Issue #15: Innovative Packaging on the Rise

Traditionally, food packaging has remained constant. Despite innovations across other industries, food manufacturers typically stick to the same packaging. That was until olive oil company Graza burst onto the scene. Unlike traditional olive oils in plastic or glass bottles with a screw top, Graza launched with a screw nozzle squeeze bottle (picture above). This format truly understood how consumers use oil, while also optimizing for Instagram-able moments and minimal mess. The innovation spawned a ton of copycats, but Graza didn’t stop there. After publically criticizing the dupes, Graza continued to innovate adding alumni cans to refill bottles and smaller sizes of their products. Both were a huge success, and despite the numbers not being released yet, anecdotally they are hard to find (check out this tweet from Snaxshot founder Andrea Hernandez).

Why do I bring Graza up? I believe it is been part of a larger trend of packaging innovation we are seeing. Having been a consumer of Graza, I know their olive oils are solid, but the quality wouldn’t exclusively be the reason you would buy a fairly expensive product. Instead, it is the combination of convenience, usability, Instagram-able packing, and quality liquid that makes them so popular. This year, Graza is on track to do just about $50 million in sales. Other industries are taking note. Canned cocktails and wine have taken over liquor stores. Tinned fish brand Fishwife has led a moment for tinned fish as it is in easier to eat rectangular packaging that doesn’t require a can opener. Even big CPG brand Tabasco is getting in on the innovation with a just-launched salsa picante. The lesson for emerging CPG brands, packaging innovation is almost/just as important as the innovation with your product. What are your favorite recent packaging innovations?

Lidl Takes A Page Out of Amazon’s Book

The saying goes when life gives you lemons, make lemonade. In the German discount supermarket Lidl’s case, their lemons were Germany and Austria’s stringent privacy and data protection laws. These laws mean data storage with third parties, like Amazon, Microsoft, and Google, was not really feasible. So, Lidl went ahead and created their own data services internally and then expanded to cloud computing and cybersecurity via acquisitions. The lemonade if you will. Similar to Amazon, which began their popular Amazon Web Services (AWS) as an internal service and quickly realized selling to others could make a good margin, Lidl has followed the same path. The new unit, called Schwarz Digits, generated €1.9bn in annual sales, employs 7,500 people, and signed up clients such as Bayern Munich and SAP. Not bad for what started as a way to address their own needs. A great lesson here for all founders and business leaders, if you are really good at something, especially if it is costly, might be worth exploring selling to other companies.

Amazon Aggregator M&A

It has been a tough couple of years for Amazon aggregators. These are companies that have lots of products on Amazon and centralize the back office. The products they sell are a mix of innovations the company has done and acquisitions of successful products already on the platforms. However, it has been not a great couple of years for these companies. A snapshot of the issues:

• September 2023 - Benitago files for bankruptcy after raising $380 million in equity and debt in the prior two years

• February 2024 - Thrasio Holdings files for bankruptcy after raising more than $3B in debt and equity

• August 2024 - BlackRock and Apollo Global Management are in talks about financing for a merger of two other Amazon aggregators: Branded and Heyday

It is unclear the updated strategy behind the merger, but one could assume they believe there are synergies that could be helpful and costs that could be reduced. However, there is a core problem with these types of businesses. Amazon charges a lot of fees. Also, the internet has many other places to shop in addition to Amazon. These aggregators typically are only listed on Amazon. Plus, they don’t have the benefits of selling in retail, like selling more products to reduce their manufacturing cost. The fundamental business makes sense, but without the eCommerce channel mix and the base sales benefits of retail, can you meet your investor’s return expectations?

An Update on Kaikaku

In Issue #11, we covered an emerging robotics startup, Kaikaku, as the startup tool of the week. Kaikaku makes robots for fast-casual restaurants and is currently piloting/developing the technology at their new restaurant in London, Common Room. This spot features bowls, salads, and coffee which targets busy working professionals. This week The Telegraph put out a great piece diving into the restaurant. In terms of numbers, it takes about 10 seconds to assemble a bowl, the machines are able to produce over 3,500 bowls a month, they stay operational 95% of the time, and profit margins are higher. It also featured a quote from a chef that got me thinking, will robots become a mainstay in restaurants? I believe at fast-casual restaurants you will see robots continue to augment humans, like Sweetgreen is doing. For fine dining, not so sure. What do you think?

Big Lots Considering Bankruptcy

This year has been a tough year for large retailers and this week was no different. Big Lots, a retailer which specializes in off-price, value home goods, announced it is seeking investors to avoid bankruptcy. This investment would be the second cash infusion of the year after receiving a loan earlier in the year. Even though consumers are searching for value, it seems that it has not driven them to Big Lots. In the last earnings call, the company blamed tightened spending on high-ticket items for the 10% drop in sales. Instead, consumers are seeking online options, like Temu, Amazon, and Walmart, other more local options, and second-hand items. I strongly believe the impact of secondhand purchasing and Facebook Marketplace is severely under-discussed. Other value retailers, Dollar Tree and Dollar General have also struggled. Going forward, it is unclear what the path forward is for these retailers. There is a lot of innovation needed in the value retail space. Maybe it is just more retail focused on secondhand items.

• Summary: Fin uses e-bikes with extra storage compared to traditional bikes and electric cargo vans to do middle-mile and last-mile movement of goods faster, greener, and cheaper than competitors

• Founder(s): Chris Sargeant and Rich Pleth

• Amount raised & investors: $16M from proChain Ventures and Pearls Capital

• How this will shape the future of commerce: The future of logistics is electric and using micro-hubs to get to the consumer faster, companies like Fin will have a big impact on that

• Why should you use this technology?: Customers want their goods delivered quickly, are searching for value, and want greener eCommerce, all of which Fin provides

• Pricing: Flat fee per package

• My take: Cities around the world are trying to reduce cars and instead use more bikes, with cargo deliveries being one part of it. Companies like Fin are the next wave of carriers beyond USPS, UPS, FedEx, etc. It will be interesting if the legacy incumbents try to buy vs build their own solutions to compete.

• Interested? Book a demo here

Additional Links:

1. The US Open has taken over NYC and brands are all trying to get in on the action, here are how two brands got major activations without breaking the bank

   • Hubspot wrapped the 7 train, the only train to the US Open, with an advertisement (see here)

   • Blue Owl Capital sponsored lower-ranked players playing against top players like Coco Gauff and Carlos Alcaraz (see here)

2. Liquid Death partners with Coinbase to advertise on their cans (read more here)

3. Chipotle is testing Chipotle Honey Chicken to capitalize on the hot honey trend in Nashville and Sacramento & customers are loving it (read more here)

4. Founders of Hale and Hearty are launching another soup restaurant, Schnippers Quality Soups (read more here)

5. Walmart continues to add more products to its marketplace with the goal of extending the aisle (read more here)

6. Walmart and Amazon are offering deals at restaurants to entice customers to sign up for their subscription services (read more here)

7. Graza launching partnership with Talenti (read more here)

8. Ikea launches omnichannel partnership with Adyen to process in-store and online payments (read more here)

9. Under Armour founder returns to the helm of the company he started (listen to more here)

10. Amazon Fresh launches 4 new stores (read more here)

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