GMOs have been on the rise in recent years, and most of the time, they dominate the marketplace. But since it contains pesticides, fertilizers, and many forms of additives, many favor organic products over them. Pat Sheridan, the President and CEO of INFRA, leads a community of retailers providing natural products that aim to widen their reach and increase public awareness about these healthy food options. Sitting down with Elliot Begoun, he shares how INFRA brands cope with the growth of eCommerce, the challenges with distribution during the pandemic, proper assessment of SKU proliferation, and the future of bulk and prepared orders. He also discusses several useful advice for emerging brands, particularly the most common mistakes they must avoid to reach a national scale in the fastest way possible.

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Listen to the podcast here

Pat Sheridan: Strengthening The Market With Organic Products

Let’s get cranking. Let’s have Pat introduce himself. I’m thrilled that he was able to join. He’s a busy guy. There’s a lot going on and a lot of changes. Pat Sheridan is here. He’s the President of INFRA and he’s joining. Pat, why don’t you take a minute and give everybody a rundown of what you’ve been doing since you got out of prison?

Thanks for having me, Elliot. I love these opportunities to talk about our industry and the role INFRA and its members play in it, especially with early stage brands in our space. They’re so important to us. Even more in 2021 than in any other year as we’re hopefully seeing the light at the end of the tunnel of this pandemic. INFRA, for those who don’t know, at our core, we’re a purchasing services cooperative. I say at our core because we’re much more than that to our membership and in the industry. We’re a community of like-minded folks, so we share a combined passion and it goes beyond retailing products to consumers.

If compassion is around, I would say under the umbrella of saving the earth. I can tell you that I’ve spoken to so many of our members that the conversation turns from how their merchandising products to what we are doing out in the industry to make sure that the earth is a healthy place for the next generations. We leverage our united voice. We drive the clean food movement. We fight against GMOs. We fight for the expansion of organic and regenerative farming practices and ultimately work for climate change. That’s a big part of who we are and that’ll continue to expand in the future. We’re 290 independent natural food retail business owners.

Were under 480-plus rooftops and represent approximately $2 billion in annual natural and organic food sales every year. We’re growing. INFRA has been growing over the last couple of years. Right now, we’re out. We’re pretty aggressively seeking growth. One of the outcomes of the pandemic, for a lot of retailers was growth in sales. For us, what it’s become is an opportunity to be introduced to more retailers that are like-minded, that want to get into programs that we’re able to offer. For your readers, our member stores are hopefully the first place they think about when they think about bringing their products to consumers.

For those reading who aren’t as familiar, most of the brands that historically have succeeded in this industry have done so in partnership with INFRA members. It’s that simple. This is a business that has been built with that relationship and will continue on. I did an episode where it was me and I was talking about what I wanted founders to understand. One of the things I said to them is they represent the biggest change agents.

In this industry, we influence roughly 50 million people and the things that we do together are the things that lead to the changes we want to see environmentally also, from a human health perspective and a social justice perspective. Commerce when harnessed for good has the biggest power to lead that change. That’s something that when the brands, the entrepreneurs and the INFRA members and everybody is growing in the same direction, that’s a pretty powerful movement.

I would agree with that wholly.

I want to give people a frame of that, $2 billion. How does that stack up compared to other natural food chain stores?

I would say I’ll compare us to what I like to call our cousins down the street, which is the National Co+Op Grocers Association. We have a great relationship with them. I would say they’re in the total sales. They’re ahead of us, between $2.2 billion and $2.5 billion. We’re all consolidating our numbers from 2020 to get a real picture of that. The folks that I partner with over there, we’re starting to talk about even a bigger united voice which is quite impressive. If you look at INFRA stores as a whole and we look at the industry, I’ll say it this way and if you look at the data side and talk to spins when they talk about the industry, they also talk about groups within that industry and INFRA is one of those. We’re one of the top three under that umbrella. We don’t compete sales-wise with someone like Whole Foods, Amazon or necessarily some of the other supernaturals. This united voice and this ability to leverage those sales still gives us a lot of power in the industry.

It’s one of the things that’s under-understood, which is a horrible way of saying that I was trying to think of a better way to say it but I’m stuck with that one. Forget all of the benefits. INFRA represents a big business opportunity for brands. You can build a brand a long way under the INFRA umbrella. It’s an important thing to understand and you represent a lot of buying clout. It’s been used appropriately to make sure that your stores are competitive.

It certainly has and part of our mission is strengthening our members. That’s about getting an opportunity to have product or differentiators in the form of product, which means your readers are who we want to talk to you to do that. Because the large CPG companies are a big part of what our members sell and they’re hugely important partners to us. If you think about 2020 and the growth in natural and organic was enormous. The biggest percentage of that was in more conventional supermarkets, which is a wonderful thing for organic and natural foods. It was ultimately the goal of the organic originators. Let’s make this big and let’s make this the way people eat.

We step back and say, “But we have this conflict as local and independent providers of these foods because now the large organizations can beat us in price often in those brands.” We look to the startups, the small brands to be willing to start regionally, be an INFRA store and create that differentiator. Hopefully some of those brands stay with us for the long run. Some of them become successful and grow or outgrow INFRA stores but not many. I would encourage your readers who have the business plan of going big and going national to think about how it might be better to take some of these smaller steps first. In my belief, it’s more likely you’re going to succeed if you do that.

You are preaching to the choir and those who are reading this regularly know that this is something that we talk about. You and I have not had this conversation. One of the challenges of this industry is that we tend to celebrate the unicorn, that brand that has that meteoric rise and the hockey stick trajectory. Our mascot is the tardigrade. This is the resilient, pioneering new ecosystem that can live anywhere can and can do what needs to be done. Those are the brands in my experience that tend to truly succeed over time.

They create a truly sustainable business model. I’m not saying this to be nice but many of those do so within the INFRA, NCG and those actual independent natural and organic retailers. That’s where it gets done. I’m going to start jumping into questions because we’ve got quite a few. Here’s one and I would not have thought to ask this but it’s interesting to me. Has INFRA looked at anything relating to click and collect or hybridized eCommerce with all the changes that are happening there?

I would say as we kicked off with our membership in some eCommerce partners but we started with the membership during the pandemic and it accelerated. Everyone out there knows eCommerce is a hard play for a brick and mortar retailer. It’s expensive, the opportunities out there pre-pandemic were relatively limited to be able to afford and the growth was unquestionable. Our members and we have members in small towns that are small stores that didn’t need to take that path. They could offer curbside delivery because they often serve their customers by bringing food out to their car or even delivering it locally.

We had members in urban areas or in suburban areas who had to step up their game so that’s one of the areas that we have a team focused on now. How can our members be successful for what’s next? That has to be a component of their future. Every article about retail that says, “If you don’t have this omnichannel experience, you’re going to fail in the future.” I believe that’s true. There are going to be those special retailers who never go there and survive and I applaud them. At the same time, our members experienced this explosive growth and those that experience part of that growth through new customers.

Those new customers also expect a different experience from our members then they may be normally delivered to their customers. Our membership is high touch. They’re good at customer experience in stores. They’re getting better at that for the future, which is great. At the same time, they can’t ignore the fact that the concept of click and collect or other eCommerce and omnichannel solutions are going to be required.

I’m glad that question got asked because I wouldn’t have thought of it but it’s an interesting thing to me. It’s also a fantastic way I would think to be able to curate some of these earlier stage brands, which leads me to the next question, which is around discovery. That’s becoming a bigger and bigger challenge for so many. How do we drive trial and discovery? Because some of the more traditional elements of that like demos, so forth have been off the table. The problem and the challenge have been growing over the past years. How does INFRA help brands, earlier stage brands, get discovered? How do the members work to do that?

It’s a mix and it’s something I’ll be honest with. We are working hard to get better at it. To a degree, we were in a luxurious position. We have incredible support from our vendors and brand partners so our growth was a little more measured with some of the growth that I alluded to that we desire over the next years. We need to get better at that and help small brands get recognized. We have a few programs that we’re experimenting with, with the goal of giving that access to small brands so there can be better discovery. There are platforms out there that deliver that opportunity but none of them are perfect. None of them are perfect for INFRA members. They access a variety of those platforms and we do too and at the same time, we have this channel of how do we centralize this procurement and promotions function for a bunch of independent business donors?

How do you herd the cats?

Exactly. Our approach is now focusing on the members that want to combine and engage within regions and start to look at brands sometimes in those local regions because our members are good with local. As a matter of fact, they’re better with locals than INFRA is because we’re a national organization. For instance, we have a robust food startup community in the Twin Cities and now, there’s an organization that’s working to build brands for natural and organic.

I’m excited about that. We’re going to get involved in that but we’re not the only place. We’re communicating better with our members to understand what are those great local or regional brands that have a desire to grow beyond that and bring it out from there? Because when one INFRA member on the East Coast tells an INFRA member on the West Coast, what a great opportunity a brand is, it’s amazing. That member on the West Coast says, “I’m willing to give it a shot.” That’s the holy grail for the brands.

There are a couple of things that I want to delve a little bit deeper into what you said there. One is regionality or local. This is another interesting thing. We have quite a few brands that are startups outside of the US, New Zealand, Australia and places where the population isn’t nearly as large as the US. They come in going, “If we can do well in California, that’s nine times the population of New Zealand. We’re thrilled.” The startups that are from here start thinking, “I’ve got California now. How do I get national tomorrow?”

You can build a strong regional business without having to jump to national right away. This question dovetails into that. With brands that succeed with INFRA, what is that usual pack? Do they start with a few strong members in one geography and build there? Do too the members sing the praises of those brands to others? Walk us through and I know in every case is different but if you were to lay out the ideal pathway of an emerging brand growing their business through the INFRA members, what would that look like?

You said a couple of things there that made me smile because that’s part of identifying how has it happened for small brands? How do we help that happen a little bit faster or better? Brands come to us at an early stage. We have our category leads who meet with them and it’s more about advice. Many of your readers have heard this advice but it’s good advice. Start small. If you want to start with an INFRA retailer, we’ll share our retailer list and we encourage you to do what you need to do, which has been hard in the pandemic to get yourself on some of the shelves.

Our traditional promotional programs, which are regional and national tended to focus on brands that were already out there and established. Either in another region and growing or we’re already national. We’re now looking at how we focus on these small brands because they’re going to be the differentiator. An example I’ll give is we’re launching the CULTIVATE Program, which is a partnership directly with KeHE, who is our national supplier and partner. That’s kicking off in June 2021. We’re launching it and we see success for small brands.

It’s starting in the Southwest out of two distribution centers. We’re picking a few brands, we have 30 or 40 doors and we set up a program that will give them shelf space and the opportunity to grow beyond there. We have a follow-up program that helps those brands grow in that region. We expect success with that and the natural growth for us is to take that across the country. We would do the same thing in those other regions. It might be a brand that was in the Northeast and not necessarily those brands that started in the Southwest but you can imagine over the course of time and when it becomes a national program in partnership with KeHE.

Those brands who are interested and willing to get into distribution would now have a pipeline into the INFRA membership. That’s a specific program. We’re not ignoring the fact that some of our best brand partners don’t get into distribution. Instead, they choose to go direct. We have a pretty robust brick direct brand community. We’re also doing some experimenting with what I’ll call an INFRA Marketplace, which leads back to that whole omnichannel experience. How do brands get exposure to buyers across the country faster? That’s the problem we’re trying to solve with the marketplace concept.

I’ve got a lot of questions. Taryn has one and by the way, Taryn of Double Rainbow Ice Cream and Hector of Tia Lupita did one of the great April Fool’s things where they introduced a hot sauce ice cream online, which is pretty funny. Taryn’s question is, “Can you or how do you help brands anchor a DC through KeHE, in other words, can INFRA members carry enough weight to influence KeHE to open or bring an item in a DC?”

That’s why CULTIVATE was created in partnership with KeHE. It’s kicking off in June 2021 in the Southwest, in Southern California, so we’re getting there. It doesn’t mean we couldn’t influence other regions as long as we can get a foothold in maybe a couple of our larger members in a region. A lot of times, our larger members unite even before INFRA gets involved to get up to get a brand in the distribution center. That was our whole approach to this national agreement with KeHE. How do we within certain regions start to influence the products that are available in that distribution center? KeHE has agreed to some minimums that are smaller than you would normally see as a brand for their larger distribution to get you in those distribution centers.

Let’s explore the comment before, which you still have quite a few direct partners. What does that look like? This is my opinion but a lot of our brands miss the opportunity that if you have a well-defined and well-established process or order to cash process to make shipping and ordering direct, easy for retail. There’s the business to be had for the items that maybe aren’t a great fit for distribution but are a great fit for retail. How does that direct program work? What, if any suggestions, recommendations or thoughts, can you offer for brands considering doing that?

It’s not so different from a distribution that they’re still some of the same steps you might want to take. Depending on what categories you’re in, a brand may want to focus on direct but still consider distribution as a viable way to sell your product. Because I don’t know that sometimes in the wellness categories direct is an easier path and there are opportunities for the brand also to sell online more are preferences that you go to retail first. It’s pretty enticing to be able to sell online and get some sales so I understand that. From a direct standpoint to your point, if there’s an easy way to order but what we see at INFRA is we talk to buyers at our stores. In one large store, they have over 200 vendor relationships, besides their relationships through INFRA, which are a few big ones.

How do we help those buyers which by the way, will help brands because buyers spend so much time meeting with brands and new brands? As you can imagine, they’re getting hundreds of emails a week from your readers saying, “I have something better.” I can only imagine overwhelming sitting there being a buyer. We’re trying to figure out how do we consolidate that experience for our buyers? I believe that if we can say to our INFRA buyers out there, “There’s one place you can go where you can order from most of your independent or your direct brands in one experience that we’re going to see better buying opportunities and better opportunities for brands.”

Aaron asked the question. Have you seen good success brands leveraging Genius Central to work directly with INFRA?

Genius Central has partnerships with many of our members. That’s another area that we’re revisiting now to understand exactly what’s happening with that because sometimes it might be happening in one region and something different in another. We’re building our team here to get a better understanding of that data. That’s a big part of what INFRA is investing in now. It’s insights from data like most companies are inundated with data. While we have a slice of insights, we haven’t built the machine, if you will, to fully understand all the data that’s available to us. We’re doing quite a large investment in data insights over the next couple of years.

Aaron also wants to know what he needs to do to be part of the CULTIVATE launch in the Southwest.

You can get a hold of Andy Huth at INFRA. He’s running the CULTIVATE Program. You can always follow up with me and I can connect you with Andy. He stopped by my office and said, “It’s happening.” June 2021 is that first launch. It’ll be our first test. We’re extremely excited about it. I can’t name it but there’s a brand in there that might have come from New Zealand. It’s a great opportunity whether it’s an international brand breaking into the US like in California, this happens to be California or some of the brands that are starting up here in the US that are ready to make that commitment. I know it’s a big commitment going into distribution is an investment and getting into our CULTIVATE Program is an investment. We believe the investment, the potential return on that investment, the ability to get that many cases of your product and on that many shelves in a given period of time is well worth it.

I love that advice. First of all, that’s how all distribution growth should be looked at. It’s an investment. It’s a mutual investment, by the way and we don’t talk about that enough. It’s an investment by the retailer and by the brand because retailers investing what is a finite amount of space in the store and any retailers job that to distill it down to the basics is to drive as much revenue or gross profit per linear foot as possible and make their shoppers and consumers happy. Our job as brands is to earn that space. We’re both investing in each other’s success.

When done right we both have the same mutual definition of what that success looks like which are our consumers that love to buy the product and buy it again and again. When you go into these programs, you have the opportunity to prove product-market fit and prove your ability to do that and test things. That’s why I wanted to have you on and why Ben is going to come out with NCG because I feel like INFRA and NCG is where most brands should start to build their business and where most brands should put those investment dollars early on because you’re going to get good learnings. Two questions here but I’ll keep them separate. If we’re wanting to start with INFRA, do we come to you first or go to member stores first?

I wanted to say one more thing about the last thing that you said about investment. One of the closing of that investments circle as if you get into a program and you’re making that investment to get into distribution and you end up in an INFRA flyer where it’s being promoted and we have committed shelf space and member stores. There’s still a little more investment. Pre-pandemic, it might be in-store tastings and other things like that.

Whatever that is, there’s still that step for brands to make sure that the end customer hears about your brand from you whether that’s social media or other avenues. I thought that was an important point to bring out there because we can do a certain amount. As you’ve helped a lot of companies to understand, it’s one thing to get on-shelf. We are more important to get back off-shelf. Back to your question, you could take either approach.

We do have category leads here that are more than happy to hear from you and I encourage you to reach out to INFRA depending on where you are in your brand stage, depending on what’s being planned. Everyone’s learning a lot of this planning is a year in advance. We want to open up space for being a little proactive or being able to put together programs to respond to what’s happening as opposed to, “We already planned that a year ago.” Definitely reach out to INFRA and get to the right category lead.

They’ll be happy to provide more guidance. Some of it you’ve heard from other resources. Some of it to you’ll hear specifically about INFRA stores. At the same time, if you have an INFRA store in your area and you’re out there selling, go to that store or talk to the owner or buyers. They do these meetings. Your ability to get on-shelf by yourself is a big statement to INFRA because that allows us to say, “We have some validity here that we can at least pass over to the next conversation.”

One of the things I found too is building a relationship with the category leads early is super helpful. In my experience sometimes they help point brands to the right members to the right stores to start with. Oftentimes, it’s looked at geographically and there’s a disproportionate amount of brands vying for a few number of members because of their location. There are plenty of other members who might be better suited and able at that moment in time to bring in a brand and support it. Getting that feedback is helpful.

I agree. We have many member stores out there that it may not be apparent that they’re an INFRA number from the outside because they’re independent. They brand themselves the way they brand themselves. You might see some indicators of INFRA in their store but you may not realize they’re a part of the INFRA Association.

Also, they may be the ones that are not ready for new products. Here’s another good question. Should we engage INFRA through a broker, do it direct or do you not care?

Either way is fine. Usually, as a startup brand, one of the pieces of advice you’re going to get besides hoofing it out there and getting yourselves up on shelves is to find a broker. Brokers play an important role in this process, especially if you’re looking to grow. The reality is we have broker relationships that are already cemented. If a broker brings a brand to an INFRA category lead, they’re not going to listen more intently but it’s going to be a level of validity that’s already been hashed out by that broker.

They’ve done the vetting so to speak and they also know how to present it to the category lead in a way that answers the questions that we’re going to be asked anyway. It’s an important thing and also but to understand and I’ll say this and you can call bullshit on it if you want. It’s also important to understand what a broker’s role is. A broker’s role is not to replace having a relationship with a category leader or a member. It’s to help make the connections, be the connection, do some of the work and add some of the validity. You still as an entrepreneur should be building and working on the relationships with the key members and within INFRA itself in terms of the relationship directly.

I don’t call bullshit on that. The broker relationship is an important personal relationship but it’s the business part of the relationship. The brand relationship still resides with those brand owners and it’s truly important for those brand owners to have a relationship here at INFRA with a category person.

To flip to the negative because there are two questions around this. What are some of the common mistakes that brands make when trying to engage with an INFRA member?

Probably going to us, a store to meet with a buyer who you all know is extraordinarily busy. You have to do a little homework. Hopefully, try to maybe identify a problem that you’re solving by bringing your brand in. I read your blog and read one where you described how a product tastes as table stakes. I agree with that. If you’re going in with how your product stays first without saying, “I have a product that’s going to solve a problem for your buyer.”

Taste is important but attributes are as if not more important and how you fit in a given store is important. That’s the thing about INFRA stores too. You can walk into ten INFRA stores and none of those ten experiences is exactly the same. If you’re going to walk into a store with a buyer, I would probably spend some time in the store first so you understand and identify some of the issues that you see are potential issues.

During this pandemic year, the issues have grown because supply chain issues have opened up. I see it as an opportunity and at the same time sometimes it’s an opportunity that might even be missed in-store because they had no choice but to fill a space with more of the same product. It works fine but the reality is if you have a brand that you passionately build to where it is, you should have a good understanding of where it’s going to fit in that store and how it’s going to make that buyer’s life better.

I would love to put an amen on that because it’s so true. For all those reading, we’ve talked about this before. That is something that is often missed even when you have a presentation. You go to meet with a buyer and you talk about the consumer only. It’s great to talk about why the consumer would like your brand but you also have to think about what your brand and what the products you’re presenting are going to do for the category. How are they helping? Because if it’s cannibalistic, if it’s switchability, if I’m a category manager, if I’m a buyer I’m wondering, “Is it worth the risk?”

I know what I have now and if it’s going to switch something out, what’s the benefit? If it’s going to be creative, if it’s going to win new customers or reassure customers that we’re looking out for them or whatever the rationale is, that’s compelling to me to give it a shot. That’s missed far too often. The question and this harkens back because I remember that you brought this up too when we did the HCI Webinar. The pandemic’s caused a lot of changes, categories and things within the store. What is it that your members are now looking for in terms of solutions? What’s changed what they feel they need to have in the store to offer consumers?

Truly our members are still having the full experience of the pandemic. The pressures that have come from that. I put that into four categories. When the pandemic hit, it happened quickly. The first one is supply chain disruption. Everyone knows about it. Everyone has heard about it. We all experienced it on the shelf or online, whether it was paper products, run on wellness or, “Why isn’t my favorite pasta on the shelf anymore?” That’s one of the big ones. Our differentiators at shelf are eroding because of the massive growth in natural and organic in the conventional supermarket shelf space.

Wonderful for the organic movement, a little bit challenging for our membership who looks for product as differentiation because our members don’t head on overall compete in price with the large players in the space. The one that follows harkens back to the brief conversation we had on the omnichannel experience. The new customers in this next generation expect convenience. Our member stores are focusing on how we give convenience? At the same time, how do we get even better at that in-store customer experience to make people want to come back when it’s safe to come back?

Many of our members, I’ll admit depending on the communities they were in, didn’t see less people coming in the store. They saw them coming in less often, which changed the way they had to deliver product, if you will, within that customer experience. All of that led to that digital economy acceleration. Whether it’s us delivering promotions digitally or this omnichannel solution, that’s overshadowed everything for retailers. At the same time, our retailers are good at saying, “What are we going to do at shelf to be different?” because they had to get rid of prepared foods and their bulk sections were closed for a while.

Ask the questions so you can hit them up now and that is, “What do you see is the future of bulk and prepared?”

Bulk is certainly making a comeback. A lot of our members have done what a lot of stores are doing out there and they’re doing repacks. Repacks come with their own downside and that’s the use of plastics. That fights against the concept of saving the earth. There’s that challenge of how do we repacks? How does packaging get better? We could have a whole hour on what needs to be done in the world of packaging. That’s a fight.

Our members mostly want to get back to bulk without having it repacked but understand that some of their customer base is going to demand repacked or they’re going to go to the supermarket down the street. Not all of them because many of our members’ customer base relies on that overall natural organic and wellness-affiliated community. That’s going to be back. The prepared foods, there’s no doubt that’s going to make a comeback. Our members are figuring it out and we’re encouraging them to figure out how to retain a portion of the dollars that are being spent on food that went away from traditional restaurants.

Not that we don’t want restaurants to make a comeback. I happen to live in the Twin Cities where like many cities, there’s a robust restaurant economy. It’s been quite fun for me to watch those who have been able to reinvent themselves during this and have and read about how they’re going to do that in the future. It’s going to be different there, so there are a lot of opportunities for retailers to keep a portion of that economic dollar still, if you will, by enhancing prepared foods or having places to sit down and eat in the future.

There was an evolution before and all that’s happened post is an acceleration of the evolution. There are going to be a lot of changes. That’s where entrepreneurs need to be. That’s the cool thing about INFRA. I’m not doing this as a shameless plug. If you think about it, the beauty in it is that we’re talking about entrepreneurs who are talking to entrepreneurs because every INFRA member is an entrepreneur.

They get that they’re entrepreneurs. That’s what they do and like you, you’re an entrepreneur so talking to each other in that way and trying to explore the way to mutually work together to solve the evolving demands, wants and aspirations of the consumer. It’s something that you can do when you’re dealing entrepreneur to entrepreneur that you necessarily can’t do when you’re doing entrepreneur to big business.

That’s right. All of the entrepreneurs out there reading know that almost every entrepreneur wants the other entrepreneurs to be successful, especially if you have a combined success. Our member owners are invested in other people that start their own business.

Going back to a question that I want to make sure I get to. It’s on SKU rationalization. When all of this started happening and we started seeing the real challenges within the supply chain. One of the things that started getting discussed a lot and started to even be driven by some of the bigger companies was recognition of SKU proliferation and the impact it was having on the distributors, on the retailers and so forth. Are your members actively assessing how many SKUs they need for each brand? Do you see active SKU growth or constriction? Do you think it’s going to settle as things begin to return to homeostasis?

If I had a crystal ball, we’d all be making a living a different way. I would say that what was identified over 2020 or so was our member stores that had a massive assortment and a massive number of SKUs. We realized that pretty quickly that they had to start thinking about focusing on what I’ll call the 80/20 Rule. 20% of their products made 80% of their margin. While you still want to have those other products, there still should be a process for selecting and focusing on SKUs that meet your customer expectations but also allow you to make enough money to stay open as a store.

A lot of our stores that had a large assortment have stepped back. I do think though and at some of the large brands immediately and they’re driven by efficiency, the large conglomerates’ brands and they cut products. They quit manufacturing. They did it for a variety of reasons. In the end, what they did it for was to create efficiency and deliver higher margin products. That’s the business model. There is an opportunity for startups there because there are less of those SKUs out. At the same time, when all of this is over whatever this is, I can’t imagine we’re not going to go back to a degree. It’s going to happen because there’s going to be the opportunity and the ability out there for the large players to expand again.

We can’t help ourselves. We’re crack addicts, all of us. Let’s be realistic. I’ve been in this business for a long time and the one thing that I can tell you is in this industry history does repeat itself. We see these pendulum swings in lots of different polls to one side or the other and have been part of times where we’ve seen SKU proliferation. SKU rationalization followed by SKU proliferation. I do, however, think it’s important to always ask the why. Why is there a need for that SKU? If you can’t answer that in your own portfolio, I promise you, that will be the skew that’s at risk all the time. A lot of entrepreneurs especially earlier stage brands spend a disproportionate amount of their energy and time trying to support the SKU they should sacrifice anyways and they could do other things with that.

That’s an interesting point and I know some of our members who are much more focused or mature in their understanding of data and data intelligence, if you will. They’re looking at product lines and saying to the folks showing up to sell, whether it’s a broker or it’s an independent, “I’m carrying 9 of your SKUs and 2 of them deliver 90% of my margin. Explain to me why I’m carrying the other ones?” There’s that whole challenge of, “By the way, if you only have two, we have a problem in shelf space.” It’s a constant battle that’s played for shelf space and getting products to consumers. A battle is probably the wrong word. It’s more of a dance between the retailer, the brand, the broker and the customer.

I always tell entrepreneurs and it wouldn’t be the first time I say things that are contrary and this is one of them. If you have a SKU that’s not getting it done, one of the best ways to build a real relationship with the buyer is to walk into their office and say, “You need to ace this SKU. It’s not performing.” Even if you don’t have a skew to replace it because what you’re communicating is, “I recognize when something isn’t performing and I am looking out for what’s best in the category.” Don’t be afraid to call. We have time for one question because I want to give you a little bit of wrap-up time. This one’s interesting to me and that is the relationship, the way your members look at brands that have robust online and that relationship in online sales and online pricing. What are your members telling you about their feelings about dealing with brands that have a big eCommerce presence?

We have brand partners that have a big eCommerce presence that our members do well with. Everyone knows all of the challenges around map pricing and all the things that go with that. I will say it’s a frustration point for members, specifically if I talk about map pricing, for instance. It’s a confusing process. It’s a little bit scary for our membership but we have figured out there are brands that still find the independent retailer extraordinarily important in how they get their product into customers’ hands. Our member stores probably have mixed emotions about it. Our job at INFRA is to clarify what that means. How can you sell that product and still compete?

Everyone knows about the showrooming problem. I remember a couple of years ago going to a member store and they were growing their wellness. I said, “How are you doing that with what’s going on with wellness online?” He said, “We step back and we said, ‘We can’t compete with the supernatural that’s only a mile away. We can’t compete with Amazon selling this product. We can offer the difference and the difference is that we can educate you.’”

Sometimes people come in and get educated and buy products online. More often than not, they’ll buy it here even though it’s our everyday price. A couple of years later, I was moved by it because I realized that if you get the right retail partner, they’re still going to be open because they’re selling more than a product to their customers. They’re selling a whole commitment to that type of or that category of product and what they’re trying to do in their community.

I also tell you that in our minds, we do ourselves a disservice talking about it as an absolute channel strategy. The reality is that’s not what consumers think. Consumers sometimes will buy a product online and sometimes they’ll buy it in brick and mortar depending on when they need it, where they are and what their mindset is, if there’s a conversation around it. The one thing though is to be planful in your pricing strategy. You don’t want to put your retailers at a disadvantage. There is a convenience factor for having something delivered to your home so take that into consideration. What are we going to tell people on this show that they don’t know about you? I’ve got a few that I can toss out there but I’ll let you pick 1 or 2. A name of a band maybe.

I’ll tell you the name of my band. I’m the lead singer in a band called The Mediocritones in the Twin Cities, which there are seven of us and the pandemic has put a dent in our live performances. We’re excited for the summer of 2021. We’ve gotten together occasionally in our backyard to play so that’s one. If you’re ever in the Twin Cities, look us up.

Have you ever played at Brit’s?

We never have played at Brit’s. I’ve lawn bowled at Brit’s many times but in some of the other venues downtown, quite a few.

Any other tidbit of information?

I hinted at it a couple of times. INFRA is consciously, strategically intending to grow our membership. We have a pretty bold vision of what the future is. I shared not only with our board but also with our team here because the concept of making money doesn’t always feel good when you’re mission-driven. I speak of making money as resources. We represent $2 billion in retail sales. What I like to say to people is imagine if we represented $10 million in retail sales. We have the ability to take what are the missions that we’re on and multiply it not by 5 but maybe 50 or 100. As we look to grow our membership, I see that as more opportunity for food startups.

To me, it’s Ben Franklin’s adage, “Do well by doing good.” There’s nothing wrong with keeping score using revenue, purchases, dollars or even profits for keeping score if you’re keeping score in an activity that’s doing good. That’s my opinion. I will say this and I’ve had lots of conversations with folks around this. Commerce, business, entrepreneurship, that engine when harnessed for good represents the biggest change agent. The thing that leads to more shift is our ingenuity. When people are doing it with the mindset that INFRA members are and that most of everyone reading are, it’s cool. It’s what gets me up in the morning. Pat, thanks for joining me. I appreciate it. It’s a great conversation. I hope you have a great weekend.

Thanks, Elliot. Thanks for having me here. I loved it and look forward to hearing from brands.

Thanks for joining us. We’ll see you next time.

Important Links

• INFRA

• National Co+Op Grocers Association

• KeHE

• Double Rainbow Ice Cream

• Tia Lupita

• Genius Central

• Andy Huth – LinkedIn

• The Mediocritones

About Patrick Sheridan

A DYNAMIC LEADER with over 25 years of experience managing people, products, projects and companies.

A CPA with a unique combination of operations management, product development, financial, project management and marketing skills.

An influencer and a powerful communicator with a successful record in product launches, acquisitions, contract negotiations, system implementations, problem-solving, mentorship and team building.

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