Food Entrepreneur - March 3, 2020 - 14

FOOD ENTREPRENEUR

the
effect
Emerging brands are
rewriting the rules of retail

BY MONICA WATROUS

M

any food start-ups are selecting
Amazon.com as a first route to
market and rewriting the rules of
retail as a result. Digitally native brands, as
they're known, sidestep the slotting fees,
limited shelf space, merchandising resets
and other hurdles of brick-and-mortar grocery, while enjoying a number of strategic
advantages that have unsteadied the competitive landscape for conventional brands.
Nutpods, a line of unsweetened, nondairy creamers, has soared to the top-selling spot in its category on the site, besting
bigger brands like Nestle's Coffee-Mate
and Danone's International Delight. In
2019, the Bellevue, Wash., start-up was
named Amazon's Small Business of the
Year, selected among 1,300 candidates. Its
sales on the site have surged 5,500% since
launching in 2015.
Nutpods already had generated buzz
from a crowdfunding campaign a couple years before, said Madeline Haydon,
founder and chief executive officer. The
effort helped demonstrate demand for the
concept, a shelf-stable replacement for
half-and-half based on a combination of
coconut and almond with natural flavors
and no added sweeteners.
Last year, the brand landed in the
No. 13 spot (No. 2 of all food and beverage
companies) on the 2019 Inc. 5,000 list of
fastest-growing companies, with threeyear growth of 11,623% and $19.1 million
in revenue in 2018. The company achieved
this with 24 employees.
14

Food Business News

"The ability to scale (on Amazon
versus traditional retail) cannot be overstated," Ms. Haydon said. "If you wanted to
launch on Amazon, you can launch it with
one person who can support your sales
when you're selling $100 a day. But that
one person is doing the same work when
you're selling $100,000 a day."
Gathering feedback and data from
online shoppers prepared Cali'flour Foods
for a broader move into retail stores. The
Chico, Calif.-based company offers a range
of frozen pizzas and pizza crusts formulated with cauliflower, eggs and cheese.
"Going online allowed me to get all the
kinks out," said Amy Lacey, founder and
c.e.o. of Cali'flour Foods. "It's more forgiving than a grocery store ... You'll never get
back in once a grocery store kicks you out."
Cali'flour products are available
nationwide in top retailers, including
Kroger, Whole Foods Market (a business
unit of Amazon) and Walmart, but Ms.
Lacey said Amazon's reach is unmatched,
particularly for emerging brands.
"We literally went from negative
$269,000, which is getting started -
there's a lot of fees in the beginning of
launching a new product - to $20 million
online within 24 months," Ms. Lacey said.
"And Amazon was a big part of that."

The size of the online prize
By some estimates, online sales are
predicted to capture 20% of total retail
grocery sales, or $100 billion, by 2025 in

the United States. A recent forecast by
Nielsen pegs that figure at $143 billion. In
2019, 54 million households purchased
food and beverages online in the United
States, up 14% from two years earlier,
according to Nielsen.
Amazon.com Inc. is the leading
online grocery seller with $8.2 billion in
sales, trailed by Walmart at $2.44 billion
and Kroger at $1.51 billion. Target, by comparison, has $423 million in online grocery
sales, said Betsy McGinn, co-author of
"The Amazon Roadmap."
Amazon offers several platforms
for brands to sell finished goods: Vendor
Central (product is shipped and sold
by Amazon), Seller Central fulfilled by
merchant (product is shipped and sold by
brand), and Seller Central fulfilled by Amazon (product is shipped by Amazon and
sold by brand). Each option offers various
benefits and drawbacks, Ms. McGinn said
during a Jan. 20 workshop at the Winter
Fancy Food Show in San Francisco.
Start-ups also may apply to participate in Amazon Launchpad, which
provides education, merchandising and
global infrastructure to early-stage businesses. Soylent, the meal-replacement
brand, gained marketing exposure and
organizational support from the program,
said Ben Knox, head of digital retail at
parent company Rosa Foods.
Product viability and visibility are
central components of a successful Amazon strategy, Ms. McGinn said. Brands
should consider pack size, price point
March 3, 2020


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Food Entrepreneur - March 3, 2020

Table of Contents for the Digital Edition of Food Entrepreneur - March 3, 2020

Food Entrepreneur - March 3, 2020
Commentary - Mind the gap
What's in store for retail?
The plant-based revolutionaries
The Amazon effect
News
Food Entrepreneur - March 3, 2020 - Food Entrepreneur - March 3, 2020
Food Entrepreneur - March 3, 2020 - 2
Food Entrepreneur - March 3, 2020 - Commentary - Mind the gap
Food Entrepreneur - March 3, 2020 - What's in store for retail?
Food Entrepreneur - March 3, 2020 - 5
Food Entrepreneur - March 3, 2020 - The plant-based revolutionaries
Food Entrepreneur - March 3, 2020 - 7
Food Entrepreneur - March 3, 2020 - 8
Food Entrepreneur - March 3, 2020 - 9
Food Entrepreneur - March 3, 2020 - 10
Food Entrepreneur - March 3, 2020 - 11
Food Entrepreneur - March 3, 2020 - 12
Food Entrepreneur - March 3, 2020 - 13
Food Entrepreneur - March 3, 2020 - The Amazon effect
Food Entrepreneur - March 3, 2020 - 15
Food Entrepreneur - March 3, 2020 - 16
Food Entrepreneur - March 3, 2020 - 17
Food Entrepreneur - March 3, 2020 - News
Food Entrepreneur - March 3, 2020 - 19
Food Entrepreneur - March 3, 2020 - 20
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