POD Foods’ Secret to Competing Big? It’s All About Backing Small Brands

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Welcome to the Community Call Podcast.

I am Melissa Travers, Director of Community here at BevNET & NOSH, here with my co-host Jackie Brugliera.

If you're enjoying the show, please follow and review us on Apple Podcasts or your listening platform of choice.

Jackie, it's just you and me today.

We've got lots of people traveling.

And I gotta say, I'm kind of excited for this Tata Tate.

Is that how you say that, Tata Tate?

Yeah, I think that's how you say it.

I just say one on one, I guess.

I'm excited to hear what we're going to talk about today.

Well, I want to start off with a topic that I'm incredibly passionate about.

It's the Whole30 diet.

The Whole30 diet is, as I'm sure so many folks in our community are familiar with, started by Melissa Urban.

It's an elimination diet.

And it was incredibly strict.

It started in 2010.

And they just started allowing three ingredients that were off limits from the beginning.

So all cooking oils, carrageenan, and sulfites.

But the all cooking oils one just totally stumped me.

And it just, to me, represents such a sea change in that way of eating.

Yeah, I'm curious if this is going to, I don't know, if this is gonna show other people that are, you know, more open to seed oils.

I know that it's kind of like very divisive right now.

Like people want to get certified that they don't have seed oils.

They're making that like a focal point.

They think that it's like inflammatory.

There's so many health and wellness influencers talking about it.

But then we see this where it's like, actually, maybe it's not so bad for you.

And they state that it's based in research.

So I'm just curious, like, what research are these kind of two sides of the conversation looking at?

And what should we be looking at?

I went down a rabbit hole.

So Hole 30 talks about why they made those changes.

And they said that they dove into randomized controlled trials and really looked at the research to show whether or not using seed oils affects people's health negatively.

And in fact, the research that they were looking at says that it improved people's health, their LDL and HDL cholesterol.

So that's the research that they're espousing.

But then, you take a look at the article that our managing editor of NOSH, Monica Watress wrote in her Trendlines report, there's still a huge movement against seed oil.

Sweetgreen last fall removed sesame and sunflower oils.

So instead, they're using extra virgin olive oil.

Shake Shack and Hop Dottie started using Zero Waker Farms cultured cooking oil instead of soybean oil.

And I just saw that Eric Schnell, who's of course the founder of Beyond Brands, is co-creating a seed oil free certification.

They're debuting at Newtopian now in collaboration with Dr.

Andrew Weill.

So it's just such conflicting information.

But I have to say, I mean, I can understand me personally, and maybe this is just because I got suckered into the original Whole30 elimination diet, and I felt so good when I was doing it that I think I sort of align the way that I felt when I was doing that diet with the things that I eliminated.

But just the way that a lot of seed oils are produced, like canola oil, they crush the seeds, they dissolve them in hexane, which is a solvent, and then they either heat or cold press them versus avocado oil, where they like mash the avocados, wait for the oil to leak out of it, and you can either use cold or heat.

But just the fact that they so highly process some of the seed oils, to me, makes me kind of want to stay away from them.

Yeah, I feel like just thinking about it simply, like that would also make me want to steer clear.

I do recognize that avocado oil and olive oil is super expensive, so it makes it really hard for people to produce products with those high quality, I guess, oils in it.

So maybe from an accessibility standpoint, they saw that this was limiting, and maybe the benefits outweigh the risks as far as being able to participate in the diet.

And this was just one thing that they saw was like a big barrier for people.

But again, yeah, I guess I personally try to avoid seed oils.

But who knows, like with more and more research, with so much focus on it right now, I'm curious to see what comes out of it.

Me too.

And I'm sure there's a difference between cooking with canola oil in your house and eating potato chips or Doritos or whatever it is that use canola oil, soybean oil, and then sort of a million other ingredients at the same time.

So it's not like those two are the same exact thing.

But I'll be really interested to see how the organizations that stand on a platform of avoiding seed oils move forward.

And I'm certainly interested to see how this seed oil free certification that Eric Schnell is working on turns out.

I have to say though, with the movement of the whole 30, I definitely started using ingredients that I hadn't used before.

So before that I never used avocado oil or coconut oil or ghee.

And I do appreciate that diets like that that are so restrictive kind of force you into trying different things.

And again, like to your point, I understand it's a luxury to be able to afford avocado oil and some of the pricier geese out there, that kind of thing.

Do you ever jump into any of these diets?

Or do you know exactly what you like to eat because of the way it makes you feel?

Yeah, I've never really jumped into diets.

I feel like, especially with like, when my parents were growing up, there was a huge diet culture, and my mom was really into Atkins, and we had Atkins everything in the house.

She bought all the products.

I would take their protein bars to school.

And I just saw some of the, I guess, detrimental effects of such restrictive diets.

So I've kind of steered clear to try and just eat what feels right to me, and maybe that fluctuates.

But I can see how it is beneficial to someone that maybe just wants to get back on track or wants to try something for a little bit to get a little bit more discipline in their eating or to try something new.

What were some of the detrimental effects that you saw?

I think it just disordered eating.

I think you'll diet.

And then once you're not dieting, it sounds like you took away some things from this, which is great.

But sometimes with like very restrictive diets, you kind of fall off the wagon afterwards, because it's not sustainable.

Whereas I do see with Whole30, like there are things that you can bring into your day to day eating that could, you know, be an easier transition out of it.

But yeah, I would say that's like the biggest thing.

And then people kind of just go back to what they were doing, or they're just, it's just chaos, because they just don't know what to do anymore.

They went from like one extreme to the other.

I do have to admit there were multiple instances while I was on the whole 30 diet of like binge eating dates stuffed with almond butter.

So there is that.

That's a good binge though.

That's a healthy binge.

Yeah, and it's delicious.

It's so good.

And there are so many businesses and brands that benefit from diets that are widely espoused like this.

Like I have to believe that Chosen Foods enormously increased their sales with their avocado oil and then their line of avocado oil dressings.

Fourth and Heart, Ghee.

And maybe there were other movements that were running alongside this that I wasn't quite as aware of.

But I do feel like this sort like Paleo Whole 30, this sort of like primal way of eating really did shift the way that brands in our industry think about putting together their recipes and their food products.

Yeah, and I'm curious because another change that they're doing is having a more expansive plant-based diet, which wasn't really featured as much in Whole 30.

They gave some options, but they were like, yeah, you really should be eating meat.

Whereas now they're, you know, seeing a lot of people are trying to eat plant-based and they're trying to adjust to that and provide an option for that.

So I'm curious if like I know a lot of people are Whole 30 certified, if that's going to open up the door for brands that are plant-based to also be Whole 30 certified.

That's such a good point.

So you can do the plant-based Whole 30, where you are able to eat legumes, and I think a few other things you can't eat on the regular Whole 30.

But with the regular Whole 30 elimination diet, now you can consume soybean oil, corn oil, rice bran oil, but you can't eat soybeans, rice, or corn.

And that doesn't quite make sense to me.

Yeah.

I know.

It's like the manufactured version you can eat.

So I'm also curious.

That's interesting.

Yeah.

Well, I'm sure it's not easy to figure out how to set up all these guidelines.

So it'll be interesting to keep an eye and see how the Whole 30 team moves forward.

Well, I have a product here that, I don't know, I feel like it probably would be included in the Whole 30 diet.

I have dark chocolate calf energy bites.

And these were sent to us by Kartik of Ducera.

And we've joked about this before, but I don't think it's an episode of Community Call without somehow mentioning Kartik.

But Kartik sends us a monthly care package of food products.

And this was one of them.

Really tasty.

So calf energy bites.

They almost taste like a tootsie roll.

So these are unlike pockets, chocolates, pocket lattes, because those are more of like a piece of chocolate.

Whereas these are date, semi-sweet chocolate, cocoa powder.

They use alulose, cocoa butter, and then they have 65 milligrams of green tea caffeine inside.

And they're a little bit chewy.

Like I feel like these would be great for runners or for you as you're getting ready for your big hike up Mount Whitney.

Yeah, I'll have to snack some of those because I'll definitely need caffeine at midnight when we start our hike.

So I'll just be chowing down on some chocolate.

I should send you a care package of like a thousand energy bites because that's what it would take me to get up Mount Whitney.

It's going to take a lot.

You told me that you were getting you were going to talk about some caffeinated chocolate.

So in my local grocery store, I saw a caffeinated chocolate.

I was like, I wonder if this is what she's going to talk about.

It's not the same thing, but it is very similar.

It's called a week.

And this is a caffeinated chocolate bar.

It's 54 percent cacao dark chocolate.

And it has the equivalent of one cup of Joe of caffeine inside of it.

I like the like playful branding.

It's like a little owl on front, like very minimalist.

I love the colors.

And I mean, the name kind of says it all, a week, which I think is clever and smart.

I haven't tried it yet, but this is also going in my backpack for my hike.

I like that it's a full bar.

So if you don't want, you know, whatever, I don't know, like maybe 120 milligrams of caffeine or whatever it is, you can moderate it a little bit.

Yeah, yeah, I like that, too, because I'm probably not going to eat the entire bar.

I probably eat like half of it.

And it does have, let's see, 101 milligrams of caffeine.

And it says to consume no more than two bars per day.

Unless, I guess, you drink five shots of espresso in a day, then you can handle it, but...

Which is possible.

What does it use for a sweetener?

That's a good question.

So the sweetener is, okay, so it's dark chocolate, unsweetened chocolate, sugar, cocoa butter, and then natural vanilla extract, and soybean oil.

Well, brands like CAF and Awake always have big challenges securing distribution at first, but POD Foods has a model that aims to assist up-and-coming brands with an upfront fee structure, speed-to-shelf, and a host of optional support from financing, warehousing, and freight that can help get CPG brands off to the races.

In this episode of Community Call, I talked to Dan Rabens, Director of Growth at POD Foods, about how POD's model works and what brands need to know to be successful.

Today on Community Call, we are talking to Dan Rabens, Director of Growth at POD Foods, a distributor that aims to improve speed to shelf and accessibility with the focus on the future of food and beverage.

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Join at slack.bevnet.com.

Working with emerging brands.

Dan, thank you so much for joining us today.

It is a pleasure to have you here.

Thanks so much, Melissa.

I really appreciate the opportunity.

So you've been with POD Foods, I think you said, for four years now.

I'd love to hear a little bit about your background and what your journey with POD has been like so far.

Definitely, yes.

So I've been at POD for about four years now, and really my role entails connecting with emerging brands in the US market place and internationally as well.

And what essentially I do is I will on-board and help introduce them to POD Foods, to our platform.

And then what my role also entails is setting them up for success on the platform and then opportunistically connecting them with many of our retail partners via our category management team.

In addition to that, working with emerging brands, I also work on the retail business development side at POD Foods in terms of on-boarding, meeting with new retailers that could have excellent fits and could have great product market fit with the brands that we carry.

And all together with POD Foods, I think it's also important to note, we currently carry about 1800 brands on our platform and we on-board about 75 to 100 new brands every single month.

So that's really where the bulk of my work now entails is really engaging and making sure that we're bringing the right brands on to the platform and then getting them set up for success with our retail partners.

And you mentioned that you spent some time in food tech even before POD.

I did, yeah.

So actually my background, I came from more of a traditional marketing background.

Got my undergrad at UCLA, master's degree, MBA at USC.

Worked at Taco Bell Corporate actually for my first three years.

Host MBA, did a lot of brand management there, and then Warner Brothers as well in CPG for about a year after that.

And then I've spent the last 10 years up in the Bay Area working in the food tech space, primarily for e-commerce, food tech marketplaces, for which POD Foods has one via our POD Direct platform.

So there's been a natural evolution and a natural flow from where I worked previously to where we are at POD Foods today.

Sounds like you're the perfect man for the job.

Why don't we get a little bit into POD Foods and exactly how POD works.

We were talking a little bit before we hopped on.

And even after multiple conversations with you and some other folks, there are some nuances that POD has that would be sort of worth exploring and explaining.

And I think one of the best ways to do this is to explain, how does POD Foods operate, and how is it similar or different from how other broadline distributors might work?

Yeah, definitely.

So for us all together, I think the best way to frame this up is in terms of what our core value proposition is for the brands that we work with.

And also the retailers, of course, will benefit from this as well.

But essentially at POD Foods, we're a national strategic secondary distribution partners with four specific ways to really help brands grow.

So the first is that we work with new and emerging brands.

We work with brands that lean into innovation, at least in some former attribute, with their product assortment.

Now, for us all together, as I mentioned earlier, we have about 1800 brands currently on our platform.

The majority are new to market, first to market, emerging brands, or brands that have gotten their feet wet in retail across the United States, that are looking for some gaps to be filled with some of our retail partners that we work specifically with.

So again, we onboard 70 to 100 new brands every single month, but our sweet spot are really the emerging brands, the brands that maybe have demonstrated some success in direct to consumer, and now we're looking for maybe their first point of entry into brick and mortar retail, or they're in brick and mortar retail to an extent, and are looking to accelerate and reach the scape velocity for which we're a very hands on organization, and we're here to assist with that.

So the new and emerging brands are really who we like catering to.

Additionally, the second component of our value prop that we provide to brands are that we offer them two paths to retail.

So our first path is our POD Direct platform, which really powers a brand's drop ship business, with some of the lowest fees in the industry.

We provide the brands with real time analytics, access to hundreds of stores nationwide, and also very fast account support.

And it is entirely free for a brand to onboard onto POD Direct, meaning they're listing their products, their SKUs, they're pricing their images onto our platform.

So that's the first path to retail that we offer all brands.

And again, free for any brand to onboard there, as long as they can drop ship their product to retailers within the United States.

The second path to retail that we offer brands, we call POD Express.

And POD Express is more of the traditional physical warehouse distribution platform, which really gives our brands access to some of the larger key accounts nationwide that we work with.

And we provide them with nine warehouses, nine potential warehouses nationwide.

And we have tri-temp storage across our nationwide warehouse network.

So what we're able to do is we're able to offer fast order fulfillment and consolidated truck deliveries of their product from our warehouses, whichever warehouses they're in, directly to the stores that are purchasing their product.

So the two paths to retail is the second component that we offer from a value prop standpoint.

The third out of four is speed to shelf.

So this is just, this has been founded.

It's been built into the DNA from day one, when Larissa and Fiona built POD Foods.

But really with us, any brand, of course, can onboard to POD for free, and we can get them onboarded within 48 hours.

They can have a conversation with us.

I'm delighted to take a 30-minute call with any brands.

Our team is willing to take a 30-minute call with any brands.

And from there, we can have them onboarded in 48 hours.

And then when a retailer were to approve the product, perhaps place the product on their APL, their approved product list, what we can do is we can get inventory inbounded to our warehouses, and then on to retail shelves within four weeks.

So really from start to finish, we're talking about a one-month process, from when a brand first takes a call with POD Foods to when that product is actually seen on retailer shelves.

And this could be retailers as large as like, let's say, a Sprouts, for example, with 415 plus stores.

So that's our third out of four components from a value prop standpoint that we offer brands.

The last is really just solving any existing distribution challenges that some of our brands might be engaged in.

We really support emerging brands.

That's our sweet spot.

And any emerging brands that have had challenges or perhaps complexities with larger distributors or other complexities in getting their product directly to retailers, we're here to assist with that.

Our model is extremely user friendly.

It was built for simplicity.

So that's another benefit.

That's our fourth of four benefits that we provide to all of the brands that we work with.

So certainly Speed to Shelf is a huge part of POD's selling proposition.

You mentioned that onboarding takes 48 hours or less.

Is that for direct or express either way?

It is actually.

Yeah.

So the direct onboard, if a brand is new to market, doesn't have a key account willing and ready to order just yet, they can onboard for free to POD direct, and it will just be a 48-hour process.

It can even be a 24-hour process if the brand has everything set up, because all we require on our side is we have three onboarding forms to get a little tactical in terms of what that looks like.

Yeah, please.

We have three onboarding forms that we require a brand to complete.

Those forms take a brand about 30-40 minutes to complete in totality.

Once those three forms are submitted digitally to our team, we then review the submission within 24 hours, review the materials, make sure that everything looks good, and within 24 hours, we will then share with the brand a user name and password so that the brand can then access their vendor dashboard, which connects directly to our marketplace.

The vendor dashboard is the place where the brand can then upload their products, their brand, their images, SKUs, their pricing accordingly, and they can select the regions, whether they want to activate POD Direct regions.

We welcome them to do that.

If they're a brand onboarding for Express, let's say they're going directly into Erawan, for example, they can then go ahead and activate our Southern California POD Express region, and we can have them onboarded there.

The only difference with POD Direct and POD Express from an onboarding timing standpoint is that once they activate the region for POD Direct and they're ready to drop ship, they're ready to go right then and there.

For POD Express, we're going to have that additional layer of inbounding their inventory to our warehouse.

And what we'll do is then once the brand onboards, we connect them with one of our dedicated category managers.

And our category manager, typically that first step is for them to assist the brand on making sure that we're getting the inventory inbound into whatever designated warehouses the brand is going to be activated in.

So it's a fairly seamless process, but the onboarding timing looks and feels a lot the same, whether they're onboarding to POD Direct or POD Express.

So if a brand is starting out using POD Direct, because let's say they don't have a key account and they have a number of retailers that they're selling direct to, does the brand do everything through the POD dashboard?

Is all communication facilitated there?

Or how does that work?

Yeah, so if a brand's onboarding to POD Direct, all communication from a drop ship standpoint, the brand will actually get the orders on their dashboard.

What they'll be able to see for POD Direct is they'll see the entire order flow from start to end.

So they'll see once the order is placed by a retailer, they'll see the checkout conversion on their dashboard.

They can fulfill the order directly through their dashboard.

And then when the product arrives at that end retailer, they'll see that delivery date.

So they'll have that all visible to them, purely transparent on the dashboard itself.

For a POD Express brand, we provide them at no additional cost.

We provide them with full access to their inventory levels in every single warehouse that they're in.

If we have physical products stocked.

Additionally, they'll see the date and time that a retailer places an order for their product.

They'll see the dispatch date for when we call the trucks to come and pick up and deliver the product to the end retailer.

They will see the delivery date for when the end retailer receives the product.

And they'll see the price they pay, any promotional activity.

And then every single month, what we do for POD Foods is we pay brands on the 15th of every month and the 30th or 31st of every month, so the last day of every month, for all orders that they've had fulfilled during that prior period of time.

So we provide all brands with full transparency from a payment standpoint and a monthly statement standpoint as well.

And really with POD Direct brands, brands that are on our POD Direct platform, we welcome them via their dashboard to self-service activate off-invoice promotions that they can run from their dashboard, which gets transferred and translated to our marketplace so that retailers can see those promotions.

And of course, that will lower the barrier to trial and increase the likelihood that one of our POD Direct retailers will convert on that product and request drop shipments thereafter.

So there's a lot one can do from a brand standpoint directly through the dashboard, but we also welcome them to take and schedule a call, just a one-to-one call with their category manager as well.

That is perfectly fine.

So a brand is working with POD Direct, builds a critical mass of retailers that would pull from a given warehouse, and then is the natural progression that they go on to turn on POD Express once they have a critical mass.

What's the number of retailers typically that will turn on a POD Express warehouse?

Yeah, so POD Express warehouses, typically for us, those warehouses will accommodate retailers.

Some of the retailers may only have one location, but they're ordering product at scale.

They have a lot of volume that they want.

So we will gladly deliver from our warehouse consolidated deliveries directly to that individual retailer's home base or their warehouse.

So we're happy to do that.

But oftentimes what we find for POD Express retailers is these are retailers such as Sprouts, such as Safeway, NorCal, Bristol Farms, Lazy Acres, Erawan.

They have store counts of at least eight individual stores within a designated region.

That's usually about the volume that we would want from a retailer such that we can stock the product and have ample inventory and a very nice APL for us to be able to deliver our consolidated trucks directly to each of their stores.

So that's typically what we look at from a POD Express standpoint for the retailers that on board to POD Express.

You were just talking a little bit about promos, which makes me want to ask you about pricing.

I know certainly that that's a big difference between POD and the other distributors.

So could you explain how POD works their pricing?

I know it's an automatic 18%, but can you explain that more in detail, how that works and then how the brand sees it on their end?

Gladly, yeah.

So I'll start with POD Direct, because it's fairly quick.

So POD Direct, and very straightforward, but for POD Direct, when a brand is gonna drop ship product to the end retailer, POD Foods, we have an 8% service fee.

So POD takes an 8% commission on any order that's placed by the retailer.

There is no monthly retainer that brands pay, nothing else along those lines.

Brands are welcome to price wherever they want on POD Direct.

They bundle their shipping into their price.

So the price the retailer sees on the marketplace is the price they pay, and POD Foods takes an 8% commission, 8% service fee off of any order placed on POD Direct.

So that's the very straightforward, transparent structure on POD Direct.

For POD Express, which is our consolidated physical warehouse platform, the structure there is we have three costs for any brand that we're going to be physically stocking their inventory at our warehouse.

The first is POD Foods charges an 18% service fee for the majority of our key accounts that we work with.

So what that means is that the 18% service fee is taken off the landed price.

The landed cost that a retailer pays for a case of product.

So what's very important to note is that POD Foods, we work on a consignment model.

So we don't purchase product from the brand and do a markup process.

A cost plus eight, for example, to the end retailer.

For us, it's a bit different.

And the consignment model has some great advantages, but what we do is the 18% is taken off the landed cost.

So to use just hard numbers as an example, if a retailer is paying $50 per case of a product, POD Foods is taking 18% of that.

So $9 would go to POD Foods.

We would do all the last mile delivery, handle the account relationship, all of that.

And the only other two costs to the brand in working with us on POD Express are that we charge a $35 per skew, per month, per pallet storage fee in whatever warehouse they're in.

And that's for dry ambient storage.

So if we have a retailer that decided that they want to bring on one brand, three of their skews into their stores, and let's say their stores are based in Southern California, we would inbound the product to our Southern California warehouse.

The storage fees would be $35 per three skews per month.

That's up to a pallet position.

So it would be $105 total for us to stock those three skews at our Southern California warehouse.

Now we have some brands that really have reached that escape velocity, and they're in multiple warehouses that we have activated for them, and they have multiple skews.

So what we do for, of course, when brands grow, if they grow significantly, we cap our total storage fee system wide at $1,000 a month.

So if we have brands that are active in seven warehouses, or even all nine of our warehouses, we are going to cap it at $1,000 per month, regardless of how many pallets they have stocked with us, and regardless of how many skews they have stocked, pallet positions at the warehouse as well.

So the storage fee is our two of three on the cost structure.

From a cost structure standpoint, the third cost that a brand will incur is they'll incur the cost of inbounding their freight, their inventory, to whichever warehouses we have activated for them.

We have a POD Freight Partner that we gladly introduce any brand to because they are essentially accountable.

And it is optional, but they're able to typically meet or beat any other LTL pricing that the brand may possibly be incurring on getting their product to us.

So we do connect the brands with our POD Freight Partner.

The other benefit, not only from a pricing standpoint, but our POD Freight Partner provides added efficiencies, there's added simplicities.

So our POD Freight Partner will pick up the inventory from wherever the origin zip code, the origin location will be, and they'll schedule the delivery appointments to our warehouse.

They'll handle all of that.

We'll be able to track the inventory inbounds from the origin to the destination, and it makes things very, very easy to just track and follow.

So again, those all together in a nutshell are the three costs to a brand in doing business with POD Foods.

The 18 percent service fee off the landed price that a retailer will pay.

There's the $35 per month per skew storage fee, and then there's the inbound costs to inbounds the product to whichever warehouses we have activated.

But again, of note, we don't do deductions, we don't do charge backs, there is no charge for data.

That's really our cost structure in a nutshell.

So we have everything bundled into those three costs.

So it sounds like brands are able to see when the product lands, which is super helpful.

I would also assume it means that brands can always understand how much the freight is costing them.

That's exactly right.

We want to have transparency from start to finish on that.

And the brand before the product, if the brand is working with our pod freight partner, before the product even leaves the station, before it leaves their warehouse and comes to ours, they will know what the costs of that inbound will be.

They'll know up front what they're going to be expected to pay.

Really, what we want to do, and this is actually foundational to our business model as a whole, is that transparency element from a cost standpoint.

We work with very young brands.

We work with some very early stage brands.

Not all, but many are.

And we want to make sure that as they're getting their feet wet in distribution, they know exactly what they can expect to make and that there are no surprises at the end of every month.

So giving them that visibility and transparency from a freight standpoint, that's something we want to do.

Giving them that transparency where the 18% is what they can expect to make, bar none, off of the landed price that the retailer pays.

We want to make sure they're clear on that.

And then from a storage fee standpoint, as long as we know how many skews are going to be taken on the retailer's APL, we know how many $35 per month per skew storage fee costs that there will be.

And that will be transparent as well.

So really what we want to do is support these young brands and these emerging brands and innovative brands as best as we can from day one and make sure that they take our cost structure into their P&L accordingly.

So the 18%, and this is something I want to spend a little bit more time on.

So the 18% is applied to the retailers, the cost to the retailer.

Is that what you said?

That's exactly right.

Let's say the retailer is paying $50 per case.

The retailer is going to sell that case.

They're going to break it down, dismantle it into units.

They're going to sell those units on shelf at their margin.

But the $50 per case sets the baseline from which we take our 18% service fee from.

And it's a landed price to that end retailer.

And so because the brand sets that $50, that's something that will never be a surprise.

Is the 18% applied when the retailer pulls the product from POD Foods?

That's correct.

So the 18% is applied when the retailer places an order with POD Foods.

That's exactly right.

Perfect.

Let's talk a little bit about promotions.

We talked a little bit about OIs.

POD Foods doesn't have a mandatory OI, which also makes it a little bit different.

Do you find that brands typically don't run as many OIs and tend to run MCBs?

How does the fact that you don't require brands to run OIs affect the way that brands are running their trade promotions?

Yeah.

I mean, for us all together from a promo standpoint, what we do is we facilitate and we do run OIs, given the fact that brands send us consigned inventory.

But we let brands call the shots regarding their inventory and the percent of the OIs.

So what we found is that brands have been very comfortable really running the OIs with us.

We process the promos as a pass-through and we don't charge brands any incremental fees in doing so.

Now, even in addition to those for brands that are on POD Direct, we offer them access to our POD Direct weekly ad, where brands can run OIs for their drop ship products directly to our retailers.

They can do that self-service via their vendor dashboard, and we can tee up those brands and make sure that those promos are visible not only on our POD Direct marketplace, but we also share out these weekly ads via our LinkedIn handle.

We share them out via newsletter on a weekly cadence every single Wednesday.

So we gladly invite brands, especially brands on POD Direct, to self-service activate those promos, and then we can help bring them to life and hopefully spread the word to as many retailers as we can, especially the ones where we know there could be adequate and reasonable product market fit.

So all together with us, retailers, they really decide what and how they want to promo with POD Foods or with the retailers, I should say.

But again, there's no requirement for them to run OIs with POD in any way, shape, or form.

Who would you say POD Foods' main competitors are?

And I understand because you offer both direct and express, it may be a range.

Yeah, so for us, you know, it's a good question and it's a hard one to define.

So the way that we really frame it up in the industry is there's some wonderful DSDs out there.

They're very localized.

They do a great job.

And they do a great job with many of the brands that we carry.

And then they're the broad line.

They're the larger distributors that are very national.

And they do a great job with many of the larger brands.

But for us, our sweet spot is being that national secondary distributor, where if a brand is working with a DSD, for example, in a localized region, but they have that opportunity to get that first national account or their second or their third national account, that's where we play.

We have those nine warehouses activated strategically, in strategic locations across the United States.

We can reach the balance of the country from any of those warehouses.

So when brands maybe move on or have an opportunity to gain a national account or a larger regional account, we can fill that gap.

And when it comes to an emerging brand that maybe needs that additional handholding, needs some guidance, wants that one-to-one engagement with a category manager, that's really the area that we play in.

And that's where we want to support our brands as they grow thereafter.

We are not exclusive.

Brands do not need to only work with POD Foods and nobody else.

But that's really the arena that we play in, is really just being that secondary national distributor to all of the emerging brands on our platform.

Could you clarify what you mean by secondary?

Yeah.

So if we have a brand or if we have a retailer that is doing 90%, 95% of their business with one of the larger distributors in the marketplace, from a secondary standpoint, if we're working with that retailer for, let's say, 5-10% of their business, that is our sweet spot.

That's what we're happy to play in.

And if it means that we're accessing and utilizing, leveraging our speed to shelf, to provide that retailer with an ever-changing rotation of innovative emerging brands that are getting a 90-day flight on shelf, that is great.

That's an area of focus for us.

But again, we are not trying to take on 100% of a retailer's business.

We have our niche.

It's really all about emerging new local innovative brands and making sure that our retail partners, that we can feed them with about 5% of their marketplace, so to speak, with POD Foods brands.

And that's really where we play.

And that would essentially be our general definition of us being a secondary distributor.

Terrific.

So there are nine POD Foods warehouses.

Which would you say have the highest velocities?

Yeah.

So Southern California is a very nice one for us.

We do a lot of business out of Southern California.

Chicago is also a great warehouse for us.

Northern California is also a fairly dense warehouse.

We have a lot of product in there as well.

You know, Texas is quite good, our warehouse in Dallas, Texas.

And then we're seeing some good growth out of Baltimore.

We're seeing some nice growth actually out of Phoenix as well.

But that's really what I would probably define as our warehouses that have the most activity taking place at this given time.

You were just talking about how POD Foods is a secondary distributor, which makes me think a little bit about how brands are layering POD Foods in with other distributors.

Is it common that a brand might be using a UNFI or a Keiki to service a chunk of a retailer's territory, but then fills in the gap with POD Foods?

Is that something that you find is common?

Sure.

That's a great way to frame it up.

And that's perfectly fine on our side.

That's great.

And yeah, we welcome that again.

We are not exclusive in the sense that a brand only has to work with us versus anybody else.

If we can fill gaps for any brands, we welcome it.

Quite frankly, if brands are doing business with other distributors, and we have one retailer, one retailer with 10 doors that we can assist the brand with, we welcome that.

We'll gladly welcome them to onboard.

If they want to have their products activated for POD Direct for Dropship, we welcome that as well.

And if we can support them into a single retailer out of one of our warehouses that has 10 doors, that's perfectly fine.

No issue on our side.

We want to support them as best we can with the retail partners that we have on our marketplace.

Could you explain how purchase ordering works?

Is the onus of responsibility on the brand to figure out how much inventory to send to a retailer?

Does the retailer let POD Foods know how much they want?

How does that process work?

Yeah, so for us, what typically happens, the process itself is once a retailer tells us and tells the brand, hey, we want to bring on, let's say, three of your SKUs onto our APL, our approved product list.

That's really the sign that we have to work on the inventory planning side.

So what that means is the retailer says they want those three SKUs.

What we'll do is our team will work with the retailer and we'll work with the brand to essentially align on that initial allocation volume.

How much product do we need in each of the retailer's stores to start?

And then what typically we want to do from POD Foods is we want to keep about 45 days worth of safety stock inventory on hand at the warehouse so that we can quickly accommodate replenishment orders as the retailer places them.

Now, to get to those numbers, there are some variables that are incorporated into that demand signal algorithm that we use to align on how much inventory we want to inbound.

And we'll certainly work with the brand on this as well and make sure the retailer is aligned.

But some of those variables, we'll want to know what the historical sales look like for comparable items on shelf at that retailer.

That will help guide what our forecast is.

We'll also want to know is there any promotional activity, third variables that we'll want to take into consideration to know that maybe the sales velocity is going to be very high in month one or month two or month three.

We'll incorporate that into our algorithm so that we're inbounding the proper levels of inventory to whichever warehouses are open for that brand.

And then of course shelf life is part of the equation as well.

We want to make sure that we have adequate shelf life on hand at the warehouse so that we don't see product decay over time and get closer to their expiration date.

We'll take that into consideration as well.

But our team, we've been doing that piece of the puzzle for years now.

So we feel very good about the inventory guidance process.

And many of our brand partners would probably echo that, where we are able to get very hands on with them and make sure that the inventory that we inbound, they feel good about it, the retailer feels good about it, and POD feels good about it from a management perspective as well.

So it's a fairly seamless process on our end.

Shelf life is certainly such a big part of inventory management.

Are POD Foods inventory requirements, is it 75% of shelf life?

That's correct.

Yeah, when the inbound takes place.

That's right.

And then are there options if brands have product that kind of times out?

Is there an option with POD to deal with that product somehow?

Yeah.

So brands are welcome to withdraw their inventory quite frankly at any time.

They can actually do that directly through their vendor dashboard.

And our category manager, the brand's category manager rather, will work with the brand to make sure the brand is in the know in regards to any product that is reaching its pull date at the warehouse.

So we're going to stay on top of that.

The brand will also have full visibility into their inventory levels at the warehouses as well.

So withdrawing the inventory, we certainly welcome that.

That could be one option.

And we also have the ability to, when inventory does get to a certain level, we may push that product a little harder with some certain accounts that we work with closely, that there may be a good product market fit there, or perhaps there's an opportunity to sell that product at a slight discount to some of the retail partners that we have.

So we can always explore that avenue as well, if there's inventory left over.

But the nice thing with our model is that we really want to have about 45, 45 to 60 days worth of inventory on hand at the warehouse.

And since we work with our retail partners as closely as we do, we're in a pretty decent place altogether, month over month, quarter over quarter, in terms of making sure that our inventory is in a healthy place for the brands.

You just mentioned that POD may help push product if you're over that 45 to 60 day allotment.

How does POD Foods help broker the product or how involved is POD Foods in helping actually sell the product to retailers?

Yeah, great question.

So one of the biggest facets of our brand, of our business right now, is our monthly innovation deck.

It's our box of innovation that we share with many of our retail partners on a monthly cadence.

So this is something that we have started implementing over the last six to nine months, is our monthly innovation deck, which flows into our box of innovation.

At this current time, we have about 1,800 innovative emerging brands activated on our platform.

We have 70 to 100 newly onboarding brands every single month.

But each month, what we do proactively, is we select a small percent of brands.

Usually, it's only about 2% of our brand portfolio, and our team, our POD Foods team, will proactively present those brands to our retail partners.

Oftentimes, it's in in-person meetings at the retailer's headquarters.

And then what this allows is it allows our retail partners to gain access, and sometimes first looks, first to market opportunities to some of the newest and most relevant emerging brands in the industry that have onboarded to POD Foods.

What the process looks like is the brands will provide us with one-page slides.

We share the slide template with the brand.

And the brand can complete that slide template, and we'll request samples as well.

And then what we do is we share out the slides with our retail partners, and we ship the samples in our specially designed monthly box of innovation to our most notable retail partners.

Right now we have probably about actually 10 to 15 retailers that receive monthly boxes of innovation with new brands.

Some of those brands might be general first to market innovative opportunities for those retailers.

Sometimes those brands are shipped via the box of innovation according to a category review that the retailer is conducting during that month or during that quarter.

So basically a retailer will know what types of brands they're looking for, and we will tailor and personalize that monthly box of innovation to that retailer directly.

We really want to provide them with the 2% of brands that we think have optimal product market fit on their shelves, and the vehicle we utilize to do this is the box of innovation.

So what's really important to note is we're not a broker, we're a distributor first and foremost, but we do want to give our brands shots on goal with our retailer partners, because if we're meeting with them every single month at headquarters, or if we have weekly meetings with them ongoing, and they have category reviews coming up, we'd gladly want to present some of our brands, if the brands would like us to do so, to some of the retailers.

And right now, we're doing this with Sprouts, we're doing this with FreshTime Markets, Central Markets, Safeway NorCal, Dash, Mark by Door Dash, and a multitude of others as well.

So we have found that this box of innovation has been highly successful, especially with getting new brands onto the radars of retailers that might want them.

Certainly, that's helpful for emerging brands who may not have the funds to hire a broker.

I'm just curious, is the box of innovation the same for every retailer, or is it different depending on who the retailer is?

Yeah, it varies actually.

So we definitely have the ability to be quite agile in terms of what we put in the box of innovation.

And we really want that box of innovation to be relevant to the retailer.

So we have account managers that work with all the retailers, and then we have an internal team that helps to manage what brands are going to go into that box of innovation.

So we do want to make sure that the retailer is getting a relevant box of 15 brands, let's say.

And we want to make sure that if the retailer is very much leaning into beverage or functional beverage, or if they're leaning into confections during any given month, we want to make sure we tee up the right brands into that right box of innovation, so that it's a relevant and compelling box for the retailer.

So yes, without a doubt, we do tailor and somewhat personalize each box for each retailer on a monthly cadence.

Before we hop off, I do want to ask you if you could give us the rundown on POD Financing, POD 3PL, and POD Grow.

Yeah, definitely.

So these are brand new components to our overall business ecosystem.

So altogether, I'll run down each of these.

So I'll start with POD Freight, which I did allude to before.

That really just connects our brands with our preferred freight partner, where the brands can save on inbound transport, and also they'll benefit from added deficiencies in getting their product inventory to our warehouses.

The end result, of course, the key benefit is that it helps maximize fill rates and also optimizes leading time.

So that's POD Freight.

POD Capital really gives brands simplified access to working capital.

So we work with a third-party firm in offering brands transparent fees, fast decisions, and funding with competitive rates.

This is a third-party POD Capital provider that we can gladly connect any brand with, and actually the brands can connect directly with POD Capital via their vendor dashboard when they onboard.

So POD Capital is the second component that we've newly launched.

POD 3PL is another one of our new components.

So this allows a brand to really activate seamless and integrated 3PL capabilities in the warehouses, the same warehouses that we work with.

So what the great benefit to brands is that they can now have their direct-to-consumer and POD Express inventory stocked at one single warehouse, one single location, which of course, reduces their overall freight costs and allows them to have higher volumes in the warehouses that we have activated for POD Express and they can fulfill via their direct-to-consumer partners as well, whether those partners are working with POD Foods or not working with POD Foods.

They can still have POD 3PL activated for them.

And then lastly, there's POD Grow.

And POD Grow, it's somewhat related to POD 3PL, but this really gives brands the ability to fulfill dropship deliveries to retailers from our warehouses directly.

So the brand would have product available at our warehouse, and then POD Foods would fulfill the dropship to that end retailer.

So if it turns out that they have product stock for their own direct-to-consumer customers and POD Express, if they want to flip the switch and go to POD Direct, where POD Foods helps facilitate those fulfillments, we can gladly accommodate that as well.

So it's really more of a 360-degree ecosystem that we've recently launched, just to support our brands from day one, and hopefully provide them with some additional value-added services that they can take advantage of.

Well, this certainly seems pretty seamless.

Thank you so much for describing the entire POD ecosystem.

If anybody wants to get in touch to talk more about POD Foods, ask any questions, where should they go for that?

Yeah, so what they can do is they can email us directly at sales at podfoods.co.

So we're not.com, it's actually dot co dot co.

So sales at podfoods.co.

I personally manage that inbox, and I will make sure that all of their questions get answered.

If they want to connect with someone else on our growth team to potentially talk about onboarding, we gladly welcome that as well.

And I'll make sure that they're connected with the appropriate folks at the company.

But yeah, sales at podfoods.co would be the best email address to utilize for any follow ups.

Dan, thank you so much for joining us today.

Dan is the Director of Growth at POD Foods.

It's been such a pleasure to have you here.

Thanks again so much for joining us.

That concludes another episode of the Community Call Podcast.

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