Grocery Update #46: Small Brands, Big Challenges.

Also: How Brands Can Win With Purchasing Co-ops. & A Dark Chocolate Smackdown.

Discontents: 1. Our Priorities. 2. Four Questions with Big Spoon Roasters. 3. The Moral Case Against Slotting Fees. 4. How Emerging Brands Can Succeed With Purchasing Cooperatives. 5. What Can I Do Now? Ten Recommendations. 6. Dark Chocolate Almond Smackdown. 7. Tunes.

1. Our Priorities.

Yes, lot’s happening in the world. Maybe you are stoked and think God-Emperor Cheeto Palpatine will make it all great again. Or maybe the thought of 25% tariffs, mass deportations, firing air traffic controllers then blaming plane crashes on “DEI”, cutting healthcare funding and cancer research, shutting down essential services to root out “transgender-green new deal-equity marxists”, Elon and his lackeys accessing the U.S. Treasury and the whole junta subsequently crashing the economy so they and their cronies can all cash in… maybe it has got you down. Or maybe you are already jaded and are tuning it all out. It’s cool. Just as a reminder, here is what we are here for at The Checkout Grocery Update. This week’s focus is #3 in this list. Stay focused, y’all.

(1) *Supporting Grocery Workers*

(2) *Highlighting Indie and Cooperative Retail*

(3) *Platforming “BFY” Emerging Brands*

(4) #Pricing Is Bullshit.

The Checkout Grocery Update is sponsored by the Specialty Food Association. Woot!

2. Four Questions with Big Spoon Roasters.

Context from this small, emerging, family owned nut butter and snack food brand: “This year, we’ve decided to make what many might consider an unexpected pivot—Big Spoon Roasters is ending our 10+ year relationship with Whole Foods Market, the distributor UNFI, and other national grocery chains to focus exclusively on partnerships with independent retailers and smaller regional grocers, as well as direct customer relationships through our online store…”

1. What is Big Spoon Roasters, tell us a bit about your business?

Now entering our 15th year, Big Spoon Roasters is a maker of small-batch, handcrafted nut butters and snack bars. We’re a values-based business inspired in part by my Peace Corps experience in Zimbabwe, where I adapted local methods of roasting and grinding peanuts to make the best peanut butter I’d ever tasted. We believe that food matters, and that it should be delicious, nutritious, and good for all those involved in producing it. My wife, our Co-Founder & COO, Megan, and I are the only owners, and Big Spoon has been bootstrapped from day one with no outside investment or stash of family money propping us up. We’ve remained independent so that these values are never at risk of being questioned.

2. What was it like working with bigger retailers and wholesalers?

When we started working with Whole Foods in 2013, the chain still embraced higher-end specialty goods that mainstream grocers weren’t stocking and had a well-run LOCAL program to bring in emerging and interesting regional makers. There was real prestige attached to making it onto a Whole Foods shelf, and doing so was an honor we won’t forget. (Editor’s Note: That’s when I was leading the National Grocery program, coincidentally.) We grew steadily with Whole Foods and invested in countless demo trips, promos, and relationships with regional, local, and store-level Team Members. We even earned the honor of South Region Supplier of the Year. Once we became a 5-region “Global” supplier, we were asked to consolidate distribution through UNFI and quickly realized that the large-scale grocery distribution system was not designed to celebrate or protect the maker. Rather, the system moves producers into positions of higher volumes and lower margins.

All surprises were unpleasant, starting with new mandatory fees introduced after we signed all our supplier agreements, including 4.5% off the top through different fees from UNFI. Whole Foods tacked on a 3% in-store execution (ISE) fee and a mandatory program to support deeper discounts to their Team Members. We support Whole Foods offering deeper discounts to their Team Members, but we do not think suppliers should be required to carry that load.

Tremendous staff resources have been required to guard against and dispute erroneous distributor chargebacks. We’ve won 100% of our claims, but the strain on our business in managing the dispute process is unsustainable. The distribution system has also struggled to forecast demand accurately, leading to empty shelves and frustrated customers one month, and overstocked DCs with aging products the next. Forecasting is owned by the distributors with insight from grocers, but there is no opportunity for suppliers to give input. In short, when errors in forecasting, ordering, execution, or reporting occur, the supplier suffers most.

Unbeknownst to us when we signed up for it, this distribution model also significantly reduced our control of pricing on the shelf, which led to notable price tag discrepancies between SRPs, independent retailers, and grocery stores. End consumers rightfully expect fair and consistent treatment, and these pricing discrepancies led to consumer confusion and eroded trust in our brand. When we brought this up, our buyer contacts advocated on our behalf, but we were ultimately told that pricing teams operated independently and set prices outside of any agreed-upon terms.

3. Tell us about your decision to "break up" with Big Grocery.

Last summer, Megan and I were in an impromptu meeting discussing the latest compound of frustrations regarding false chargeback claims, grocery pricing discrepancies, and the latest customer complaint email asking why our products are out of stock again at a grocery store. These things were happening even though we never mispacked a single order, missed a single deadline, had a single QC issue, or screwed one lid on wrong. We stopped, took a breath, and realized that the underlying causes of these issues were systemic and part of a path we no longer wanted to travel. Even so, the decision to leave the national grocery distribution system wasn't easy. It meant giving up a large percentage of our revenue. 2025 might be the first year our total revenue hasn’t grown year-over-year.

4. What is your vision for a better food industry?

Every food choice supports the entire system behind that choice. More and more of the “food” choices out there are destroying our planet and are not even made with “ingredients” our grandparents could recognize or pronounce. It’s a trend that some might find delicious, profitable, and/or convenient, but it’s not going to be good for any of us in the long run. A better food industry is one that celebrates and nurtures biodiversity, regenerative agriculture, transparency, fair trade, entrepreneurship, wholesome nutrition, and of course, quality – the joy of eating, cooking, and experiencing food.

I think everyone would benefit from more transparency at every step along the way, from farm to table. The average consumer has no idea how the grocery industry’s one-size-fits-all approach to supplier relationships reduces their options on the shelves and hides several layers of costs behind their weekly grocery bills.

3. The Moral Case Against Slotting Fees.

By Charlie Gentry

Charlie Gentry is the founder of TruJoy Yogurt, an emerging Frozen Greek Yogurt brand in Austin, TX.

For context, slotting fees are fees charged by retailers to their suppliers for shelf space. These fees can come in the form of a ‘free fill’ or simply a cash payment. You can almost think of these fees as rent that suppliers pay a retailer for the right to sell their products in their stores.

Assuming that a supplier wants to stay in business, and maybe even make a profit, every penny spent must be recovered. And given the rapid pace of the CPG industry, it is not unreasonable for a supplier to want to recover their marketing investment within a year.

So, when a supplier is forced to ‘invest’ more up front in placement, what must s/he do? Raise prices. The only way for a supplier to recoup his investment in slotting is for him to marginally raise his price so that each unit sold can slowly recover the investment he made in slotting. Is this value additive to the shopper at the checkout register?

Let’s look at how the math shakes out - say the cost of a case, and corresponding free fill, is $24 and holds 8 units, and assume you can sell 1 case per month. The supplier needs to recover this ‘investment’ over the course of a year. It then follows that $2.00 per case, or $0.25 per unit, contributes to the recovery of slotting fees. Assuming a $5.00 price, the $0.25 baked in to recover slotting represents 5% of the price customers pay at the register. In this case, doing away with slotting would essentially give the customer a 5% discount!

Now imagine a scenario where the supplier did not have to pay slotting fees. Assuming that the supplier wants to make the same amount of money for each unit sold, he could lower his wholesale price by $0.25 per unit. And assuming that the retailer wants to make the same penny profit for each unit sold, these savings would be passed directly on to the end customer. This $0.25 price decrease is essentially a 5% discount at checkout compared to the scenario where slotting fees are charged. In practice, the savings to the end customer would be even greater because this simple example does not contemplate the compounding effects of distributor and retailer markups or that retailers typically price products to achieve a certain gross margin!

Developing and launching a new product is inherently risky. The risk is shared by the retailer and the supplier, but the majority of the risk falls on the supplier. So why add more risk to the supplier by levying slotting fees? Increased risk disincentives and new product development. In a world where there is so much complaining about our ‘broken food system’, why are we compiling more risk on suppliers who are actively doing something to enhance the food system and enrich the lives of customers?

Generally speaking, it is the upstart brands that bring the most innovative products to market and these businesses lack the financial resources to compete with the major food conglomerates that have the balance sheet to block off shelf space from would-be challengers. This anti-competitive pay to play system condemns challengers to the sideline. One must wonder how many innovative products have we missed out on because young brands couldn’t afford a seat at the table.

This argument would not be complete without considering the other side. When a retailer decides to replace a proven product with something new and untested, there is tremendous opportunity cost that is quantifiable. The retailer knows exactly how many bags of Fritos it will sell this year and replacing them with something else will take a bite out of their revenue. The retailer justifies charging slotting by claiming that this will replace the missing revenue, should the new product not perform as well. But there is also risk to the retailer by not experimenting with the new product, its customers may become bored with the same stale selection and choose to shop elsewhere.

Not all grocers charge slotting, Walmart, Costco, Publix & Trader Joe’s, to name a few. These retailers are beloved by their customers and have cultish followings. The only explanation that I can find for this extreme customer loyalty is their commitment to offering their customers the absolute best value. Price is ultimately the deciding factor for the majority of purchasing decisions and customers prefer to shop where they know they get the most value.

Mysteriously absent from the list above are any major retailers in the natural channel. Why this is, I do not know. But there is this gross misconception that natural, healthy food has to be exclusive and expensive. Natural channel retailers artificially inflate the price of their goods on the shelf by charging slotting to their suppliers who must bake that expense into the price of their goods. By doing away with slotting, natural grocers will be able to compete on price with conventional stores, thus democratizing healthier options for the masses.

4. How Emerging Brands Can Succeed With Purchasing Cooperatives.

By Dawn Reiss. Excerpted from New Hope Network.

Purchasing cooperatives aren’t like a typical grocery store. Unlike investor-owned corporations that operate grocery chains, purchasing cooperatives are independently owned and operated by members. National Co+op Grocers (NCG), the largest trade association of retail food cooperatives in the United States, said the average co-op within its network sources from 169 local farms and producers.

“We like to work with brands at all stages,” said Jason Stein, category management director at National Co+Op Grocers, which is headquartered in Saint Paul, Minnesota. “Because we're a quirky organization, people often—even our most established brand partners—don't understand who we are.”

With 240 storefronts in 39 states, NCG’s network of 165 members range from single-store operators to its biggest member, PCC Community Markets in the Seattle, Washington, area. “We are a cooperative owned by the co-ops in our system,” Stein said. “We exist to provide value and services at their direction for them.”

In 2023, NCG led all natural food retailers nationwide in percentage of sales derived from local, organic and fair-trade foods and products. Based on SPINS natural products sales data, NCG co-ops sold more fair-trade certified, B Corp certified, cooperatively produced and organic products than other natural retailers and conventional grocers.

About 5% of sales at co-ops come from fair-trade products and 8% of sales from certified B Corp brands, Stein said. Approximately 38% of NCG's food co-ops'combined annual $2.5 billion sales come from USDA Organic products, leading the industry. Other natural grocery retailers report organic products account for 23% of sales, while conventional grocers report just 2.5%, according to SPINS’ 2023 data.

“Each co-op is unique to its community,” Stein said. “NCG, as a secondary co-op, exists to take all the collective buying power of all the co-ops in the system and secure more favorable contract terms.”

NCG uses its collective buying power to secure better promotional plans and vendor investments to drive sales of their brand products at member co-ops. “We leverage that collective volume, while still allowing each of the co-ops to maintain their autonomy and be able to meet the demands of their specific communities,” Stein said.

Just like other retailers, NCG has fees. “Every retailer has fees or gets at fees in different ways. Our fees truly go to cover the costs of running NCG,” Stein said. "That includes paying wages and benefits for staff, keeping the lights on for operating costs, producing programs and the outputs of the programs, including the flyers members get. “Our fees do not go to enrich investors because we’re owned by the community of co-ops that are owned by community members,” Stein said.

5. What Can I Do Now? Ten Recommendations.

Great piece by Robert Reich if you are not a fan of Cheeto Palpatine and his cabal of grifters, rapists and morons. Here are the highlights:

1.Protect the decent and hardworking members of your communities who are undocumented or whose parents are undocumented… Red Cards / Tarjetas Rojas | Immigrant Legal Resource Center | ILRC. And Immigration Preparedness Toolkit | Immigrant Legal Resource Center | ILRC.

2. Protect LGBTQ+ members of your community.

3. Help protect officials in your community or state whom Trump and his administration are targeting for vengeance.

4. Participate or organize boycotts of companies that are enabling the Trump regime, starting with Elon Musk’s X and Tesla (Editor’s note: AKA “swasticars”).

5. To the extent you are able, fund groups that are litigating against Trump: American Civil Liberties Union, the Center for Biological Diversity, the Environmental Defense Fund and Common Cause.

6. Spread the truth. Get news through reliable sources, such as the American Prospect, Americans for Tax Fairness, the Economic Policy Institute, the Center on Budget and Policy Priorities, ProPublica, Labor Notes, the Lever, Popular Information. (Editor’s Note: And The Checkout Grocery Update).

7. Urge friends, relatives and acquaintances to avoid Trump propaganda outlets such as Fox News, Newsmax, X and, increasingly, Facebook and Instagram.

8. Push for progressive measures in your community and state.

9. Encourage worker action.

10. Keep the faith. Do not give up on America.

6. Dark Chocolate Almond Smackdown.

Whew, all that was so intense. Let’s talk about chocolate now.

I love chocolate. Don’t you? Who doesn’t? There is so much good chocolate out there. I decided to do a small product sampling of dark chocolate almond bars I found at the inimitable Kimberton Whole Foods. Crazy thing is, they were almost all on sale for V-Day and I spent like $11 for 5 bars of chocolate. Stoked. Like a kid in the candy store. Indie grocery FTW.

Here are tasting notes, product attributes and scores from 1-5. Big winner below.

Alter Eco. Organic, Gluten Free, Fair For Life fair trade. 85% cocoa. Beautiful logo and branding. Blander and more bitter, very creamy, not sweet, with tasty almond nuggets, very smooth, not grainy, very adult-ish, candy for grown-ass kids. 3/5.
Theo. Organic, Fair For Life fair trade. 70% cocoa. Really good logo and branding. Very sweet, good sized almond nuggets, mild bitterness, drier and crunchier, very candy-like. Most accessible and mass market tasting, most confectionary experience, like Theo never closed their iconic Seattle factory, which was a lame decision by their new owners. 3/5.
Taza. Organic, Gluten Free, Direct Trade beyond fair trade. Branding speaks to this products positioning, upscale. 80% cocoa. Grainy, fresh ground taste, not from bulk couverture, crunchy, balanced sweetness and not too bitter, very smooth finish, amazing complexity. Mature and specialized, slightly snobby but deservedly so. Cathy Strange must love this brand, she is the world’s greatest taste-tester, legit. 4/5.
Chocolove. Non-GMO Verified, 70% cocoa. Nice casual branding. Mostly sweet and slightly bitter, bigger almond chunks, denser bite, most bland and neutral tasting but that is not a bad thing, makes it more accessible and consumable. Mass market grocery vibes. My usual go-to but that may change. 3/5.

Endangered Species. Non GMO Verified, Gluten Free, Fair Trade. 72% cocoa. I don’t like the branding, too understated and hard to read. Great cocoa aroma, smells freshly roasted like a chocolate factory, sweet, mildly bitter and rich, deep cocoa taste, almost like old school cake frosting or hot cocoa and marshmallows, creamy and crunchy. These folks really dialed this in, very surprised and delighted. 5/5. Winner by a long shot! Congrats.

7. Tunes.

Do you need a hug? Here's a hug. Hang in there. And a Happy Black History Month to all!

peace.

(Perspectives are 100% our own and do not reflect those of our sponsors).