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PODCAST - Unpacking the digital shelf

Roundtable: Snacking on DTC

This week, Rob and Peter weigh in on the Pepsico DTC launches of Snacks.com and PantryShop.com. Genius or folly? Plus, how much did those URLs cost?!?

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TRANSCRIPT

Peter:

Welcome to unpacking the digital shelf where we explore brand manufacturing in the digital age. Hi, I’m Peter Crosby coming to you from the digital shelf institutes, Cape Cod office. Rob's on from the Berkshires. Hey Rob. Lou. Yeah. So Rob, I thought we'd start today with direct to consumer because there was some pretty big news this week. Pepsi CO's snacks.com and pantry shop.com. But before we dive into that, which I, I can't wait to serve you know, without any data at all opine about its goodness about this. I wondered what, you know, this has been, you know, online shopping latest data for, for April, which came out of Adobe had said that let's say that online shopping is up, was up 88% in, in April. Mmm. Super exciting. And can, so those trends continue and I just wondered, how have you been spending your DTC dollars in the last couple of months?

Rob:

You know, it's, it's interesting you ask. I think my experience with this is probably similar to a lot of other people's, where things are not in stock on Amazon like they normally are. And so I've been looking other places to find them and the things have not been in stock in a grocery store that we go to and things of things have not been stocked everywhere. So I mean you see all these stats about like 70% of consumers are trying brands that they don't, I don't normally try and it's because their preferred brand is not in stock and all this sort of stuff. W what I, what I've been finding is in general, I buy a lot of products directly from the manufacturer and I've been doing that even way more than I normally do during this time. So some, some kind of fun examples. First, I've been buying razors at CVS for forever.

Peter:

I'm bald. I shaved my head and one of your vault it's probably cause you can't see me because of the glare. It's just so it turns out that Proctor and gamble has a subscription service for the Mach three razors that I use for my head and it's free delivery and it's cheap and there's a discount for the first order. And so I said, man, I don't want to have to go to CVS to buy razors that often. I'm just now buying them directly from July. And so that, so that's a, are you doing, are you doing this, are you doing the subscription model or are you just when you need it, you order it? I just, I did the subscription model because what I do is I, you know, I don't, I don't really have much facial hair, so I just I'm like a naked mole rat in terms of the amount of hair that I have. So I use the same razor all week and then I'll shave my head on Saturday and then I'll throw the razor out. So I'm like a very scheduled four razors a month kind of guy. So I just threw the through the subscription on there and set it and forget it and never have to think about it. And I mean, you know,

Rob:

Not to jump ahead to Pepsi, but

Peter:

Proctor and gamble is a giant CPG company, like Pepsi's a giant CPG company. And here I am moving my spend from retail direct to manufacturer and is one of my very first purchases in quarantine. So I, I knew it. I thought that was an interesting example.

Rob:

Yeah. Well, so we've been oddly, we've been fortunate enough right now to get a second condo. We're out here on the Cape and so that requires some furniture. We, we enjoy sleeping and so we thought we'd better in, we were investing in a, in a King size bed and you know, just the Wayfairs I don't know, I just couldn't get into it. And, and and just, I think through Instagram we had seen this brand called Puma. And so we looked at that site, T H Uma. Dot. Co. And we looked at the site, first of all, we are incapable of building things. And so I don't know about you. The process of setting up a normal bed with all of the Allen wrenches and all that stuff just like kills us. And, and a lot of cursing. So we we looked at Thuma and it's a really cool bed.

Rob:

And, and I love, you know, when we talk about D to C companies, sort of having their their philosophies, sort of what sets them apart, their sort of reason for being. And when you look at sort of their about page, they said we set out to fix the bed, you know, strip away everything unnecessary. Functionalism, minimalism, luxury design, mindful of their environmental impact drawing from Japanese craftsmanship. And what's really cool is that the whole thing only has two screws, which which connect the mid rail to this, to the center. And then everything else is just a dropping it in place, a sort of groove construction and it looks beautiful. So Dave and I did a time lapse photography of us putting it together. And then and then the Casper mattress going off. So it was a double D to see whammy. And it's so comfortable and awesome. So that made us very happy. Yeah. But I do have to mention, I'm sorry, go ahead.

Peter:

So I've got an example of that might be useful for other people in this age where you're probably your screen time usage has gotta be near, near capacity. Right. And this was a recommendation from Cal Newport's book, digital minimalism. Excellent book by the way. And the recommendation was the mouse well

Rob:

Club,

Peter:

The mouse books, they're, they're excerpts from major books and you get 'em every quarter and their theme and they're about the size and the shape of an iPhone. So the idea is you take one of these, these small books and you put it in your pocket with your phone. And so when you go to reach to your phone to distract yourself, your hand hits the book and you're reminded, maybe I should use my phone a little bit less. So you pull out the mouse book and you read a few pages and then you get on with your life. And the first volume set that I got was an excerpt from Plato's, the George's, the conversation, which is the first one I read. And I'd never run any Play-Doh before. And I thought it was just awesome. And then I read excerpt from Julius Caesar's commentaries, which I had read some of that way back in college and it's, you know, it's been decades and, and man, I really enjoyed it.

Peter:

And then next I've got some Cicero as the, as the third one. They're like 40 or 50 pages. And so, you know, you read them over a month or so and, and it's been, I don't know. I, I, it's been great. My, my wife has seen me reading them and she even got in on it now. So what is the, what is the moment, what are the moments where you will take the break to do it? Like, cause you're reaching for your phone, you see this instead? Like is it just maybe a couple of times a day or what's, how do you build the habit? For me, what I've been doing. Cause I mean everyone's in the same building that they wake up and all day long. Right. I've been trying to leave my phone in a different room and primarily it's so that I'm not checking my phone in front of my kids all the time.

Peter:

But the habits still there, your hand still goes to your pocket. Everyone's felt the Phantom vibration or the Phantom ring before. Mmm. So mostly it's like leave the phone somewhere else, had the book in my pocket, pick it up and read a couple pages. And as you know, it's a benefit. My wife doesn't get annoyed at me for reading Plato in the same way that she'd get annoyed at me for being on the phone. Yeah. I mean, how can it really, how can you sort of upgrade someone for reading Plato? Yeah, that's hilarious. And I do note that. So it's mouse book club.com I do note on their homepage right now, the featured image is on the duty of civil disobedience by Henry David Thoreau. So yes, someone's curating they, I mean, they're there, they're intentional. I'm throws, it's been a while since I've read some thorough but Oh my God. Also also worth it. Yeah, for sure. So my, my other purchase on the, the far from far from the the simplicity and academia of yours is Johnsonville sausage and we don't usually talk about satisfying the show, but they happen to have become a customer recently of Salsify. And one of their one of the things that was posted on Slack when we were sort of celebrating

Rob:

That, that they'd selected us was a picture of a can't spell sausage without USA tee shirt. And so I clicked on that immediately and ended up with a seller named Hong Kong on Twan. And I won't say his whole email, but it begins with cuddle bug. And so I don't know who he is, potentially even a sheet, I'm not sure. But I can't wait to get my tee shirt. It's in the mail now. Yeah, that's, I mean, that's just a great example of

Peter:

A brand driving further engagement with their consumer base. I love old Bay. I've been raised on old Bay and they, they released zoom backgrounds for old day one of which is super cool. It's like you're crabbing off, off on the shore of Maryland and there's old Bay logos on it and it's super cool. And I don't know the, the, the tee shirts that

Rob:

The backgrounds, I think there's a lot to that for brands that have the type of

Peter:

Lifestyle loyalty that, you know, an old, an old Bay does or a Johnson, Dell does,

Rob:

Right? Yeah. That's cool. That's a good, that's a good purchase. If you have consumers that are affectionate for your brand and are willing to share it on their chest or something. That's, that's, I mean, that's loyalty and and it's viral marketing in the old ways. It's pretty cool.

Peter:

Yeah.

Rob:

So so the, the big DTC news, let's move on to it this week. Frito lay Pepsi going going full D to C and, and in a big way with sort of fancy, expensive URLs that that they managed to snag SAC snacks.com and pantry shop.com. Tell me a bit what so you know, just some background on it. It isn't meant to replace their wholesale stuff obviously. But one of the articles we read Haley Savage in retail brew, you know, say they're offering an alternative that's friendly, friendly to blanket Fort life. And so, and also with the difficulty sometimes getting stuff through w through retail channels right now they're kind of taking control of their own relationship with the consumer and in a really big way say blanket for life. Yes. Yes. All right, Hailey. Hailey's really coined that. And when I, when I read that, that phrase, I thought, yeah, that's what it is with your family and got the flashlight on and the blanket put over and who wouldn't want to open up a Fritos snack assortment pack in that moment? So I thought, I thought it was really engaging, particularly pantry shop.com, which I thought they have a bunch of, of sort of curated categories of packs and some of them are like priced 25 bucks or 50 bucks. So they're like significant. You've believed

Peter:

They could be making some money here, some profitability. They've everyday pantry rise and shine, snacking, hydration, protein workout and recovery with muscle milk and stuff like that. And family favorites. Which yeah, I just, I thought that in particular that curation was, was really interesting. But and then when you read their mission on the site, it talks a lot about in this time of coven. And so it was, it's very, it's clearly something that they spun up quickly, but in a, in a, in a way that feels resonant with the times. Yeah. So a few observations here. First of all, the fact that I read that they started from, from scratch and had this thing up in a month and the fact that that's even possible just now just shows with focus given the technology that exists today, how quickly you can spin up a major eCommerce site.

Peter:

I just think back to when we were at I was at Endeca technologies in the arts and you know, we did the search search navigation for walmart.com and target.com home depot.com and a bunch of others and standing up an eCommerce site back then before cloud technology had really taken off was it was really expensive and took a long time. You had to set up the servers and the whole thing was just a mess. And now Pepsi's going from zero to launch in 30 days. I mean, that's, that's just an order of magnitude different. You know, you just thought, I don't know what platform they're using. Shopify, big commerce, one of those. But man, it's, that's fast. That, that's the second thing is that they probably supply chain wise had been already making the investments too ship direct to consumer through fulfillment centers so that they could operate as their own three-peat backstop for when Amazon goes out of stock and for up for other sites.

Peter:

Yeah. Progressive grocer had an interview with Pepsi's head of e-commerce and they said that Pepsi's manufacturing centers are close to end consumers. So I think they must have enough manufacturing manufacturing centers around where they can get where they can now guarantee two day shipping for most orders. So that's as impressive you know, a fulfillment capability as practically as Amazon. Yeah. It's, I mean, it's, it's just, it's just great. So the detractors from this, and I'm, I'm not in the detractor camp, but the detractors for this, I don't understand how Pepsi could possibly make money on this. Mmm. And you know, that probably the cost of getting those don't, I mean, snacks, snacks, dotcom is not a cheap domain to get. I don't know what they pay for it, but man, there's no way that's cheap. So you've got the cost of the domains, you've got the cost of setting this whole thing up.

Peter:

The margins on snack packs are when you're picking and packing and shipping eaches or some or small numbers, or just probably not as good as shipping containers to Walmart fulfillment centers. So, you know, the, the tractors are, are just saying there's, this is just no way that Pepsi is going to make money and if even if they do make money, it's going to be low volumes because how many people are going to go to snacks.com versus Walmart, Amazon, target, Kroger to grocery store and so on and so forth. Yeah. So that, that, you know, that's the bare case. You know, why it's kind of a, why bother argument, you know what I mean? I, I just by coincidence was talking to the head of eCommerce from a competitor of PepsiCo's the other day and, and he was saying that that was sort of his, what, you know, as they think about their DTC strategy, it's, it's how do you want to play and where do you want to put your focus in terms of if you're going to do assortments and bundles that, you know, making those work in your retail channels and being able to make a profit.

Peter:

There is is it's maybe where they're putting their focus more than this kind of thing because of, have you said, will these habits change enough to make it worthwhile? I, I just, I mean, so I get the bear case, but I just don't agree with it. And the reason is the future is not selling high volume products the way that you've done for the last 60 years. The future is I'm a lot more volatile and if Pepsi has, even if it's low volume, if they've got channels that people interact with, it'll enable them to launch experimental products and get market feedback without having to do that through a traditional channel. So if PA, if, if Pepsi, which has a wide variety of, of brands is going to launch a new Frito lay flavor, they can just do it on their own anytime they want and just see what the reaction is.

Peter:

And if the reaction is really strong, then guess what? They have a lot of data that they can bring to a grocer and say, guys, look, this is killing it. Right? It's like when McCormick last launched old Bay hot sauce on mccormick.com it's not like mccormick.com is driving huge volumes from McCormick versus either their food service division or their or their spice. You know, the, the consumer division that sells spices to grocery stores and stuff like that. But corporate, that column is not driving massive volumes. But the fact that the hot sauce sold out immediately gives them data that they can then use for negotiation with retailers and wholesale. Right? So I think that Pepsi strategy of having a site where you get, even if it's not a big number, if it's just some number of people, you get the CRM data, you get the ability to launch and test and you can, you maintain your control of your destiny in a way that's just not true.

Peter:

If you're, every single thing you do has to be big volume. So I really liked the strategy. Yeah. And, and you, when you, and it also gives them not only control over their destiny, control over the experience, and they can test experiences and content and how they talk about it. And these, these sort of curations that then can easily be stood up. They then they have the content already and you know, modifying that or specializing it for any other particular retailer is you know, is then a quick tweak rather than starting from scratch. Absolutely. Yeah. And I mean you could imagine also Pepsi doing things like adding a where to buy functionality on the site for if people just want to pick something up and you know, they're not sitting there trying to absolutely drive margin and drive huge volumes from stax.com I mean, I doubt that sister that adapt, that's the strategy.

Peter:

They just want people to be buying their brand. They just want people to be interacting with their brand as much as possible. And if, if their brain happens to be out of stock at a local grocery, they want people to be able to purchase it and know that there's a tube two day fulfillment. And sort of back to your point about agility, the fact that we now live in a time where if you have the will to to do that and the focus, it actually can be accomplished. Whereas, you know, even even as much as, I don't know, a year or two ago, I don't know whether that would have been maybe not a year ago, but a couple of years ago, not too far out, it just wouldn't have been possible. Well, the supply chain part alone is something that, you know, a lot of manufacturers that put effort into the last few years, but you know, five years ago, very, very few of the majors could ship direct to consumer effectively at any type of scale.

Peter:

Yeah. Now, so all this aside, I would say that even if this doesn't work out for him in a year from now, they shut down snacks.com they still own the domain, snacks.com and that thing will appreciate and value its spot. And if they get any traffic going to this thing at all, they could probably flip it to somebody else and make a profit. So I think it's a, it's, it's good real estate, you know, and I would love to know what they paid for that. I could be a fly on the wall and accounting and pepsi.com. Yeah. I mean, look, even when Sears was getting hammered, the Sears could sell the real estate that it owned and then lease it back from, from the buyer and use that cash flow to maintain the company's lifeline. Like real estate is valuable. And so snacks.com [inaudible] dot com that's good real estate. So kudos to them on the buys. Trying to imagine the corporate conditions under which they would give up snaps to snacks.com to a competitor that just, I think, I think they're like, you never know. Right? Never know. Never know. But still, you know, they've got an appreciated asset that appreciates so good. Get on Pepsi. I like the strategy. I like the move. It's bold. I think, I think it'll work out for them.

Rob:

I think time will tell whether they use it the way that I would use it in terms of testing the market and launching new products and doing it more often. But we'll see. Yeah. It's a, I think it's a, it's a great sign and a great sign again of the, of the importance that we talk about so often on this program about Mmm. Brands needing to get agile, needing to build these capabilities so that they can test and learn. You know, go back to the episode we have with Mike [inaudible] from good baby and there and his philosophy about how you test and learn how you you know, they setting up particular products that are for higher net worth customer and going direct with those to see if they can build those relationships and have more of that direct connection. But doing it over in the corner and, and Pepsi is so big that pantry shop and snacks.com is over in the corner. But for somebody like good baby, a corner is a, is a much smaller set of real estate, but they get to learn something. So I think this is something that every brand manufacturer ought to think through their strategy for, for how they want to build those relationships and get that data and then apply it across larger moments. And that takes infrastructure and process and people that are willing to be nimble. And I think it's a, it's an impressive example.

Rob:

So would that we are done, we are going directly back to work. As always check out digital shelf, summit.salsify.com for those of you that are interested we recently released an episode with [inaudible] control who are experts on channel strategy and, and setting up marketplaces and applying the legal pressure to have brand control in marketplaces super episode, digital shelf summit.salsify.com. Please leave a review for either our selections in private label brands and D to C brands or for our shows. We'd love your feedback and thanks as always for being part of our team.