Issue #3: Restaurant, CPG Brand, or Both?

Thank you for the readership as always. Before we dive into this week’s news, I would greatly appreciate participation in these two polls to help shape the future of the newsletter. I'd also love to chat with anyone interested in discussing this further.

Trend of the Week:

This week, Crumbl joined a long line of restaurants/food service establishments expanding their product to grocery via CPG. For example, fellow cookie company Levain used to sell 2 oz frozen cookies in grocery stores, salad store Sweetgreen partnered with Siete Foods to launch Green Goddess Ranch potato chips, restaurants Rao’s and Carbone both spun out Tomato Sauce brands, and Chick-Fil-A bottled up their famous Chick-Fil-A sauce. These are some examples of larger restaurants adding CPG brands, but regardless of size, restaurants have always looked to CPG as a brand extension, an opportunity to grow revenue, and a way to connect with consumers in their non-restaurant food experiences. By having a large presence in an area, you gain brand loyalty that should be tapped into with CPG products. I would recommend all restaurants seriously explore adding a CPG product.

On the flip side, restaurants represent a great opportunity for CPG brands to partner with as they launch or to help spur growth. For instance, hummus brand Little Sesame partnered with another CPG brand, Fly By Jing, to create a spicy hummus and also partnered with Sweetgreen to make a salad. Brand partnerships should not be limited to just Coke or Pepsi machine. There are great opportunities to make money and grow your brand by launching your product in a restaurant. Additionally, you are able to gain credibility by partnering with the restaurant, drive trials, and get faster feedback loops. I am very bullish on CPG and restaurant partnerships, and expect to see more in the future. What is your favorite restaurant and brand collaboration?

News of the Week:

Positive:

1. BinStar Launched Fourth Store - BinStar, the Massachussets-based discount store where customers can shop from overstock and returned items, opened its fourth location in Kingston, MA yesterday. Returns have long been a black hole for e-commerce (read more here). Not only is there a financial impact of returns (over $620 billion), there is an environmental impact too (up to 24 million tons of CO2 emissions due to returns per year). As retailers like Amazon push back on returns (more details later on), there still needs to be a better method to handle returns that the platform doesn’t want to resell. At BinStar, customers shop from a random assortment of items that has been sourced from liquidated return centers. I believe soon you will see some of the larger discount stores, like Marshalls, add this product line. Would you shop here?

2. Bokksu Launched in First Grocery Store - Bokksu, the Japanese snack marketplace and subscription website, launched their Japan Crate snack box with supermarket Giant Food this week. It will be available at all Giant stores for $19.99. Bokksu was already in 5,000 specialty retail stores but this was the first grocery store they entered. With rising costs across the board, consumers are hesitant to spend on an e-commerce subscription they have never tried. This box is a great way to grow the Bokksu brand and drive trial for customers who are apprehensive about investing in a subscription. If they are able to delight customers with the box, hopefully, the customers end up subscribing.

Negative:

1. Common Goes Bankrupt - Common, the co-living startup founded by Brad Hargreaves, one of the founders of General Assembly. The concept, like many other defunct co-living spaces, had a private bedroom and shared rest of the house, with flexibility about locations. Common had reached 18 cities when it filed for bankruptcy. Co-living as a concept enables denser living, community, and more people in an area to support local retail businesses. Ultimately, they raised too much money to meet venture returns. However, I hope similar to how the fall of WeWork spawned many local, not venture backed co-working spaces, the fall of Common will spur the same new business growth in. the co-living space.

2. Dollar Tree Reshufflling - This week, Dollar Tree announced Q1 earnings which caused the stock price to fall due to missing expectations. Like anything in retail, it is nuanced, with both positive and negative aspects. Revenue and net income were slightly up, but operating income and net profit margin both fell. This comes at a tumultuous time for Dollar Tree as they are doing some serious reorganization. After acquiring Family Dollar, a city-based dollar store, in 2015 they are now exploring the sale of it. On the West Coast, Dollar Tree will be adding 170 locations after it acquired the leases of 99 Cent Only, which recently went bankrupt. Finally, 50 employees were recently laid off at the corporate office. Overall, a tumultuous week, but a reshuffling that may be needed to ensure the future health of the business

Startup Feature: Bonside

• Summary: Non-dilutive growth capital for brick and mortar stores in exchange for a percentage of revenue financed via Bonside’s fund or from a network of accredited investors

• Founder(s): Neha Govindraj

• Amount raised & investors: $4.35M from Floating Point, 81 Collection, TMV, and Jacob Jaber (Philz Coffee co-founder)

• How this will shape the future of retail: The more capital available to retail stores the more opportunities to start new businesses and expand successful ones

• My take: By having a fund and opening up this as an asset class to accredited investors, Bonside both helps retail grow and brings exposure to the retail world from people who may have not invested in it before

Job Opportunities:

CloudTrucks | Remote - Operations Strategy Lead - Carrier

Loeffler Randall | New York, NY - E-Commerce Site Associate

On | New York, NY - Retail Area Lead

This Week’s Retail Earnings:

With such a big week in retail earnings, here is a little recap.

Bath & Body Works ⬇️ - lower revenue than expected due to declining foot traffic, going to open more non-mall stores

Big Lots ⬇️ - lower revenue than expected due to less spending on high discretionary items

Dollar Tree ⬇️ - higher revenue but lower profit margin, amidst a reshuffling of store footprint

Five Below ⬇️ - lower revenue than expected and most growth from new stores, positive growth from candy, food, and beauty

Lululemon ⬆️ - higher revenue than expected but struggled in the US due to poor inventory management

Stitch Fix ⬆️ - higher revenue than expected by focusing on a profitable, excellent client experience

Victoria’s Secret ⬇️ - sales decreased year over year, but foot traffic and gross margin were up

Zumiez ⬆️ - higher revenue than expected led by the men’s business

Additional Links:

1. How Ace Hardware sticks out ahead of the competition (read more here)

2. Hashi Mart, a Japanese supermarket, has opened in Tribeca (read more here)

3. Dunkin and Scrub Daddy collaborate on making a Scrub Daddy based on a social media interaction (read more here)

4. McDonald’s hits back at conversations about their price increases (read more here)

5. Grocers in Washington, DC ban large bags in their stores for shoppers (read more here)

6. Amtrak remodeling Washington, DC’s Union Station which will have a major impact on the retail footprint there (read more here)

7. Amazon gets approval to expand drone deliveries (read more here)

8. Halara, a DTC activewear brand, opens their first pop up to test the NYC market (read more here)

9. Walmart expanding in home grocery delivery to more cities (read more here)

10. The rise of restaurant groups and chains (read more here)

11. Breaking down all the price cuts you are hearing from Target, Walmart, and other big retailers (read more here)

12. Bored Cow, animal animal-free dairy, launched into 2,000 Albertsons stores (read more here)

13. FTC preparing lawsuit against Southern Glazer’s Wine And Spirits, the largest US Distributor (read more here)

14. Foxtrot is reopening? (read more here)

15. Gopuff expands private label line, adds more premium items (read more here)

16. Amazon to start charging a returns processing fee to sellers for items that have a high return rate (read more here)

17. Radius, a superette/grocery store, with local ingredients announces its location (read more here)

18. Costco announces it is building out a retail ad network utilizing its unique ability to tie every purchase to a specific customer (read more here)

19. Wonder, the food hall concept, announces outsourcing the production of its meals and adding 25 stores this year (read more here)

20. Great tweet on the difference between retail and CPG

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