Building a successful direct-to-consumer snack business is no easy task, but that’s just what NatureBox has done since its launch back in 2012. The company’s ever-changing lineup of unique munchies — Sriracha-roasted cashews, mini Belgian waffles, and cheddar and hatch chili crackers, just to name a few — have attracted scores of loyal customers. But NatureBox’s secret weapon, according to founder and CEO Gautam Gupta, has nothing to do with marketing, supply savvy or even culinary expertise. It’s all about the data.
Data coupled with frequent consumer testing, according to Gupta, whose background is in technology, is what guides NatureBox’s assortment of roughly 150 items. And it’s data that’s helping the company expand into retailers like Target, Safeway and Sprouts Farmers Market.
Gupta chatted with Food Dive about why starting online was the best way for NatureBox to break into retail stores. He also gave his thoughts on the Amazon threat, snacking trends and the importance of physical stores in an increasingly online world.
Food Dive: Was it your plan all along to move into retail stores?
Gupta: The vision was always that at some point we would have enough brand awareness to take the product into the physical stores. The thesis I had on the industry was: I don't think grocery stores are going away. I think they're going to change and I think the grocery store experience is going to be about fresh food, and it's going to be about brand discovery. How do you find out about a new product? How do you try a product that you haven't had before? When we were building the company, we really thought about how do we use the online part of our business to generate data and insights about the consumer, and create products that are not only delicious and healthy but also that are proven winners? So we knew from day one that eventually we'd be serving brick-and -mortar stores.
"We're not just talking about putting items in the store. We're talking about a much broader partnership around how we can help the buyer put the best items into the store."
Food Dive: So why go online in the first place? Why not go straight to the retailers and pitch them?
Gupta: It was a combination of a few things. First, my co-founder and I came from the tech industry. So we didn't know how distribution in stores worked. And second, we felt like we could build a brand online much faster than we could build a brand offline. And we really felt that because of the power of social media and the internet, we could create a brand that that retailers would get excited about working with. And then the third piece was around data. We really felt that if we could sit across from a retail buyer and show them the data on the product and our consumers down to the zip code level... that would be incredibly compelling.
And from what we're hearing from the market, it is compelling. We're not just talking about putting items in the store. We're talking about a much broader partnership around how we can help the buyer put the best items into the store.
Food Dive: Retailers gather data on their own. How does your data work with theirs?
Gupta: I think it's complementary. Some retailers have access to some really great data and insights about the consumer. We've built an organization around technology and data. It's the core of what we do. So I do think that there is a significant difference in the way that we use data and how sophisticated we are about data analytics and data science. But also, because of that direct relationship with the consumer, we can find out not just what the consumer is buying, but who they are as well. With retail data, you're making inferences based on what they're buying, but you don't know what they're looking for.
Food Dive: How does this play out with retailers? Can you give an example?
Gupta: I'll give you a couple different quick examples. One is really about geographic preference. We're able to work down to the zip code level with retailers and tell them which products are over-indexing in that particular zip code or neighborhood. We’re also able to bubble that up to the city level or the region level.
Another way that we use the data is we sit down with some of our retail partners and we show them what their shopper is buying at NatureBox.com. That starts a conversation around what products to put in-store, how often they need to be rotated, and their broader strategic approach.
The third piece is this aspect of proven winners. We launched a cheddar-flavored lentil chip on the website. We got very strong reactions to the product and a very high repeat purchase rate. We were able to take that as a case study to one of our retail partners, who launched the product in a particular region where it was over-indexing on NatureBox.com, and the product sold out in less than a week.
Food Dive: How important is it for suppliers to provide category-level insights, not just for their specific products?
Gupta: What we're trying to do is really build that relationship, that trust with the buyer, and have them think about us not just as a brand and another vendor that they work with, but as someone that can provide insights and be able to test new ideas. So we do a fair share of that at the category level, just [with] insights and sharing what we're learning about the consumer.
Food Dive: You launched NatureBox's first retail offerings in Target stores last year. Talk about how that relationship developed.
Gupta: What made them a really attractive retailer to us, and the reason that we launched with Target first, was their commitment around health and wellness. That's been a huge strategic focus for them. The second piece is their commitment to innovation. We had and continue to have a lot of different ideas about how we can improve the retail model, how we can leverage direct-to-consumer insights. And what we found in Target is a partner that's really open to those ideas and willing to test with us.
Food Dive: NatureBox is able to get products to market in a quarter of the time of a typical CPG company. How are you able to do that?
Gupta: We’re able to develop and launch new ideas within about 10 to 12 weeks. And that's obviously a very short timeframe. We're mining the data to see what's working, what isn't working and what we're hearing from the customer to make sure that we're not just shooting in the dark. We're making really informed bets around product development. We also have different ways to test products and get feedback from the consumer. So we'll actually concept test on the website prior to launching a product. That gives us a signal of, is the consumer interested in this? Will it sell? We control the channel, and products have to prove out at NatureBox.com, so we're not bound to a retail launch schedule.
"We’re able to develop and launch new ideas within about 10 to 12 weeks. And that's obviously a very short timeframe. We're mining the data to see what's working, what isn't working and what we're hearing from the customer to make sure that we're not just shooting in the dark."
Food Dive: How often do you update your product selection online?
Gupta: It's pretty fluid. At any given time we've got about 120 to 150 active items on the website. These are unique products — these are not just SKUs. And then we launch about 50 new items each year. Whenever we launch a product, we're also taking away a lower performer. It's a really fluid assortment; it's constantly evolving.
Food Dive: How are you driving membership on your site? What are some of the most effective ways you are acquiring customers?
Gupta: A variety of different ways. We've been huge proponents of and have been involved in influencer marketing from the very early days. We were very early into things like podcasts and YouTube, so those continue to be very important traffic drivers for us. The other thing that goes without saying is word of mouth. Our business is very much driven by consumers trying it, telling their friends about it. And then I'd say the last piece is, consumers see us at retail or maybe try us on [a] Delta or American Airlines flight, and they like the product. We are seeing consumers come from the offline world to NatureBox.com.
Food Dive: One of the main hurdles direct-to-consumer businesses face is building brand awareness. What were some keys for you as far as getting noticed?
Gupta: The first thing we did was really around that influencer piece, where we were building relationships with bloggers and getting them to write reviews about the product. What we realized was in food, taste is paramount. And so if you were going to buy NatureBox, you needed to believe that you were going to really enjoy the product, and ideally you were hearing that from someone, either a friend of yours or someone you trust who was incredibly important. Obviously the brand has evolved, but certainly in the beginning we were very focused on how can we leverage the credibility of a friend telling you about NatureBox.
Food Dive: What have you learned about the supermarket industry since you’ve moved into that channel? Is there anything that’s surprised you about the snack category at brick-and-mortar stores?
Gupta: I think we've gained an appreciation for how complicated the go-to-market is in the channel. Outside of that, what we've learned is that there's just a really great opportunity ... to forward what we think our brand stands for, which is better-for-you snacking.
Food Dive: What are three prominent snacking trends you're seeing right now?
"I think Amazon is really at its core a platform company. I see Whole Foods as the beginning of a platform for Amazon and I think that platform is really around delivery and logistics infrastructure."
Gupta: Obviously protein is a huge one. With our direct-to-consumer data, we've actually identified what we call the magic number ... in terms of grams of protein per serving. If you're at or above that magic number, consumers will care about it and deem it to be a good source of protein. But if not, then you don't get the credit for having protein in that product.
I think spice is another huge one. Ethnic spices [and] food as exploration [are] just a huge, huge trend for millennial consumers. Sriracha to Korean and Indian inspired spices — we're really seeing all of these things. These aren't passing trends. We're seeing consumers by and large looking for bigger, bolder flavors, and they're sticking with them. And then I’d say the third one is sugar. ... Consumers are focusing on the difference between added sugars versus natural sugars. There's also a lot of thought around the amount of sugar — where that tipping point is, and when a consumer deems a product has too much sugar. It's that idea of permissible indulgence. Consumers want sweet, but they also want to balance that out.
Food Dive: As someone who understands coming from online retail and a very data focused model into retail, what sort of threat do you believe Amazon and Whole Foods pose to the grocery industry?
Gupta: I think Amazon is really at its core a platform company. I see Whole Foods as the beginning of a platform for Amazon, and I think that platform is really around delivery and logistics infrastructure. How do we get the product to the consumer faster, and realizing that in the world of grocery there are a few different models that could work. There's delivery to the home, and there's pick-up at the store. I see it as the beginning of what could be a platform where Amazon basically extends their Prime capabilities through the Whole Foods store network and then the Whole Foods product and vendor relationships.
Food Dive: So many grocers have expanded into e-commerce lately. Does that make you guys more attractive to these retailers since you’re already an established online brand?
Gupta: I can tell you that with retail partners where we sell in both store as well as their online or mobile experiences, we over-index on both online and mobile. It makes sense because a consumer shopping for NatureBox is likely more tech-savvy and more of an online shopper. I think flexibility will be the key to getting consumers to adopt food online. Being able to offer the product to be purchased in any different way, whether it's same-day delivery or pick-up in the store, or it's a la carte purchase versus subscription. I do think offering all of those options is going to be critical to long-term success in this space.