic and natural brands to make sure they're at every meeting, and they don't rely exclusively on the broker to be in there talking to their customer, because the brokers, they could be the best broker in the world, but they've got multitude of other items and other brands and other products to show. If you're in that room and you have the opportunity to ask the buyer, "Where do you see a gap? Where do you see something, a trend?" et cetera. That question's going to get asked and it's not always going to be asked if the broker is being sent in there and has 17 other things to show.

Dan: Right. Well, I'm glad you said that also because I believe, and thank you for sharing that, that every brand needs to have their hand firmly on the will. What I mean by that is that brokers are phenomenal resource if you leverage them correctly. Reality though is that they do not have the same passion drive and enthusiasm as you the owner does because you're more connected to your consumer and to your point, they've got a lot of other things that they need to worry about at the same time. So by being engaged at retail, you're right, it gives you a unique opportunity to communicate, connect with, and really develop that relationship with the retailer.

One of the things you said earlier talking about data, and consumer data is so fantastic because consumer data allows brands like yours to be able to understand what's really going on in the category, understand what your consumers are looking for. Now, when I draw the correlation between this and focus groups, sometimes focus groups tell you what they think you want to hear, so that's not always the best strategy and that's what big brand use. But one of the things I did for a competitor of yours many, many years ago is I had them run a very informal Facebook survey. I baked that into their deck and helped them get into all the Safeway stores.

Now the point being is that, any of that information, being able to help a retailer understand how their consumers use their product, why they use the product, why their product matters, is so important to every retailed because the retailers want insight, they want actionable insights. They don't want to hear the same thing every other brand tells them. So when you're developing this data, this rich information about what your customers want, how do you go about communicating that to your retail partners?

Doug: Well, I mentioned Oracle earlier, we spent a bunch of time with Oracle just trying to understand our consumer better, not based on information other than what would historically have been available. From those consumer insights you can tell these are the characteristics of our heavy users and this is what else is purchased by those people, and how does this correlate with your customer Mr. Retailer, and often what we'll do is obviously just do some work on what that retailer's customer does and obviously, hopefully, demonstrate why bringing that heavy user of Made in Nature's products is good for that retailer. That kind of data is available and it's remarkable how predictive it is. It works. It's amazing. You can then target, one can then geotarget your advertising spend, your digital media spend, your social spend, et cetera, et cetera, and be able to demonstrate to the retailer that by taking these actions, it's going to drive more people to their store.

All of that ties together and we use that pretty consistently, and it's not overly expensive. Oracle's model actually is not that they're going to make money off of you, but they'd rather you are going to then buy targeted social media and digital advertising, and they will make money from whether it's Google or Facebook or whomever, from buying more targeted placements. Ultimately Oracle, this is for all organic and natural food companies, this is a tremendous asset to be able to understand more about your consumer and how you can target that consumer and then sell that story to the retailer as how you're going to turn that into more foot traffic in their store.

Dan: Well said. Then what's great about this, as you become a value added resource to the retailer, then you can use that as a point of leverage to negotiate slotting and other things. So instead of being an ATM machine, now all of a sudden the retailer looks to you as a value added resource. Now the retailer comes to you if they need an end cap or they need a promotion that they need to backfill or something like that. That's what's great about this. Then by the way, a lot of the retailers that I've worked with in the past actually give me full access to their internal data, which is even better, because then I don't have to pay for it, and it gives me a much deeper understanding of what's going on in their category and what's going on with their stores.

Is there anything else ... by the way, one of the things I forgot to mention is that as a kid, actually I used to take dried fruit to school all the time and everyone used to kind of look at me kind of strange, but I miss that. So the fact that you're bringing it back, I want to say thank you. Okay. So is there anything else that you can think of that we've missed that you wanted to share, and by the way, had a chance to try your veggie pops at Expo East, fantastic. Loved them. So anything else that-

Doug: It's great.

Dan: ... you think that you want to mention here?

Doug: One thing I would tell you is, because you suggested that maybe we would talk about the challenges, and one of the challenges any of those of us in the organic and natural, or well, called better for you snacking category, face these days is just inconsistent placement. So if you were to bring out an organic, let's call it Made in Nature shampoo, you would know exactly where in the retailer to go and find that shampoo. It would be where all the other personal care items are, or if you came up with a yogurt, it would be in the dairy section, or you came up with a soup, it'd be where the soups are.

The interesting thing is that if you go into a conventional retailer, most retailers at this point, and you said, "Would you mind just pointing me to the healthy snacking section?" They're going to look at you like you've got a bird on your head. "No, I don't know where the healthy snacking section is. I can tell you where the chips are," and as you probably know, the chips are sort of the traditional snacks and they used to be considered ... that space is controlled heavily by the Frito-Lays of the world, the people who are in the store stocking those shelves. They control that space.

So what happens from retailer to retailer, and even within a retailer from store to store, is that our products could be almost anywhere. So it's an extra challenge that people who are in the organic, natural, healthy, sort of better for you snacking lines, and they had this extra challenge of even if the consumer wants to buy the product, they don't know where to find it in the store. Some retailers at this point are starting to come around and saying, "You know what? We do need to kind of create that destination within our store, and we're starting to see some things happening, but it's an extra level of challenge that we face until that takes root and becomes ubiquitous."

Dan: Well said. Years ago when I used to work for SPINS, I was working with a brand that wanted to understand the energy shot category. They were in 12 different places within of Whole Foods, 12 different places. You're right, how do you compete against that? To your point, Frito's not going to give up any space. So you've got to have a great story around that, and by the way, just launched a series of courses. One, how do you land shelf space and win at retail? It's exactly focused on this, and where I'm going with this is, and you're talking about retailers selling shelf space in terms of real estate, I go one step further. Retailers cannot be experts, cannot possibly experts on every category and every item they sell, is incumbent upon us as brands to help guide the retailer to how the consumer shops. So that's what this course does. It helps you have the retailer ...

I think it's so unnecessary because it's something that brands need. There are so many times when a brand will reach out to me and I'll help them, but because they're in the wrong category, it takes a lot of extra money to fix the problem, et cetera. A lot of extra work on their end in terms of moving products around and whatnot, within the store, the remerchandising, et cetera, and that's very expensive as opposed to getting it right the first time. So back to that example I shared with you, one of the things that we identified is that we put this particular product in the produce section and this is contrary to the way the retailer wanted to do it, but because we had a story around why that made sense, they did it and it worked for them.

Doug: I was going to say that it takes a tremendous amount of discipline for a small growing company to say no to a retailer when they want to place you in this part of the store as opposed to the place you'd like to be, because saying no on the hopes that saying no to an immediate opportunity, on the hopes that eventually, when the next category review comes up from the part of the store where you'd like to be in there, you're going to be able to get that across the goal line. Almost everybody is motivated to make the sale, and then you can get traded in that part of the store, extricating yourself to go to the other part of the store is more difficult, or your velocity is in the part of the store where you did get placed, turned out to be exactly as you expected, which is lower than it would be if you were in the other part. This kind of discipline is a very, very difficult thing to have for any kind of up and coming company who wants to broaden their reach. But it is absolutely necessary.

Dan: Absolutely. So very well said. I go one step further. Some brands accept distribution as stories that don't make sense to them, that don't fit within their core customer. Then they struggle to fill the shelf or to support that retail customer, and as a result, the rest of their business suffers. So you're absolutely right. Well, I really appreciate your sharing that. One of the things that I mentioned to you when we talked earlier that I've been doing on the podcast is giving you an opportunity to ask me a question. Is there a specific bottleneck or something that I can help you solve?

Doug: Well, I think strategically what we're always facing is are we filling an existing need or are we leading our customer, and what should be the balance between those two things? So to give you an example, there is a major convenience store chain who asked us to develop some products for them, and we did successfully and we said, "But you know, it's the person who's coming in after they've filled up their gas tank to buy a snack, are they looking for a hot dog or are they looking for whatever? Or are they looking for a healthy snack?" They said, "No, no, no. We think we're three to five years ahead of our customer, but we're trying to lead our customer to eating better." So you gained the distribution, but you know that the customer or the consumer of that retailer isn't quite ready to try your products.

Now, arguably, I mean Walmart is notorious for this and that they have said, "We want to lead our customer to eating healthier," and that's going to take time. So is it good or better to devote your distribution and your sales efforts, et cetera, et cetera, to these places where you probably know you're not going to get the velocity because the consumer is not yet there, versus focusing your attention and your marketing resources and your corporate attention, et cetera, to those places where you know your consumer already is?

Dan: I'd say the answer to the question is going back to what we just talked about, knowing where your sweet spot is, knowing where you have the ability to really drive sales, knowing where you have the ability to do the most good, not only for your brand but for your retail partners. Now, here's the caveat. One of the things that I think that natural organic brands need to do a lot better job of, I mentioned this before, is educating the consumer, educating the retailer first and then educating the consumer, because if we can't communicate the value of the products that we're putting on the shelf in such a way that we can get the retailer to share that same passion, enthusiasm, and help their customers understand the benefits of those products, then that is the issue. So while convenience is a tremendous opportunity, and I think it's going to be the future, it's certainly going to open up the doors for a lot of natural organic brands to be the future of CPG in terms of driving the health focused brands.

I think the answer to your question is that until we can do a better job as an industry, until retailers can do a better job communicating the value of the products that they're putting on the shelf, that's kind of a fine line to walk, and where I'm going with this is that if you could have an honest conversation with that retailer and say, "Okay, let's lower your expectations. Let's not talk about us in the same vein that you would if we were an established brand that everyone is going to be reaching for, but let's talk about this as an innovation strategy to build out future sales, and then set that expectation, so it's a different expectation, and then build yourselves and your strategies around that," that would be the first thing I'd consider.

Then if they are willing to go down that path with you and partner with you, understanding that they're not going to have the velocity that they would expect off of a salty snack like a Frito or M&M's or something like that, but yet they still want to lead the charge or lead the way in this way, and in that area, then I think that's an opportunity for you to differentiate yourself. It gets your brand in front of more customers or a broader variety of customers, but again, at the end of the day, don't lose sight of your core business and don't lose sight of your ability to educate the retailer, educate your consumer, own your consumer by driving them through your website and having that one on one relationship with them, and then leverage that relationship that you have with your core consumer to every retail. Does that help?

Doug: Yeah. Yeah. I think in this particular case I'm talking about, with both Walmart and with this particular convenience chain, they do have lower expectations, and they go in with their eyes open, that this is an investment strategy for them. So I do think that we're fortunate that they're not expecting it to sell like Doritos. I also loved your point, which is never forget where you came from, and a retailer, one of our closest customers once said that to us, they said, "You're doing great with all of these innovative products, et cetera, et cetera, but never forget where you came from." I think that presented an excellent piece of advice that we-

Dan: Thank you.

Doug: ... follow closely.

Dan: Well, it is, and it's that because, I forget the comment, you got to dance with the one that brung you so to speak, but yeah, it is so important. One of the things kind of as a side note that really frustrates me, is that a lot of small brands get their start in the natural retailer. Then when they have an opportunity to go to a mainstream retailer, this is the way it used to be, they would then leave the natural retailer and go to a mainstream retailer, and what I'm getting at or what I'm going back to, is that we all rise by helping each other and we've got to be committed to where our ... got to be found where our consumers are, one, and then two, we've got to help support the industry that gave us our start. The reality is that these natural organic retailers are the ones that are driving the change long before they show up on a mainstream shelf. So thank you for sharing all that.

Doug: Let me make one comment on that because I do think that it is another area where the rules have changed, and maybe your listeners in our sector would appreciate this, and that is that for a long, long time, organic and natural foods companies started out selling their products at a farmer's market or something. Then they got into the natural food channel and maybe they got into one division of Whole Foods or some other thing. Then eventually through blocking and tackling, they expanded their position and their in the natural channel. Then maybe they would get into a conventional retailer, and eventually roll out like that, and then down the road they would get to a mass, like a Walmart or a Target or something. Finally, if they were really, really good they would get into a big club chain. What's happened?

What we've been able to do, which is tremendously fortunate but also something that I think many of your listeners may want to consider, is that our new product development strategies often build around our relationship with Costco. So if we develop something new and innovative, we are able, by virtue of just the sheer pool of volume that Costco pulls through, and move down the cost curve of purchasing ingredients, of producing, of buying the equipment, et cetera, et cetera, much, much faster than we could if we started out selling in a single region of Whole Foods or in a single smaller retailer.

So what that enables us to do is to offer that product at a better, more attractive price to all these other channels, because we've been able to purchase things by the truck load, rather than by the pallet. So I think that their way of introducing products in the natural and organic food sector is different than it has historically been. More and more retailers are looking for exclusivity, and maybe you don't need to start and prove yourself at a natural food channel. Maybe you can go in and give an exclusivity period to a Kroger or a Target or Safeway or whomever, and get down that cost curve much faster.

Dan: Absolutely. In fact, I actually I spoke at NatchCom this last week on exactly this topic, where you've got to have a dual strategy and to your point, it's expensive to gain distribution in the natural channel. I'm just saying, you don't want to turn your back on the people that support you, but the reality is, while you're thinking about that, if you can drive sales into a mainstream retail or in any retail, Costco is an excellent example, then certainly there's an opportunity for you to gain runway. The topic of the conversation was developing sales online, develop, getting more runway, getting back to the beginning of our conversation about venture capital and how do you get enough runway to grow the rest of your business? So being able to do that online and then being able to leverage that relationship that you have with your customer to drive sales in traditional brick and mortar as you grow. But more importantly, not overstepping, as you said earlier. So thank you for that. Well, I appreciate your time. Thank you so much. Again, thank you for coming on and I look forward to our next conversation.

Doug: It was my pleasure and thank you for moderating as you did and asking the questions you did and I appreciate it. Thank you.

Dan: I want to thank Doug for coming on the podcast today and for sharing his insights. I'll be certain to put a link to Made in Nature in the podcast show notes and on the podcast's webpage. Today's free download is my free Turnkey Sales Story Strategies course. This is one of my most popular downloads and it was the inspiration for my first mini course. I'm developing a whole suite of mini courses to help you put the recommendations that you hear on this podcast, and other podcasts, into action, to help you get your product on more retailer shelves, and into the hands of more shoppers. How to land shelf space and win at retail, proven strategies to grow sales, stand out on a crowded shelf, and 2X your loyal shoppers. You can get there by going to brandsecretsandstrategies.com/session93. As always, I really appreciate your listening. If you liked the podcast, share it with your friends, subscribe, and leave a review. I look forward to seeing you in the next episode.

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