Don't wait for perfect: Advice on small food business from the women of FreshDirect
If she had the chance to warn herself of the challenges that would come with launching her own company, Anita Shepherd doesn’t think she would do it.
“I think there’s a really big value in being naive,” Shepherd, the founder of Anita’s Yogurt, told Food Dive. “People will tell you, ‘You can’t do that,’ or, ‘That’s not conventional,’ and you have to be a little naive to do it anyway.”
These were just a few words of advice shared last week at “Women in Food Deliver,” a Washington, D.C. forum celebrating women in the food industry. The event — hosted by Pineapple, a local network for women in food, and online grocer FreshDirect — drew a crowd of female entrepreneurs and aspiring business owners to hear from the founders of four emerging brands FreshDirect carries.
Marissa Dobbins, senior category merchant of dairy and grocery at FreshDirect, moderated the discussion between the women behind Anita’s Yogurt, Chloe’s Fruit Pops, Health-Ade Kombucha and Early Bird Granola.
Throughout the event, the five women discussed how consumer demand for authentic brand experiences is creating opportunity for new entrepreneurs, the challenge of maintaining that authenticity when scaling up, and the importance of finding female community in the industry. The entrepreneurs also challenged their audience to take the leap themselves.
“You’re always going to be your own harshest critic,” Shepherd said. “I think that generally men will have an idea and think it’s better than it really is, and women will have an idea and think it’s worse than it really is. … Don’t be scared to completely break the mold.”
Big potential for small brands
As a FreshDirect merchant, Dobbins spends her time sourcing products from around the world and developing relationships with brands to understand how best to convey the brand story to online consumers.
“I’m particularly passionate about working with small, emerging brands,” Dobbins told the audience.”They are super eager, excited, willing to test and learn — and sometimes fail — and then test again. For me, there is nothing more rewarding than seeing a small business scale and succeed in a super competitive space.”
Dobbins told Food Dive that FreshDirect’s portfolio of emerging food brands is what sets it apart from competitors. About 20% of the grocery and dairy brands that the e-tailer carries are small to mid-level players.
“Working with small brands is going to allow us to differentiate,” she said. “Most large retailers aren’t going to have the bandwidth or the energy to really focus on these smaller businesses. This is the FreshDirect story — it’s all about those brands.”
Dobbins said that she looks for flexibility and a willingness to try new things in potential company partners.
“It can be really scary to go onto the online space for some of these emerging brands. In a lot of cases we’re the first online retailer that they’ve worked with, so that can be sort of a hump to get over.”
“Working with small brands is going to allow us to differentiate. Most large retailers aren’t going to have the bandwidth or the energy to really focus on these smaller businesses. This is the FreshDirect story — it’s all about those brands.”
Senior category merchant of grocery and dairy, FreshDirect
These concerns aren’t baseless. E-commerce grocery poses unique challenges, especially for marketing little-known, regional players. Growing consumer demand for convenience has made this especially difficult, Dobbins said, as online shoppers want to spend as little time as possible selecting their groceries. Extra care must be given to product descriptions and brand photos in order to catch a time-strapped consumer’s eye.
This shopping behavior has pushed FreshDirect to find creative ways to market industry newcomers. Dobbins said the company has developed strategies that engage site visitors without distracting them from their online shopping trips, such as attractive lifestyle shots and landing pages that feature recipe hacks for cooking inspiration. Leveraging social media has also been key for the online grocer, she said.
Dobbins said that these practices have made FreshDirect “better-positioned as an e-commerce space to be able to tell those [brand] stories than a brick-and-mortar.” She also feels that the e-tailer’s commitment to emerging brands is at the heart of its success in fresh categories.
“We can’t hang our hat on convenience because another company is going to be able to deliver conveniently," she said. "It’s not going to be about price because then it’s just a race to the bottom. It has to be about the freshness of the product.”
FreshDirect entered the D.C. market in April, and will soon expand its footprint and SKU base with a new state-of-the-art 650,000-square-foot facility in the Bronx, which the company will move into at the end of the year.
“We’re at a really exciting tipping point,” Dobbins said. “Being in that new facility will... give us a lot more space to play with small, emerging brands.”
Relationships are key
Nekisia Davis, founder of New York City-based Early Bird Granola, said it’s important for small business owners to find retail partners whose values align with their own.
“A lot of people we’ve approached brush us off as ‘another granola company,’ but when we started working with FreshDirect, they wanted to come see where we made it and they wanted to meet us. There are very few people who have done that,” she told the audience. “If you don’t have that kind of touchy-feely first few connections with a retailer, that can lead to a lot of stagnancy, especially if you don’t have a sales team.”
“If you don’t have that kind of touchy-feely first few connections with a retailer, that can lead to a lot of stagnancy, especially if you don’t have a sales team.”
Founder of Early Bird Granola
Davis also warned against business relationships that undermine brand autonomy.
“We had a partnership a couple years ago where we outsourced fulfillment and we outsourced our website and it was a real nightmare,” she said. “I know that a lot of people who work with co-packers don’t have these experiences, but for me I feel like we’re in this experience economy where how I make you feel is what [the product] is all about.”
Shepherd feels similarly protective of her vegan coconut yogurt. She began Anita’s Yogurt by cooking yogurt in a pot on her stove, making five cases at a time — because that’s what was able to fit in her fridge when she took all of the shelves out. Eventually she moved the operation to a shared kitchen, using equipment she had built herself because she couldn’t afford kitchen-grade tools.
“I would go on beer brewing websites… to get zany, crazy tips on things you could buy at the hardware store to make your own equipment,” she told Food Dive. “Beer fermentation and yogurt fermentation are different, but you can use a lot of the same principles to make a fermented product.”
Anita’s is now produced in a 2,000 square foot facility in Brooklyn with the help of eight full-time employees, but Shepherd hasn’t scaled down her involvement in production.
“I’ve never not made the product myself and at this point that’s the way that I foresee our future,” she said. “Quality is king. … If I followed all the rules, I wasn’t going to get the product I wanted.”
Financing isn't one-size-fits-all
Shepherd has also managed to scale her business without funding.
“I made sure that we were making profit from the first sale,” she said. “I hear about so many big companies that struggled for years without profit. I have no idea how they do it.”
Shepherd said that when she first got her product into stores, her closest competitor’s product cost less than half of what Anita’s Yogurt did. Today, 16 ounces of Anita’s plain creamline coconut yogurt costs $9.99 on FreshDirect, while 32 ounces of Chobani’s non-fat Greek yogurt costs $5.99. And while this hefty price made it difficult to convince retailers to carry her product, the strategy has allowed her to retain independence.
“There are people who use Kickstarter, there are people who get investors, and there are people who get loans, but I just knew that if I was going to make it happen I had to make money every week,” she said. “I’m funding myself from nothing; it has to be funded by revenue.”
“There are people who use Kickstarter, there are people who get investors, and there are people who get loans, but I just knew that if I was going to make it happen I had to make money every week. I’m funding myself from nothing; it has to be funded by revenue.”
Founder of Anita's Yogurt
Health-Ade Kombucha co-founder Vanessa Dew, on the other hand, praised the benefits of venture capital, which has helped the company expand to nearly 10,000 stores across 50 states in just five and a half years.
“In the summer of 2013, we were growing really quickly, we were turning a profit every month, but we couldn’t [handle] the growth,” she told the audience. “At that point we started a Kickstarter. We didn’t know the ins and outs of private equity, but about midway through our Kickstarter, our current investor found us.”
The Los-Angeles based kombucha maker, run by Dew and friends Diana and Justin Trout, raised seed funding from First Beverage Group while still brewing kombucha out of the Trouts’ home. This investment helped Health-Ade construct two small manufacturing facilities and hire 40 employees. In 2016, when the company footprint spanned about 3,000 stores in 42 states, CAVU Venture Partners invested $7 million in venture funding.
“It’s really essential to have a sounding board, and that’s one of the benefits of private equity — their board members can add to your board,” she said. “Everyone and their mother was telling us to be careful about private equity, [saying] they’re so scary, they’re going to be vultures and they’re going to take advantage of you, but that wasn’the case for us. [Private equity] is a major reason why we were able to grow.”
The power of authenticity and community
Shepherd, Dew and Davis encouraged attendees to take chances, hold fast to their brand ethos and look to fellow entrepreneurs for support when navigating the small business world.
“I wish I knew how hard it was going to be, honestly, and that I needed a strong community around me,” Davis said. “There’s really no handbook to know how to do this stuff.”
Dew stressed the importance of maintaining brand integrity, especially when financial temptations arise.
“You need to stay true to your values as you grow your business, because you’ll come to a point where you ask, ‘Do we go this route because it’s way cheaper, or do we do what we need to do to make a high quality product?’ We stuck to our guns with our kombucha,” she said. “As you go you can learn and refine and tweak your model, and because you are an entrepreneur you will want to do that and that will happen naturally.”
The women also cautioned against trying to perfect business models, product sourcing and formulas before launching a business, because just getting to “good” can be a lengthy process. Shepherd admitted that it took two years of experimentation with different kinds of coconut milk and live cultures to create a formula that was "good" enough for "someone to pay for it at the store.”
“I always try to encourage people who are working on a product and running their own business to not wait for things to be perfect because they never will be,” Shepherd said. “As soon as it’s good enough, just go for it.”
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