How Online Grocery Seller Hungryroot Benefits From Not Launching An Ad Platform

Organic GardeningThe country’s largest grocers are adapting to new shopping habits with a hybrid model that combines their brick-and-mortar footprint with online advertising platforms.

Although Amazon paved the way with its ad platform and 2017 acquisition of Whole Foods, grocery giants, including Kroger and Walmart, are also investing heavily in sponsored search and programmatic. And now delivery aggregator Instacart is in the mix as well.

But there’s another type of hybrid model that combines a retail distribution network and DTC deliveries with a consumer subscription service on the front end.

At least, that’s the plan for the online shopping and recipe company Hungryroot.

Hungryroot doesn’t have an ad platform or facilitate sponsored searches. And it doesn’t carry big-name food and beverage brands, such as Pepsi, Coca-Cola, Nestlé and Kraft-Heinz.

Even so, for regional or startup brands that also straddle in-store and ecommerce sales, Hungryroot can be a valuable channel.

Soup’s on

Take Nona Lim, for example, a brand that makes Asian soups and noodles.

Nona Lim was founded in 2014 and for years focused on grocery chains for distribution, because its fresh, perishable products couldn’t be fulfilled by Amazon. Although Nona Lim could ship items itself, the fees outstripped the price tag on many products, according to the company’s eponymous CEO, Nona Lim.

Since the start of the pandemic, Nona Lin added Instacart and Amazon Fresh to the mix. But it’s been working with Hungryroot since 2019, Lim said. The brand was looking for ecommerce partners that it could sell to akin to how it works with grocery chains, which take over fulfillment at a cost-effective level.

Another important differentiator is that Hungryroot doesn’t behave like most platforms, where brands pay for discovery.

A six-dollar cup of broth and noodles doesn’t have much margin for performance marketers, Lim said, “and the cost of customer acquisition on social media channels is really high.”

A small brand can easily be outgunned on free-for-all ad platforms, such as Instacart and Amazon. And while Hungryroot doesn’t have paid brand promotions, it does feature brands in social media and recipes. Many Hungryroot customers order in-house meal kit-style recipes, rather than just picking groceries a la carte.

Lim says Hungryroot has also helped the brand reach out to micro-influencers and featured Nona Lim products in recipes. Because Nona Lim is no longer able to set up store installations due to the pandemic, influencer deals and recipe integrations are a priority right now as a way to get its products and potential cooking ideas to customers and prospects, she said.

What’s for supper?

Hungryroot itself is looking to get smarter about how it’s able to help brand partners.

For example, Hungryroot wants to take inspiration from how Netflix or Amazon learns from previous choices in order to suggest new options, said CTO Dave Kong.

At first, subscribers often select every item for delivery boxes. But as they get more comfortable with the service and find new products they enjoy, he said they tend to rely more on Hungryroot to fill out an order with suggested items.

Kong said the company has been surprised at how strongly outside brands have responded to the element of random discovery. It’s now so beloved by third-party partners that it would affect the company calculus if Hungryroot ever decided to create white-label product lines of its own, he said.

A recipe for sales

The major grocers (see: Walmart, Target, Kroger and Amazon’s Whole Foods) all have online search and ad tech platforms. But those platforms don’t incorporate products directly into recipes.

Spicewalla, a spice distributor, relies on content, such as recipes, to spur sales, said founder and CEO Maherwan Irani.

People usually don’t buy spices based on an impulse, but rather they have a vision for a meal that incorporates the spice.

“We want to find opportunities to tell the story that spices are there to add flavor to whatever you're making,” Irani said. “That's the customer we’ll connect with and who will continue to come back.”

The major grocery platforms work with global brands on recipe-based content marketing.

Hidden Valley, for example, which is owned by The Clorox Company (seriously) and Meredith’s Allrecipes piloted an online grocery delivery product with Amazon Alexa. And Kraft-Heinz said in its recent earnings that a popular meal kit company will integrate its products into recipes.

But Hungryroot, which creates its own recipe content and features other brands on its social media, provides an important assist considering it doesn’t charge for the promotion, Irani said.

That free media was particularly helpful over the past year and a half because so many consumers have picked up home cooking. Direct-to-consumer ecommerce sales via channels such as Hungryroot are now twice as large as Spicewalla’s wholesale business, which includes nearly 1,000 restaurants.

And the branded business is more valuable, too. Grocers such as Trader Joe’s and Wegmans have popular white-label products that are purchased wholesale from a brand. Selling spices or other perishables to Trader Joe’s can be lucrative – but it doesn’t create customers who will remember and become loyal to the brand name.

The plant-based pudding brand Noops said part of Hungryroot’s appeal is its openness to brand collaborations, said CEO Gregory Struck, who also happens to be the former COO of Hungryroot.

For instance, Noops and Hungryroot created a seasonal line of packaging and products in six weeks, whereas major retailers and incumbent brands – Kraft-Heinz Jell-O and Conagra’s Swiss Miss, in the case of pudding – don’t have that flexibility. At least not for free.

Noops is testing the GoPuff ad platform, which launched earlier this summer. Struck said Instacart is the only retail media platform with the current scale to segment and target the brand’s core audience while also generating consistent ROI.

He also noted that Noops is open to using any online grocery ad platform that’s able to target potential customers at a positive ROI.

But a typical online platform’s attitude toward brand discovery – i.e., pay for it or die in the shadows – makes Hungryroot’s approach to promoting brand partners through emails, recipes, social content and campaigns a welcome change of pace.

“With the transfer from offline to online, you have to recognize that your product visibility on these platforms is part and parcel of the marketing funnel,” Struck  said. “And oftentimes being on the platform just isn’t enough.”

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