- Online natural and organic foods retailer Thrive Market has branched out into creating private label products that sell only on its site rather than at retailers like Whole Foods.
- Thrive's first, recently-launched private label products are coconut oil and organic tomato sauce, and the company plans for about 100 private label products in the first half of 2016, Thrive co-founder and co-CEO Nick Green told Fortune.
- Thrive's goal is to sell natural and organic products with a price tag comparable to their conventional non-organic equivalent by pricing their products just high enough to make up the company's fulfillment and shipping costs. Thrive instead makes its money by offering these prices on a subscription basis.
"It's Whole Foods-type products at Costco-like prices," Green told Fortune.
To develop natural and organic products and price them as low as Thrive wanted to, the company had to turn to a private label rather than third-party brand model for some categories. These categories are generally the ones that don't generate a high enough margin to cover the product's cost, such as flour and cider vinegar, which are low margin and heavy enough to be expensive to ship. Thrive sold both product categories at a loss to date, but, as pantry staples, they top the list for private label brand development, Green told Fortune.
Traditionally center-store manufacturers like Campbell are looking to fresher foods, such as through acquisitions like Bolthouse Farms and Garden Fresh, as a way to combat slowing sales. But Thrive is looking for growth and success in the center store by focusing on only non-perishable items, which don't spoil and can be shipped anywhere via delivery services like UPS and FedEx. The difference is, Thrive sells these products online rather than the center of a physical grocery store.
Green said that packaged foods will always exist, but they will change in the coming years, looking more like natural foods than those laden with artificial ingredients. Instead, much of the sales of packaged foods will shift online, particularly with companies like Amazon offering more food products. Plus, as more manufacturers commit to an e-commerce strategy, as General Mills, Mondelez, and PepsiCo already have, Green's prediction isn't so far off.