While trying to keep up with increased demand during the pandemic, fermented food brands can’t lose sight of their core values and business strategy.
The COVID-19 outbreak has altered retail sales, with fast-paced, constantly changing sales and production cycles. Customers are going out of their way to find natural and fermented products, believing healthy food will be one of their best defenses against the global virus. But there is also pressure on pricing, with soaring unemployment and large segments of the economy shut down.
Dan Lohman, author of Brand Secrets and Strategies, says brands that sacrifice quality in order to compete on price will suffer.
“We as a natural (industry), we need to do everything we can to help leverage this storm,” he says “The mainstream retailer’s Achilles Heel is price – and you’ll struggle to compete if you just think about price. … Don’t apologize for quality. Always, always focus on the quality of the product.”
Lohman, an organic and CPG industry strategic adviser, shared business advice in a webinar sponsored by Whole Foods on “How Do You Future Proof Your Store in Uncertain Times.” Here are four of his strategies to help brands survive the pandemic.
1. Focus on Quality
As consumers experience wage loss and unemployment, brands will be tempted to drop their prices and offer a cheaper product. Lohman calls this a tired strategy.
“When you’re thinking about gluten-free, plant-based, some of these other things that we champion that start in our industry, these are the things that are driving sustainable sales across every single channel,” he says. “We should never have to apologize for good quality. Understand it’s our products, our industry, that’s responsible for growth across every category.”
Nielsen Data shows total U.S. food sales are up 1.9%, but natural and organic sales are up 11%.
The modern consumer frames their shopping list by the adage “You are what you eat.” They know eating a healthy, nutritionally dense food will keep them full for longer than a cheap, generic product.
“If I buy the cheap generic bread, I’m hungry almost before I finish eating it. If I eat the best mainstream bread, I may be satiated for a few hours. But if I eat the organic bread and that organic bread provides me the nutrition I need, that might satiate me longer. Even though I’m paying more (for the organic bread), I’m paying less overall. That’s the argument this industry needs to make,” he says. “Unfortunately, this is where we need to rethink how we need to go to market. Its not about price, its about value.”
“Focus on that, focus on how you are delivering that real value to your customer.”
2. Know Your Shopper
The natural shopper stereotype is someone who eats a salad and takes a walk. Defining the shopper in a small scope is limiting. Today’s natural shoppers are diverse and united in a common purpose: craving healthy food.
“Creativity is our single greatest asset. This is how we stand out on a crowded shelf. This is all about having a purpose. Natural is really good at that because were all purpose driven,” Lohman says.
3. Maintain a Score Card
Critical during the pandemic is continuing to track sales measurements. Brands need to tell retailers average turns, anticipated sales, ideal backstock, customer insight and category trends.
“A lot of brands today are reactive. They need to be proactive. It’s your name on the package,” Lohman says. “When a customer sees your product out of stock, they’ll blame the brand, not the retailer.”
Eighty percent of natural food brands fail in the first year of operation. Measurements are key to surviving, Lohman says. They show the retailer “the contribution a brand brings to the store.” Your band may not be the top-selling brand in the category, but it may be bringing the most dollars to the category.
4. Market Intentionally
As grocery store shelves quickly deplete of essential goods and medical supplies, natural brands can market their product as a health alternative.
Shoppers are struggling to find cold medicine. How does your product help alleviate cold symptoms? Grocery stores are selling out of flour. Is your product a healthy alternative to a carbohydrate?
“Help customers understand you’re there to solve their unique problems,” Lohman says.
In a matter of days, the novel coronavirus outbreak dramatically changed grocery shopping. Empty grocery store shelves have become a ubiquitous symbol globally of home quarantine.
Sales exploded for pantry staples like dried beans (62.9%), powdered milk (126.3%) and rice (57.5%). But another grocery quarantine must-have item is emerging – fermented food and drink. Sales are up for kombucha (10.1%), natto is selling out in Japan, yogurt is selling out in Europe and pickle and sauerkraut sales in Russia are up 79%. Fermentation brands are reporting some of their biggest sales during the month of March, as much of the nation was forced into self-isolation to prevent the spread of COVID-19.
“For fermented food, it’s an interesting time. We’re an immune boosting type of food, so our sales are skyrocketing. We’ve had the best month we’ve ever had in business,” says Drew Anderson, CEO of Cleveland Kitchen and TFA board member. Cleveland Kitchen makes sauerkraut and fermented dressings and marinades. “It is bittersweet. Obviously, we want this virus to go away. But we’re seeing the fermentation industry as a whole, the one benefit is it’s driving a lot of trial. People say ‘I heard fermented food is supposed to be good for you, I’m cooking more, why not grab a pack of kraut.’”
Though sales are high, brands are changing their operation model. Rather than running two shifts of processing at Cleveland Kitchen, they’re down to one. Employees must take daily temperature readings before work, stop for mandatory handwashing breaks and use new Purell hand sanitizing stations.
“Sales are up overall, but we have had to implement our emergency sanitation protocols to continue production,” says Meg Chamberlain, CEO of Fermenti, LLC. The North Carolina-based brand sells a variety of vegetable ferments, teaches fermenting workshops and hosts annual the annual WNC Fermenting Festival. Their staff is under voluntary home quarantine – which means staff only goes from work to home. “Overall our company is proving resilient and we are hopeful to continue to provide Fermenti to our community.”
Because food production is considered essential business, licensed fermentation companies have not been forced to stop working during the coronavirus outbreak.
Aneta Lundquist, CEO of 221 B.C. Kombucha, has been posting videos to her Instagram stories of the Florida based kombucha processing facility. Lundquist says employees are working overtime to deliver orders.
“Our orders during the global pandemic have spiked. Consumers have gone full blown ‘healthy’ food during this health crisis,” she says. “Now is the time to make a switch from over-processed and denaturalized pseudo foods to real, natural and unprocessed foods that nourish our body, mind and spirit and help building a strong immunity.”
Lundquist adds customers need to “think of kombucha, kimchi, sauerkraut and other fermented fruits and vegetables as microbiome rock stars!…Always choose wildly fermented foods.”
“Remember it is about diversity and the quality of microorganisms, not just quantity. You can only achieve this by fermenting traditionally.”
Keenan Smith, CEO of Goodwolf Kefir in Portland, agrees. He says: “The probiotic and fermented space will increase as people have an increase in health awareness and want a better functioning immune system.” They are home delivering their kefir, and donating a
Brands are getting creative with their marketing, too. Goodwolf Kefir is home delivering kefir to the Portland area and donating a proceed of sales to their local food bank. Cultured South and Golda Kombucha have setup a pick-up fridge at their Atlanta location where customers can prepay for an order online, get a secret code to unlock the fridge and grab fermented food and drinks. Wild Kombucha in Baltimore is offering free, local, “no human touch” home delivery for their 12 pack bottles. 28 Mile Vodka & Distillery in Illinois have converted their distillery to make hand sanitizer that they call “Fool’s Gin.” The CEOs of Miyoko’s Creamery and Lifeway Kefir are both using the brands Instagram accounts to share recipes using their product.
Outside the U.S., though, different government rules are restricting fermentation brands from operating during the global outbreak. In India, Mountain Bee Kombucha has halted operations during a 21-day lockdown.
“There is no question that our business is impacted immensely, one for the fact that we are still quite small-scale which supplies directly to a handful of local grocery stores. Currently those grocery stores have been working at limited capacity and/or temporarily shut,” said founder and head brewer Honey Islam. “Another reason for lesser business in these times is due to the lack of awareness in the Indian market about fermented foods, especially kombucha. We are engaged in educating our customers as well as spreading awareness in the community via workshops, classes, 101 sessions, pop-ups, all these channels are education are currently disrupted which stalled our efforts in bringing kombucha awareness to the masses.”
Mountain Bee Kombucha is focusing on educating through Instagram videos and YouTube tutorials.
Craft alcohol producers, who asked the government for assistance this month, may now obtain SBA loans interest free to help maintain payroll, mortgage, rent and utilities during the coronavirus outbreak. The CARES act was designed to incentivize small businesses to avoid layoffs. Craft breweries and cideries who were forced to close breweries, bars, wineries and taprooms this month during the coronavirus outbreak. The Emergency Disaster Loans will provide assistance up to $10,000. ..Both the Brewers Association (BA) and the American Cider Association praised the stimulus package, but noted it’s not perfect.
“This this is a significant step forward that provides much needed relief for small and independent breweries who are facing dire economic challenges, there is more work to be done,” according to a statement by the BA.
Read more (Beverage Daily)
Oregon-based TMK Creamery is using the leftover whey byproduct from their cheese and fermenting it into vodka. They call it “cowcohol” and the flavor has a carmel-like sweetness with a smooth finish. Owner Todd Koch learned about the method from Dr. Paul Hughes, assistant professor of Distilled Spirits at Oregon State University. Hughes began experimenting with fermenting whey into a spirits base and has now helped more than a dozen creameries all over the U.S. ferment their whey into alcohol.
Fermenting upcycles the whey while bringing some attention to the animals, Koch said. Artisanal creameries typically have to pay thousands of dollars to dispose of whey in landfills.
From Atlas Obscura: Whey fermentation offers a brave, new world for small creameries, both in decreasing their environmental footprint and ensuring financial security in an age of mass conglomeration. For Koch, a life-long, self-proclaimed “cow person,” the possibilities of bovine booze are a relief to him and his beloved herd. “Going through college, I was like ‘Man, if I could just figure out how to get cows to make alcohol, we’d be set,’” he says. “So I guess we’re one step closer here.”
Read more (Atlas Obscura)
As the coronavirus outbreak continues to put health on the forefront of consumer’s minds, the sales of probiotic products are rising. GlobalData, an analytics company tracking grocery sales, notes that natto (fermented soybeans) were out of stock in Japan consistently since the outbreak. Sales of yogurt are also increasing.
“Consumers are more actively buying probiotic products. There will not be natto panic buying in Europe, but probiotic products claiming to improve the immune system are likely to grab consumers’ eye,” said Mitsue Konishi, senior innovation analyst at GlobalData.
When Keenan Smith made his first batch of water kefir, it was for his kids. He wanted something more nutritious for his young daughters, avid sparkling water drinkers.
Tangy, bubbly and packed with probiotics, water kefir hit all the right notes. The next year was full of home kitchen experiments, creating enticing flavors and perfecting the four-core formulation — purified water, kefir cultures, cane sugar and mission figs.
“My daughters are my best taste testers,” Smith says. “We used to be big kombucha drinkers, but water kefir is providing a different alternative. Water kefir is lighter, less sour and it has no caffeine. The kombucha flavor doesn’t work for some people, and water kefir is a perfect entry into the probiotic drink space. It’s a bridge between kombucha and sparkling water. People can still have a yummy, probiotic drink with water kefir.”
Smith is hardly a kombucha hater, though. He’s a big fan of the fermented tea. Smith was a sales broker for many natural brands for almost two decades — including Health-Ade Kombucha, one of the nation’s leading kombucha brands.
“When I was their broker, they majorly grew their company. But they’re still fermenting in individual glass vessels,” Smith says. “I look to that model because they’ve been so successful without sacrificing the fermentation process.”
By November 2016, Smith rented a commercial kitchen near his home in Portland, Ore. and began brewing kegs of water kefir under his label: Goodwolf Feeding Company. His first customer was Airbnb’s corporate offices. By late 2017, Goodwolf opened their own manufacturing facility, scaling up without sacrificing small batch fermentation. Even now as Goodwolf expands from a Pacific Northwest brand to the West Coast, Goodwolf continues to ferment in 50 gallon stainless fermentation vessels, cultivating additional kefir cultures as the business grows.
“Production is moving very quickly. It feels like we’re in a rocket ship,” Smith says. “It’s a great time for water kefir.”
A few months after his big win as the Expo East Pitch Slam winner, Smith shares how he responsibly built a fermented drink brand.
The Fermentation Association: You were formerly a sales broker for natural food and drink brands. How did your background help you launch Goodwolf water kefir?
Keenan Smith: Knowing the industry, understanding how retailers and distributors work, knowing the cost of doing business upfront. That’s why it’s taken so long for us to grow — we didn’t raise venture capital out of the box. We’ve been slow and steady. We haven’t taken on much investment at all.
A lot of brands will start selling at farmers markets, then pitch to stores, but I had the connections to the retailers. We went right to the retailers.
It’s been a blessing and a curse. The blessing is we’ve been able to get into a lot of the retailers, but where we’ve been short-sighted is the on-premise channels. We haven’t done much with food service and the alternative channel side — like local offices, beer distributors and bars, they’re wanting non-alcoholic options. We’ve missed out on that keg business. These were things I didn’t think about when I focused on the retail challenge.
TFA: Functional beverages are shaking up the drink industry. How do you stand apart from other functional drinks?
Smith: Our best IP (intellectual property) is definitely our recipes, our flavor. We have really good recipes because we really came into it, that was our main goal, to create a very good tasting and nicely packaged product. We announced our social mission at Expo East around mental health. We didn’t want to lead with that though, we wanted to make sure the product and the branding was dialed in.
And also our packaging and position stands out. If you look at the kombucha case, there’s a lot of yoga, spiritual, Hindu vector art. Everything screams yoga. It’s a lot of white. And our packaging is black. We are trying to be a challenger brand. We don’t want anything that’s superfluous in there. We want to position ourselves as a challenger brand to the industry norms. We’re trying to stand out that way — with our marketing and positioning that we’re a little different.
TFA: Tell me about the genesis of the name, Goodwolf.
Smith: Before I started Goodwolf, I was dealing with a lot of depression and anxiety. I was working on eating better and exercising. I was running one day and listening to a podcast and heard the popular good wolf legend story — the classic story on the good wolf, bad wolf. The good wolf is full of joy and love, you feed it by eating healthy. The bad wolf is angry and succumbs to fear, and you feed it a box of donuts. The one that wins is the one you feed. So I had this idea of the Goodwolf origin story.
TFA: What’s your most popular flavor.
Smith: Ginger. But our Gold is creeping up there. It’s cold pressed organic ginger, lemon, lime, pineapple and spices like turmeric and a little bit of black pepper. Our newest flavor is Habanero Fire, it’s our 5th flavor. It’s a nice addition because most brands don’t think about habanero, there’s a lot of cayenne cleanse, but no habanero. I tasted a habanero-infused cider and it had more of a round flavor, while cayenne is more of a single note of heat. Habanero is more well-rounded. We add cayenne, but the habanero really comes through. And it’s cold-pressed with ginger and apple cider vinegar.
TFA: It sounds like a lot of work goes into crafting your flavors.
Smith: Yes. There’s a lot of R and D. Our No. 2 ranked SKU is called Bloom. That was originally called Wolf Berry because Wolf Berry was another name for goji berry, which we were fermenting with in the beginning. The way we use figs now, figs are used to culture the wild yeast out of the air, they float to the top of the water when fermenting, then you throw them out. We were doing the same thing with goji berries. But something happened in fermentation that made it very foamy with goji berries. So we stopped using the goji berries and now we’re using figs.
TFA: You announced a social mission at Expo East. Tell me more about your social mission.
Smith: Coming from a broker world, I worked with a lot of brands that were social mission first. “Buy our product and we’ll give our product to someone that doesn’t have this product!” But this doesn’t always work. Maybe this product isn’t something needed, or it’s not as good as something else on the market so it didn’t make sense. We didn’t want to lead with that social mission.
We could slap 1% for the planet on the bottle, that would be easy. But I struggled with anxiety, I have family members who have struggled with depression. I can really get behind that interest because I relate to it. This felt unique. It’s part of the challenger brand position. And it’s feeding the good wolf, making the right choices.
We’re trying to do something harder, align our brand with mental health awareness. We can’t just donate our money to it because we don’t have money yet, all our money is going back in the business. You can’t really volunteer unless you have a degree, they don’t just want anyone off the street working with people suffering with mental health issues. A friend who is a doctor is consulting with us on how we can best use it. Maybe profits go to the National Association On Mental Illness. Right now it’s an intention versus a full fledged mission. It will be baked into the company as we grow.
TFA: How can brands effectively advertise the health benefits of their product?
Smith: I personally think you have to be crafty. You don’t want to scream health at the customer because you alienate people who think it won’t taste good because it’s healthy. Or you’re preaching to the choir because the healthy people know it’s healthy. You need to be able to imply the benefit without being too forward.
TFA: What challenges do fermented food and drink producers face?
Smith: Education. Even though we’ve made strides, there’s still so much education to be done. One of the big challenges is how do we stay true as smaller brands that are doing traditionally fermented products against larger brands with tons of venture capital and are adding probiotics. It’s apples and oranges when you’re talking about products sitting on a shelf together. Are they a brand funded by Coke? We have to tell our story. It’s advantageous when you’re going into retailers and say we’re small, we’re traditionally fermented. If you can tell that story to your buyers and convey it to your customers. We pushed the traditional fermented aspect.
TFA: What are the fermented food and drink industry strengths?
Smith: Well look, there’s a global pandemic happening and I think that ultimately, you will begin to understand that health is your only wealth. Health and your family are the only things that matter. When people understand that, your product is like gold because you’re providing health to people. And that’s the most important thing we have.
TFA: What’s your advice to other entrepreneurs starting a fermentation brand?
Smith: My advice is some advice I heard recently: Find a space that isn’t already crowded. Maybe we don’t need more sauerkraut and kombucha brands or water kefir, frankly. But try to focus on how you can expand to your maximum potential locally and regionally. Don’t just look at national chains and distributors, but look at on-premise sales. How can you get your product into universities, schools, tech campuses? Think outside the box, find something truly unique that the markets are not flooded with. Or else we’re all just cannibalizing each other.
CNBC “Suddenly Obsessed” explores how kombucha went from a niche beverage to a massive fermented drink category reaching $500 million in sales. Once only popular among hardcore health enthusiasts, CNBC notes kombucha’s appeal is because of a growing consumer preference for healthier drinks. Bigger brands are entering the kombucha space, though, manipulating the brewing process. Pepsi Co. acquired Kevita kombucha, for example, and now Kevita pasteurizes their kombucha for a longer shelf life.
Read more (CNBC)
Mezcal, once deemed the next big thing, is “radically different” in 2020. The New York Times style section explores the amount of entrepreneurs entering the craft mezcal business. Mezcal is an alcoholic drink, distilled with fermented agave. “While some bigger mezcal brands exist, most are still small-scale, with tiny outputs. Tequila production is largely industrialized, at least for the brands available in the United States, but mezcal is still the equivalent of homespun,” according to the New York Times.
Read more (New York Times)
Julie O’Brien of Firefly Kitchens in Seattle wants to “put the sexy in sauerkraut.” She says: “It’s everyone’s goal to make their meals look beautiful and taste beautiful, but wouldn’t it be great if somebody also felt good after eating what they make? By tossing in a dash of kraut, you’re getting that digestive boost and support, so you’re not hung up on the couch in sweatpants after eating a big meal.” O’Brien began fermenting 14 years ago after fermentation piqued her interest during a nutrition program. The high density of micronutrients in fermented foods originally appealed to her. She’s survived the unstable Seattle food scene by championing the traditional food craft.
Read more (Seattle Pi)