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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-hosts Mike Schneider and John Craven.
If you're enjoying the show, please follow and review us on Apple Podcasts or your listening platform of choice.
John Craven, this is your debut appearance on the Community Call Podcast, Vantur.
It's so good to have you here.
Melissa loves it first.
I love it first, right?
Well, thanks for having me down to the studio.
Thanks so much for joining us.
Great to have you both here.
We had a really great week with our community here at BevNET & NOSH.
I would like to formally and publicly congratulate Katherine Harvey of Bare Bones.
She won our, woohoo, our RangeMe giveaway.
Bare Bones is instant beef broth.
So you just add their little-
Oh, I know what it is.
So you've tried it?
Yeah, they're sticks.
They sent us some Bare Bones.
I think I drank most of it.
I think you did, because I totally missed it.
Yeah, it was hiding in the photo cue for a while, and I just helped myself.
I was reading the nutritionals.
10 grams of protein, 50 calories, grass-fed beef collagen.
What a good little snack, especially now that everyone's so obsessed with protein.
It's pretty easy.
We have boiled water from the coffee machine.
So you're basically making a little latte with it.
I'm gonna have to get my hands on some of that.
So Catherine and everybody else, thank you so much for joining the giveaway and congrats again.
I also spoke just recently to Christina Olsen of Ice Blocks.
She is one of our newest Slack community members.
And this is such an interesting product here.
So Ice Blocks is Kraft Ice.
I have a package right here, eight slow melting, large ice cubes.
And Ice Blocks is a premium Kraft Ice by Ready Ice.
So I like those words, eight slow melting, large cubes.
I mean, somebody perfected that.
Someone was sitting going, you know what?
It's very descriptive.
Slow melting, large cubes.
A lot of a description for an ice cube.
Yeah, you tried these out, right?
I did.
I also prefer the description that some bars use of just calling those cubes a BFR, which you could maybe guess what it stands for.
Big.
F in rock.
Anyway, I like that too.
Yeah, no, I tried it out.
It's nice.
I have a bunch of clear ice molds that I've acquired from various PR companies.
So, I guess it saved me some time.
I mean, what's the secret to getting your ice clear?
John Craven.
I mean, you could just Google this or go on YouTube, but.
But why wouldn't we want to hear it from John Craven?
Yeah, the ice master.
Are you an ice master?
Well, I like these molds from a company called Winnersmiths, which we have a bunch of them sitting in our storage room over there.
If you ever feel like making ice, but basically it's like the ice that you make in like an ice tray is cloudy because of the minerals and whatever's in the water.
So these things basically make the cubes kind of at the top and all the stuff sinks.
So like you're filling up this mold with water and then you put these little like ice molds that kind of just sit at the top.
There's also like other ways you can do it with like putting water in like a hard cooler and putting it in your freezer.
And then you take off the top layer.
It'll be clear.
There's a million different ways to do this.
Sounds like a massive pita.
That's another acronym.
And thank goodness for ice blocks.
Wait, with the cooler, how do you separate that cloudy layer?
No, it'll just happen.
I like you fill a cooler.
Again, you could look at this on YouTube later.
If you're really curious, you sound like you are.
We'd prefer you describe it.
You can fill up a cooler.
Fill up a hard cooler, put it in your freezer, crack it like an inch, and I don't know, come back in maybe 24 or 48 hours, and you'll have a nice little ice layer on the top with some water below.
So you dump it out, you take the sheet of ice, chop it up, and then you have clear ice.
Fascinating.
Absolutely fascinating.
You can tell I've gone down this rabbit hole.
It's been a long time, bud.
Dr.
John Craven.
I knew that you were the man for this job.
I do have to say, I think I'd probably be more likely just to buy the ice.
And I really do have to admit, they're just so clear.
It's one of those things that until you try it yourself, I mean, I couldn't really imagine what the difference was, but there really is a difference.
And if it wasn't cool, you couldn't call it a BFR, right?
That's right.
Right.
I don't think they have acronyms like that for things that aren't cool.
Maybe.
Yeah.
No, but it's DNS, we don't just say S.
Exactly.
Because it's cool.
Right.
Yeah.
Doesn't suck.
Well, good stuff, Christina Olson, welcome to our Slack community, and thanks so much for sending us those samples.
I sent a box.
Yeah.
Sorry to interrupt.
Yeah, of course.
I will say too, I've been trying out these ice blocks with my new favorite drink of the summer, which is a white Negroni.
I have here one that Via Carada sent to us.
It's a sparkling white Negroni.
Sparkling?
Yeah, right?
Really?
And you know, I will say, so for most of the cocktails that I make at home, I don't know if this is blasphemy or whatever, but I usually top it off with club soda because they go down a lot slower and you're sort of like hydrating while you're drinking.
So I love a sparkling cocktail.
Yeah, I mean, I think, yeah, adding club soda, good trick to make it a little smoother, add some cheap ingredients.
But no, I think with this, you know, they were trying to do a ready to drink that was different.
So I think going the sparkling routes is pretty interesting.
And I mean, their packaging just looks awesome.
That bottle is like kind of insane.
It's absolutely beautiful.
What does it take to get a glass bottle like this?
I mean, this seems like a difficult...
It's like scalloped, you know?
Yeah, it seems like a difficult thing to pull off.
Find a vendor in China?
No, seriously, I mean, that's probably, I don't know where this one's made, but I mean, you can make custom bottled.
It just costs money.
So a lot of times, smaller beverage companies opt for stock bottles, which is fine.
Then you don't have to own inventory at your Copac or in a lot of cases.
It is.
So on and so forth.
It's absolutely beautiful.
I was making them at home with Gin, Dolan, Blanc and Vermouth.
You mean Suze, you were using.
Oh, in Suze, yeah, yeah, yeah.
And then you suggested I pick up the Bitter Bianco, which is absolutely beautiful.
The Luxardo product.
It is, yeah.
I mean, I guess it's a bitter liqueur of some type.
I don't know what the exact way that they describe it on the bottle, but yeah, I mean, you could make a million different variations that are similar to that.
It's kind of the beauty of a Negroni cocktail.
It's like three equal parts.
I guess sometimes it falls into the class of the Mr.
Potato Head cocktail, where you can just keep swapping the parts.
So I did not invent that either.
I think I was in one of the classic like Death and Company or the Me and Book or something like that.
We still like it.
Yeah, we still like it.
For me, the Negroni, I mean, I just, I can't get away from the whole idea of not working with Campari, because I like, that was my favorite part of the Negroni.
So the white Negroni just, it kind of, it still tastes like a Negroni, just no Campari, and no red color, which I really like.
The red color is pretty clutch, but I do have to say, I'm really falling for this white Negroni version.
I had the first one at this place called Quanto Basta in Portland, Maine, that night that I did the bang, bang, bang, bang.
Isn't that just called a bender?
Yeah, it's an, on the night I went on an eating bender.
But for listeners of the podcast, they'll know what you're talking about.
The bang, bang.
The night I went to three restaurants and then bought snacks, but.
Well, you could, just to put it out there, satisfy Mike's desire for Campari and still have a white Negroni.
You could make a clarified Negroni.
You should look that up.
That's for extreme cocktail nerds.
Wow, does it involve egg whites?
Milk, you need milk to make clarified drinks.
We're gonna have to attach a lot of YouTube links to this episode.
John Craven, what is your current...
Let's just drop them in the Slack community.
Join us at slack.bevnet.com.
You'll find all of the YouTube links that you need to make everything you heard about in this podcast.
Do you have a current favorite version of Negroni?
I don't know.
I honestly haven't been drinking that many of them.
So this season, I don't know, I like cocktails we've been into at home.
I guess still a little bit with the Jungle Bird as well as a Bitter Pineapple Daiquiri, which we served at the open house.
Kind of like that one too.
That's a rum based drink.
That was delicious.
Yeah, it was good.
It's a pitch slam.
Well, grab your favorite version of Negroni or your favorite summer drink, sit back, and enjoy this episode of Community Call featuring Scott Romano, VP of Innovation at Sprouts Farmers Market and Elliot Begoun, founder of TIG Brands.
Learn their best practices for not only getting on the shelf, but also ensuring you have the resources and strategy for a lasting partnership.
Whether Sprouts is a target for you or you're already there and focused on increasing your velocities, this episode is for you.
Enjoy.
Do you have a recent product launch, new hire, marketing campaign, distribution news, or some other exciting company announcement?
Let us know.
With our new self-service PR portal, submitting your news is easier than ever.
Just head to submit.bevnet.com to get started.
Today on Community Call, our guests are Scott Romano, Vice President of Innovation and Forager at Sprouts Farmers Market, and Elliot Begoun, founder of TIG Brands, talking about what it takes to get on shelf at Sprouts and how to thrive once you're there.
Scott and Elliot, thank you so much for joining us.
I know that this call is incredibly popular with our audience as Sprouts Farmers Market is such a target for so many brands in our audience.
Why don't we start off with an introduction?
Scott, let's please start with you.
Could you explain your role at Sprouts Farmers Market and what you do?
Sure, absolutely.
Thank you, and appreciate being part of this call today.
So Vice President of Foraging and Innovation at Sprouts, really primarily looking for and foraging around the world for the most differentiated and unique products that we can find to put on the shelves for our customers is primarily what we do, as well as really working with and helping the young entrepreneur brands how to go to market on the retail shelves is primarily our function.
Excellent, thanks so much.
Elliot, please, we would love to hear from you.
Could you explain your background with Sprouts and how you became so ingrained with Sprouts Farmers Market?
Sure, I mean, the joke we were talking about before, I was at Scott and I were cellmates, which was not that far from them because we've been prisoners of this industry forever.
But I've known the Sprouts team for a long, long time back in prior lives, prior companies for all of us, years past.
And when they really put the effort and emphasis on the Forager and Innovation program, I reached out to Kim and Scott and said, listen, you guys are fantastic at being able to identify brands that your shoppers want.
Where we can really help is be under the hood of those brands and help you understand if they're really ready to scale and also help the entrepreneurs understand that because nobody wants a brand to come in before they're ready and not be able to sustain and put their business at risk and or not be able to supply.
So that's how it started and we've been working together in collaboration now around that for a few years and continue to.
And I know that one of the things that excites me is Sprouts is really committed to being the place that, and this is Scott, you can pay me my five bucks later, but they're really committed to be the retailer that brands bring their innovation.
They wanna make it as enticing and as beneficial to everybody to say, this is, Sprouts is where we wanna launch.
And that's really what the effort has been.
And I think that's great.
I mean, entrepreneurs in this climate need all the help and any advantage they can be given.
And if a retailer is willing to give them that advantage or that opportunity, then it should be seized upon.
Certainly, as we've seen, Outfox Hospitality shut down those doors.
And other retailers shut down.
There is such a need for a retailer where brands can launch.
So that's incredibly important for our audience to know.
Why don't we start out by talking a little bit about what Sprouts identity is and how Sprouts Farmers Market fits into the landscape of natural grocery chains.
I think that this will also help our audience understand whether or not their product is a fit for the retailer and how they're differentiated from other retailers in the marketplace.
You know, when you think about the landscape of natural and it's ever-changing, I primarily think of the three or four big ones, right?
You have a Whole Foods and Trader Joe's and Fresh Time.
And where we kind of fit in that is right square in the middle of a Trader Joe's and a Whole Foods.
You think of Whole Foods to be a little bit more on the higher end, super clean ingredient, and I'll use the word bougie, if you will.
And then you have Trader Joe's, who's on the opposite side of that, where it's a little bit more fun, playful.
They've got a lot of mostly all, if not all Trader Joe's brand.
So where we sit is right in the middle with our health enthusiast customer, where we want to bring differentiated product, clean product, but make it affordable in as many locations as possible for our customer.
So we're kind of right in the middle there with a strong Sprouts brand, as well as a strong branded play to the customer, but kind of right in the middle there.
And who would you say the Sprouts customer is?
I would assume perhaps they're a little bit less bougie, but who is shopping in those stores and what's important to them?
Absolutely.
There's two primary customers that we target and that shop at Sprouts, and they're called the health enthusiast and the innovation seeker.
So they're looking for new, innovative, healthy, better for you products.
They're looking for healthier options.
So not necessarily I'm going to eat everything healthy, but I'm looking for a healthier option.
So I'm a health enthusiast, as well as those innovation seekers just love the treasure hunt in our stores.
They love the looking for new items that they can't find anywhere else.
And those are our two primary customers that shop at Sprouts.
Is local an important part of Sprouts Farmers Market's offerings?
I would say absolutely.
We don't have a strong focus on local products today that you would expect or that you would see maybe at a Whole Foods, but we do play for the sustainability role.
We really work hard with our distribution centers to be within 250 miles of all third locations that they deliver to.
So there is a strong play on regionality, but it may be different from where you're seeing a local to this state or this market.
It's definitely more regionalized, but it's very important to us on the sustainability side.
And how many Sprouts Farmers Markets are there in existence now?
So today there's 414 stores across 23 states.
Any plans for expansion?
Yes, Sprouts is one of the, if not the fastest growing retailer.
There is over 100 stores on leases that are signed at Sprouts today.
Now I would encourage anybody to listen to the last earnings call that was recorded yesterday, where all this information is public.
But there's 100 leases out there across the country that Sprouts continues and will continue to expand.
Are there any particular regions of focus?
There is different, the growth is, there's not a lot of new markets, I would say, where we are seeing the fastest growth is Florida is a key state for us, right?
There's expansion in Texas, Arizona, California and Northeast.
So all of our existing markets today, but there's always talk about where, where can we get more of this product available to more customers?
And how many DCS service Sprouts Farmers Market?
It's, it's Cahee primarily, is that right?
Yes, we for our non-perishable and some of our frozen items, there's eight warehouses that we deal with from Cahee, as well as many, you know, DSD and other different distributors across the country.
But there's eight primary Cahee warehouses that we buy from.
Let's move in to the brand side of this a little bit.
When is a brand ready for Sprouts Farmers Market?
I know that Elliot, you just said that it's a great place for brands to launch.
What should brands have in place before they're ready to do business with Sprouts Farmers Market?
Oh geez, I mean, first of all, they have to understand, they have to have the cash, right?
I mean, you know, we, the number one reason brands wind down or fail in this industry is cash.
They just run out of cash.
And when you say yes to an opportunity, when you say yes to 414 stores, you know, you are going to build a lot of inventory for those stores.
You're going to hold a lot of receivables for those stores.
You're, you are going to consume a lot of cash.
So you have to be prepared to understand that that cash that you're going to use for that is locked in a box and isn't available for you to operate any other aspect of your business.
So that's number one.
Number two is supply chain.
You have to be able to fill those orders and sustain those deliveries and deliver to the DCs on time.
And then three, you have to know, you know, the battle is getting on the shelf.
The war is getting off the shelf.
And so you need to have a plan and understand how you can activate consumers and reach consumers to get them into the stores and buy.
And that's one of the things that people miss in my mind in the innovation set is that it's not a field of dreams.
If we build it, they will come.
You know, if we put it on the innovation set, people are just going to buy it.
And it's especially an opportunity because it's not a high...
And Scott, I'm sure we'll talk more about this.
It's not the typical high low.
You're not going to be able to buy that volume through deep discount.
You're going to have to figure out a way to build a compelling message and a compelling call to action to get consumers, both the ones that are already are aware of you and the ones that you want to be aware of you into the stores and to that innovation set to buy.
So those three things, cash, supply chain and brand activation, you need to have a plan.
How do you find that equation if you're a brand that tells you how much cash you're going to need and what kind of inventory considerations you're going to have to make?
Is that a conversation, for example, that a brand might have with TIG Brands or with their buyer at Sprouts?
Both.
I mean, it's harder quite frankly with, and it's one of the reasons why Scott and I are doing this is that category managers at Sprouts and really at any retailer are overwhelmed with the amount of brands that they're working on.
And to have them also be part-time business coaches are, it's pretty unrealistic and difficult.
And so, you as an entrepreneur, you have to take responsibility for learning these things.
And the way I would start is you should have, everyone should be constantly utilizing a 13 week rolling cash flow and understand, okay, if I say yes to Sprouts and I go into all 414 stores with my minimum order quantities, with my copacker, I'm gonna spend this in production.
And so that cash goes out.
And then you start trying to plot when that cash will come in and working through that.
And if you can't figure that out, find somebody who can help you do that.
Because honestly, that is the number one reason brands are failing.
And right at this moment, early capital is as tight as it has been in decades.
And so there's less access to that cash.
And Scott and team are really willing to work with you.
If you do that analysis and you recognize, I can't do that in 414 stores, but I could do it in 45 or 50 or 100.
Have that conversation with Scott and Brody and Laura and the team.
And you can go on the innovation set in one or two DCs and not put your business at as much risk.
Excellent, thanks for explaining that.
Why don't we talk about the two different ways to get on shelf because there are very different requirements whether you get in through the forager program or whether you get in through the more standard category review process.
Let's start with the forager program.
First of all, who's a fit for the forager program on the brand side?
Is there a certain size you need to be?
And if you could explain that forager program as well, that'd be fantastic.
Sure, it may be easier to kind of start with the buying through the regular side to open some tours to what the foraging program offers.
But pretty standard on the submission process through the category review process, through the category managers.
That's not a lot different from most retailers where there's a schedule posted and they're receiving submissions X amount of weeks prior to those category review process.
Now, the foraging program is the beauty of that is that we are looking at all items in all categories all year round.
So we're looking for items across every category at any time that they're available.
So, and we're, as far as the submission process and who's a good fit to submit toward the foraging, that's anybody to tell you the truth that if you're, hey, you're a small brand, an entrepreneurial brand that has a great item that is local to Texas, let's say, we wanna see that item.
If you're more broad or just East Coast or just West Coast, anybody is open to submitting to the foraging program.
The beauty of the partnership that we have with Elliot and the TIG group is that a lot of those brands, we will encourage to work, to start off through TIG because of the pre, I would call it a pre-screening or availability of what is, how viable they are to be on the shelf at Sprouts.
But we can go as small as one state all the way up to the 414 stores nationally.
So that's at a very, very high level.
The foraging program also offers different concessions to start up brands for really exchange of some exclusivity.
Doesn't mean that you can't be sold anywhere, but what we call exclusive would be more like exclusive.
So if you're in a Kroger, if you're in Costco, if you're in Whole Foods, something like that, that would be an exclusive for us Innovation Center and more for the regular category review process.
If you're a D2C retailer or D2C brands, or if you're in some small independents, that's perfectly okay and still could be submitted for the foraging table.
And what is the submission process to get into the forager program?
Is there a portal?
Are there specific buyers that brands should reach out to?
How does that work?
There's two ways, really.
There is a submission portal on sprouts.com all the way at the bottom for new vendors that you can submit that is specifically for foraging as well as all the other category reviews and schedules.
So that's the formal way to submit.
You can also work through TIG and Elliot.
We work very closely weekly and monthly doing calls where there's, I would say, open submission.
I'll let Elliot obviously talk through that.
But those are really the two primary ways that we're looking at brands as well as, you know, the old fashioned way of shows or finding you through emails.
But we do prefer, we're just gonna push you to the portal or through Elliot so we can have that formal process.
Elliot, how do you typically work with brands who are interested in the Forager program?
And if you could also let our audience know how to get in touch with the right folks at TIG, if they are interested in starting that process, that'd be great as well.
What we started doing is Scott and I run a workshop.
In fact, we've got to get a couple more calendared here pretty soon, but we run a workshop.
We have an online video that both Scott and I recorded, like a brief boot camp.
Here's what you need to know if you're Sprouts ready.
And then we do an open Q&A session.
But any brand can reach out to us anytime.
They can do that through our website at tigbrands.com or just email me directly at Elliot at tigbrands.com.
And if you're wondering, if you're questioned, if you're ready, right?
And if you're not sure, we can really help you there.
We can help you make that decision or at least open your eyes in terms of what is going to be required and what you need to be prepared for.
And if you're not, we can work with you and coach you a bit to get you ready.
We have our collective program where you would wind up with some advisors supporting you, some education and so forth.
So that when you do decide to do this, you're in a position to succeed.
And that's really ultimately what we want.
We talk about this a lot, and Scott and I have talked about this a lot.
The reality is sometimes in this industry, we kind of compartmentalize things.
It's us the entrepreneurs versus the distributors versus the retailers, right?
But truthfully, it's all three of us together trying to appease the same consumer, right?
And we all need each other to do this well.
And Sprouts desperately needs and wants our innovation.
We desperately want and need Sprouts to be an innovation location.
And more importantly is that despite everything that's going on in the macroeconomic environment, consumers are demanding more than ever the products that are being created by our entrepreneurs in this industry.
The products that are solving problems for human health and climate and social and all of those things.
They want that.
And Sprouts wants to be the conduit to that.
They think that, and I'll put words in their mouth, they think that that is a point of differentiation that they can own, that they can do better.
And great, we want to facilitate that.
That's in our mutual best interest to do that.
So that's really the intent.
But we also don't want any brands to blow up in the process of doing that and do it too soon.
It doesn't do anyone any good.
And that's the premise.
So let us come in and take a look.
We'll be honest with you.
We don't make the decision.
We don't have any say in terms of what goes in or doesn't go in the innovation set.
And Scott has never let me strong arm him as much as I've tried sometimes.
But what we can do is give you honest feedback if what your risk is in doing it or what you should be doing or how you can better be prepared.
And if Scott asks the same question of us, we're gonna tell them our opinion as well.
On that note of not blowing up any brands, is there a smart way to roll out with DCs and regionality if you are an emerging brand and perhaps you're not ready for all 414 stores?
What do you typically recommend?
Yeah, I mean, I first of all, I'm a big, I mean, right now in this market again with the capital the way it is, which I think is really healthy for the early stage entrepreneur because it shifted the mind focus from growth to profit.
We want, you should be putting profit before growth and cash before everything in this time.
And so starting smaller is a great way.
I mean, what the, one of the huge benefits of the innovation set is to fail.
And I know that sounds strange, but you don't learn until you test.
And what a lot of brand owners do is they get on too many shelves and then everything they believed about their brand isn't proven true by the market.
And the cost of that lesson is devastating to them and to their business, and sometimes existentially so.
But if you're disciplined and you pick a region, and I would pick a region, especially if it's a region you live and you can affect, impact, be out in those stores and talk to them as a founder, you can learn a lot about your packaging, your price point, all the things that you need to do.
And even if you wind up not, you know, matriculating into the main set, but you've got all of that learning to go back and do, and you did it without free fills, without, you know, having to pay activation fees, without having heavy TPR spans, without having the risk of buyback inventory, all of that kind of stuff.
It is a fantastic learning laboratory.
And we've seen this before, where entrepreneurs have taken that learning, they've gone back, they've made those adjustments, they've come back to Scott and team and said, here, we took everything that we learned, can we do it again?
And they have, and then they're successful.
So failure is gonna happen in this industry as an entrepreneur.
The faster you fail and the softer the landing of that failure, the better you are.
And really the entrepreneurs in this space, it's not having the answers, it's having the questions and questioning everything about their business and looking for laboratories in real life to validate the assumptions in their growth hypothesis.
Yes, and I would just add to that, to go backwards just a tad on the highest level of what the foraging program is at Sprouts is a 90 day test and learn laboratory, if you will, with a destination in the store for the consumers to have a place to find all the newest, coolest, hottest items in the store.
So it is a 90 day test and learn, and to Elliot covered a lot of the points that I had missed earlier, but we're not gonna charge you a free fill, which is a savings that you're gonna get.
We're gonna own all the inventory that we buy, whether it's just for Florida or whether it's all 414 stores, we'll own that inventory.
We're not gonna mandate 90 days to come in on the shelf.
We want the product to be the hero.
And again, it's a 90 day test and learn where we can say, at the end of these 90 days, first of all, how did you do every week?
How did you do each month?
And then how did you do for the 90 days throughout, which is gonna give you a leg up or down with our category management team to get on the shelf with permanent location.
And are you typically giving brands an idea of what the expected velocities are for those first 90 days so they can really get a picture of whether they are succeeding or not succeeding?
Yeah, the beauty of the Forging or Innovation Center, if you will, display is that you're off shelf.
So you're gonna have one advantage as your off shelf display.
However, it is also a disadvantage for certain categories, whether it's olive oil, a customer is not necessarily looking for an off shelf olive oil display, they're going to the olive oil on the inline set.
So we don't hold the brands to the standard of the category, which is good news.
Because of those advantages and disadvantages, we're also not looking for TPRs and reduced retail.
So we're looking for a great everyday value of what the consumer is willing to pay for your item and let it really be the hero.
So you're not gonna be able to buy your velocities, if you will, that buy will get one free or 10 for 10 or whatever ways necessary there.
So it's individual buy item, even past category level.
So what you will get though is once a week, you will get a very, I'll say barbaric report that does give you sales volume by store.
And it will give you that for the entire innovation set.
So you can see if there's other items how you're doing, but there's no one magic formula that says, hey, you did really good.
And we're not just measuring velocities.
We're also looking at what did you do as a brand to drive traffic into Sprouts to purchase your items, right?
So that's another metric that we're looking at.
We're looking at all different forms of data that include more than just sales velocity.
And what kind of footprint do the innovation sets have in store?
How big is it and is there refrigerated opportunity, frozen opportunity?
Oh, that's a great question.
All 414 stores have some form of an innovation display.
Our most common is gonna be a 12 foot display.
That's a 12 foot gondola with two end caps.
And that's in a large majority of the stores.
All of the innovation sets range from a four foot pod, if you will, a four by four, all the way up to a 16 foot display across all stores.
Now there's some small, very small locations where they may just have an end cap, but we're, you know, over 90% of the stores are gonna have an eight or 12 foot display on the Innovation Center.
As far as refrigeration or frozen, we are testing right now a refrigerated end cap.
It's a small test, but, and we know we have a pretty dang good feeling that it's gonna be successful.
So we are looking to expand into refrigerated.
And if that works just right, possibly making the other end cap a frozen end cap.
But today we are looking at all that innovation.
And if we see something very exciting, we are facilitating getting those products to the category managers or directors of those two departments.
But as of today, we're not actively seeking out large amounts of frozen or refrigerated on the foraging side because of our display limitations currently.
Elliot mentioned that failing is an option with the innovation set.
Traditionally, I think the general understanding is that if you launch in a retailer and you don't succeed, you never have a shot with that retailer ever again or until that buying team leaves or whatever it is.
What's the case with the innovation set?
Do you have another shot if you fail in the innovation set?
Absolutely, and that's the beauty of it, right?
It is a true test and learn.
So we wanna know, it could be that instead of a six pack per case or per unit, that a five pack would have been a lot better.
It may be that you were just 50 cents retail too high.
It may be that, I don't wanna say, but maybe we had a distributor issue where it shipped late and you didn't get your full 90 day picture.
So we're absolutely looking to test and learn and give the brand the best opportunity to be successful because when they're not successful, there's cost and risk to Sprouts as well.
So we wanna really do the work upfront.
And that's where Elliot and team really helps us out.
And then we wanna do the work when it's on the shelf to do the best we can to make that item a viable item and a permanent item in our inline set.
And Melissa, there's other ways to use that test too.
It's also a great time to test different marketing levers, right?
You can geotarget certain areas and work certain social campaigns around it.
One very successful thing just for everyone listening that's worked very well is using the employee coupon program through Inmar, get the team members at Sprouts involved.
They're all shoppers in their own stores for the most part and they become ambassadors, but they also especially have an item that they're likely to take back to the break room and snarf down.
You can drive a lot of velocity that way, but there's a lot, I mean, growth hack, test things and isolate certain variables and look at this as a really relatively low risk.
And that's why I suggest not getting swept away in the glory of 414 stores, but work with the team and identify the right number of stores, the right number of DCs, where you can try the things that you're going to learn so that you know which things you can do.
Because as an entrepreneur of an emerging brand, you're always resource limited, so you can't do everything.
And sometimes what happens is you try to do all the things in all the stores and affect very little movement when in fact you can do the right things in the right stores and drive all the volume that you need.
I have a few comments here that I would like to get to.
Yale Linker would like you to know if Sprouts is coming to the northeast of the Philly area, that that would be very exciting for her and everybody that she knows.
Richard from LinkedIn wants you to know that he would like you to come to Canada.
And Jeffrey Paul has a question, are all products eligible for the forager program?
All products are eligible to be submitted, but as we spoke a little earlier, non-perishable.
So grocery, vitamins, beer and wine, bulk items, all those non-perishable, what we call non-perishable items are merchandised on the innovation sets today across those departments.
However, if you do have a very innovative brand that is refrigerated in the dairy, or it's a frozen item, we do wanna see those items as well, but we don't have display space designated as an Innovation Center display today for those items.
So hopefully that answers your question.
And I would just encourage you, if you are a refrigerator or frozen item that is really innovative, even though you know that, go to the foraging team, go to the innovation team, because they can act as internal champions for you within Sprouts.
And they often will talk to the cat, because category managers are bombarded.
Not that the foraging team isn't bombarded with opportunities, but when they see true innovation, that's what they're on the lookout.
And they'll carry the water for you and take that message to the category managers.
Well, that was a great explanation of the forager program.
Let's dive into the more standard category review process.
So this is a standardized process.
There is a category review calendar.
I would assume that this is probably applying to get into all of those 414 stores.
Scott, could you talk a little bit about the portal that brands need to go through for this, requirements for trade spend and marketing?
What do brands need to know if they're applying for the full deal application with Sprouts Farmers Market?
Sure.
The good news is it's the exact same portal for the foraging.
So at sprouts.com, at the very bottom, you scroll all the way to the bottom and say new vendors as a link.
Once you click on there, it's gonna give you all the information to follow step by step, whether you're submitting to foraging or you're submitting for an ice cream review that happens in March, let's say.
The requirements that are there, we do have an ingredient standard deck that is listed there that will give you all the, we call it a boot list, if you will, of items and ingredients that we're not interested in supplying to our customers.
As far as if you're submitting for the regular category review process, if you're selected for an appointment with the category managers, which they would be the ones to choose that, all the negotiations for trade spend and intro deals will be done directly with the category manager.
There is some minimum kind of requirements that are requested throughout Sprouts, but they are different by department.
But there will be, generally, there's gonna be a free fill ask.
Some departments are two case free fill.
Most are one.
Maybe your category manager will negotiate an EDLC program and waive your free fill or half price here free fill.
So there's negotiations that could take place after selected to meet with the category manager.
And if and when that happens and you're selected, all those negotiations will take place in those meetings one-on-one with the CNs.
You mentioned that exclusivity is a great thing to offer if you're in the innovation set.
If you're applying through the category review process and you can offer an exclusive flavor or an exclusive skew, for example, is that something that your team's looking for?
Absolutely.
Sprouts is looking to be as differentiated as possible across all categories in the entire store.
And that's really our survival.
When you really think about different margin requirements by different conventional retailers to natural retailers, there's a whole breadth of reasons why we need to carry different items from the retailer across the street.
So we are definitely looking for that.
When we think of innovation or exclusivity, there is a difference between foraging and the merchandising or category management team where it may be an exclusive flavor, where that would fly across category management, where that's, I would say, good and excellent.
With the foraging team, that's not how we define innovation on the foraging table.
We're looking for true innovative brands and items that are different from the rest that aren't like a, I don't want to throw a name brand out there, but maybe a popular national brand that has an exclusive flavor.
That goes down more to the category management road.
If you're a new to the category general, even a new doesn't mean it's completely new item.
It can mean new packaging delivery system.
It can mean different things, but it truly is different and not a me too or an additional skew of an existing line.
And if a brand submits through the category review process and maybe doesn't hear back, is it appropriate to reach out to the category manager and ask what's the best way for folks to understand whether they made it or not?
Absolutely not.
I would never reach out to the category manager.
You're going to get some form of acknowledgement through the portal that the item has been received.
You should as well get some sort of, if the item is not accepted even for, let's say an appointment or a meeting, you're going to get some response back from the portal that that's going to tell you the reason why that the item was not selected.
So at that point, if you were working with a broker, you can work with the brokers who usually have meetings with category management team on weekly, monthly, quarterly basis.
If you were, if it was denied, there was over 30,000 items submitted to the portal last year.
So I want you to think about that number.
That's just brands that were educated and strong enough to get through the portal submission process.
There was 30,000, that doesn't include emails, shows and other means to see new items.
So the category manager does not have time to go into deep depth on why the item wasn't selected, but they will give the respect to say, hey, we did review the item at this current time.
Maybe it's space, maybe it's retail, maybe it's ingredients, but there will be some reason why that item wasn't accepted.
And it doesn't mean forever, to your point.
It doesn't mean forever at Sprouts.
It just means for this review cycle, we're gonna pass.
Certainly that notification is much appreciated.
I have a question here from Keaton Vacill.
He says he's a little unclear on how you submit for the forager program.
The website and RangeMe Path seem to be for the main category review.
Is there a specific place on the website where you go?
Would you mind repeating that?
Yeah, if you go to sprouts.com and you scroll all the way down to the bottom of the website, there's a new vendor tab or link, if you will.
If you click on that link, then that's gonna bring you to the submission page at Sprouts.
That's our portal for new items.
That's gonna give you an option to select a category or I think it's department first, then category.
And within that, as you scroll down, you will see a foraging table.
You could click right on that link and submit your items right there.
Yeah, actually click on grocery first, cause that's that.
And then when you hit the drop down in grocery, you'll find the forager table.
If you're not a grocery item and you hit like Hava or something like that, you won't see it.
Thank you, Elliot.
I just learned that.
Elliot knows more than I do.
And then for the traditional category review entry, how long do you have to prove yourself in that regard?
And is it really a velocity driven metric that helps you understand, that means that you survive or don't survive if you submit through the more traditional process?
Yeah, if you're selected on the merchandising team in the category review process and you go through all the hoops and you're on shelf and you're cranking, it's not just velocity, right?
We're looking at dollars, maybe you're a higher ticket ring.
You could be a differentiated item, maybe you're goat milk and we don't sell a lot of goat milk, but we have those five customers that really need it.
We're going to keep those items on the shelf.
So they're looking at a whole range of different metrics as well, but primarily at the end of the day, the category manager is responsible for every single skew that they carry within their categories and every single skew has to perform.
And there's always a bottom 20%.
So if you're going to fall in the bottom 20%, you're going to be at risk if you're not differentiated or there is no other reason to carry that item, then it's going to get discontinued.
And you're generally, the general rule of thumb is six months that you're going to have on the shelf.
It may be five if they're doing two reviews a year, but generally, they're going to give you a six month window to kind of prove yourself.
And this is, I think, a really important kind of tough love moment for entrepreneurs to understand.
And just to put all the BS aside, I mean, at the end of the day, this is to some degree a real estate game, right?
And a category manager has so many linear feet and they have to deliver gross profit per linear foot.
And if they're taking something off the shelf to put you on the shelf, you have to perform at a rate that helps them grow that gross profit per linear foot.
And that's why it's so important to be in an innovation center, test and learn.
I wish it's something that I will continue to work in lobby with Sprouts that we figure out a way to give entrepreneurial brands a little more time on the shelf because it's very hard to come on the shelf and literally hit from day one at a point where you're delivering the kind of contribution to the category, both either in velocity or in category gross profit that a legacy brand or something that's been in the market for a long time does.
It takes time to build and you need that time to build.
But that was my call to arms to...
Battles getting on the shelf, the war's getting up.
Before you ever go on the shelf, you need to have a plan that you know works to get you to that level of category gross profit generation per linear foot that you need to sustain.
Otherwise, you are going to really cost yourself, you're gonna cost yourself all that free fill, all of that TPR, all of that, all those resources that you've locked in that box and can't use for other elements of your business.
And that's why starting smaller, winning where you are, first, only say yes to where you can win, first of all, and then win where you are first before you start taking on more.
And just make sure you have that plan or don't.
I've had a few times where people have been so excited, they've submitted the Sprouts, the category manager loves the product, and then I've met with the brand and I say, you gotta go back and tell the category manager, we're not ready yet.
We're not confident we're gonna succeed on your shelf.
And the category managers often look at you like, what?
But I've never had them not respect that and then be there to talk to them when they're ready to come back around and do it.
So it's just so key to understand the business you're saying yes to and the amount of investment you're about to make.
If you don't know how to do it, don't.
Great point.
Margaret Kirby wants to know, once you're in the set, does Sprouts have an internal data reporting system that suppliers have access to?
So not so sophisticated, but very helpful metric that you get if you're in the innovation set once you're steady state with Sprouts.
How do suppliers understand what their performance looks like?
Yeah, that's a great point.
And I'm not going to sugar coat that we're a little bit behind the times on having a consumer or a brand facing portal.
We are working on that today as we speak.
It's going to be a little bit of a process.
So I wouldn't hold my breath too long.
But today there is not a way that you can just go somewhere and click and see how you're doing.
That will be more of through the category management team, which does make having a broker a little bit more beneficial.
It's not 100% necessary or requirement, but you may have a little bit more access to our merchandising team if you have broker support.
So I wish I had a better answer for you than it's that we're working on it, but that's what we have today.
I have a question from Sarah Couch here who wants to know, so if you're in the innovation set and then you're adopted into the larger category, what do you typically see brands having in place to be successful there?
What does a successful transition usually look like?
That's a great question.
All these are great.
In a perfect world, we would like to transition.
We would look at the category review schedule and say, okay, chips are resetting in July, so we want to go three months back from that and look at, so 90 days prior to that, and looking at as many chip items to put in the innovation center as possible because we want that transition to be as smooth as possible.
So there's two different, I'll answer it two different ways.
If that happens, great.
That's an easy flow into the set.
If there's a gap in between, we may keep you on the innovation set for another 30 days, 60 days.
If it's past 60 days, we may look at, hey, can we get an off-shelf display somewhere in the grocery department to keep that inventory turning through Cahee while the reset happens?
So that kind of answers the transition.
As far as what's successful on the shelf, that's going to be, that's a harder question to answer, right?
And to Elliot's point, it's easier to say what not to do.
What not to do is wait for sprouts to sell your item.
You need to be proactive in selling your item.
You need to be proactive in driving traffic to sprouts to drive sales to your item.
So that's social, digital, all different ways that you can find ways to drive traffic into sprouts is gonna be beneficial.
There may be advertisements.
Sprouts doesn't wanna be known as a high-low retailer.
So running four BOGO ads a year would get you sales, but that's not what we're looking for.
We want our items to be items that customers are seeking out because they're health enthusiasts and they want your item, not buying it because it's the cheapest one on the shelf.
So there's all different ranges and your category manager for each category is gonna have a different strategy and they're gonna walk you through what is best for nutrition bars is gonna be different than box cereal.
So they'll walk you through the best merchandising plan to drive as much sales as possible for your item.
And sorry, if I could add one more comment.
There's nobody that wants to sell your item as bad as you do than us.
So we're in it together.
If you're selected for the everyday set, we both have the same exact goal that we want to sell as much product of yours as humanly possible.
Does that mean that a brand shouldn't necessarily expect to run quarterly promotions or participate in the Sprouts marketing programs?
Is there a general recommendation around what you're looking for from brands to help move those products?
Yeah, absolutely.
There's no, if you take it to the highest level possible, we want to have an item at a value, right?
So whether that's an item that's 499, and we can have it on the shelf every day at 449, 479, 399, we're looking for an item that the customer is gonna feel as a value.
And value is not defined by price.
It's defined by many other factors, right?
It's the person that wants to buy a Cadillac, but they're gonna buy the dealer driven Cadillac or a one year used Cadillac, right?
So they still want the Cadillac, but they're gonna look for a value in that item.
So that's at the highest level.
And then as it goes down, yes, we want you to take advantage of marketing programs, but what we're not looking for is, you know, if you're coming in with a very deep, high, low program, and again, every category is different, but we're generally, that's not exactly the customer we want shopping in our stores, is the one that we're buying for the week or renting for the week.
So we want an everyday true value on the shelf.
And that may be in the form of a quarterly promotion that's a month long, or, you know, a 20 or 50 cent off promotion, but that again will be negotiated by category by CM.
For the Sprouts consumer who you've described as, you know, perhaps they're a health enthusiast, they're also looking for innovation.
Are there particular certifications that they're looking for?
Are you finding that customers are asking for regenerative, organic, fair trade?
What are your consumers really focused on?
Yeah, I mean, USDA Organic is still the powerhouse of the bugs, if you will, or certifications on the label on the front of your packaging, is still very, very strong.
We have a strong gluten-free base, we have a strong vegan base.
You know, regenerative agriculture is still a little bit ahead of the consumer.
It's something that is gaining some traction, but it's still a little bit ahead of its time, as far as the consumer trading their wallet for it.
And then B Corp is huge.
As customers get educated on what B Corp is, we see a huge return and repeat purchase on B Corp items because of the amount of everything it takes to get certified B Corp and all the good that it is.
We do see a lot of repeat purchases on B Corp items.
All right, one last question here.
What category and ingredient trends are you keeping an eye out for or are you seeing?
Are there specific products that you're seeing be really interesting to your buying team?
Are there ingredients that you're looking for, looking to avoid?
What's of the moment right now?
That's a great question.
There's two that jump right to mind.
Anything mushroom and adaptogen there with all of the health benefits that virtually you can pick, spin the wheel on what health benefit mushroom, adaptogens have, as well as cognitive health and mind health and brain health is something that I feel we're ready for.
Mental health and cognitive health are two that we're starting to see bubble up that we wanna get ahead of as fast as possible.
I can't thank you both enough.
Scott Romano and Elliot Begoun, thank you so much for this discussion on sprouts.
It was incredibly helpful.
And I know it was very useful to our audience.
So thank you again so much for joining us.
That concludes another episode of the Community Call Podcast.
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