We First 5: A Path Appears
Purpose At Work: How Grove Collaborative Is Disrupting The Consumer Goods Industry
June 24, 2020
Entrepreneurship is an uncertain journey. It’s filled with challenges, mistakes and if you’re lucky, success. Regardless of changing market conditions, global catastrophes and economic downturns, companies that build their foundation on purpose have a guiding force to lead them through such obstacles.
I had the opportunity to speak with a truly purpose-driven business innovator, Stuart Landesberg, about how he built his company, Grove Collaborative, from the ground up to reinvent the deeply entrenched consumer packaged goods industry. Here’s what we discussed:
Simon Mainwaring: What was the motivation behind Grove Collaborative and when did you get started?
Stuart Landesberg: My parents were progressive when it came to sustainability issues. They weren’t wild left wingers, but I thought that all paper towels were brown until I went away to school.
It was a rude awakening when I saw the amount of waste our society makes with things like single-use cups. Unfortunately, there wasn’t a long term solution.
I ended up as an investor at TPG Growth covering a combination of consumer, retail and internet brands. I was spending a lot of time in the grocery category and I had this weird parallel experience. In my own life, I started to regress from my conscientious values. At the same time, I was looking at these grocery stores and saw that conscientious values were underrepresented on the shelves.
The American consumer wants to buy conscientious products. Yet, the brick and mortar distribution system is tied to pools of dollars that don’t make it easy for challenger brands to break in. I felt there’s an opportunity to use the internet to fulfill this unmet need.
I wanted to save the world. I love to work. I worked like a hundred hours a week. The reason I quit my real job to start the company was because if I’m going to work a hundred hours a week, I want to leave the world better than I found it.
So I started Grove Collaborative in 2012. I’d done pretty well as an investor. I thought, ‘I’m a smart guy, I’ve had some success. This is going to go well.’ It did not, for the first four years.
I was totally naive about the ability of one person to make a difference overnight but thank goodness for that naivety. It was then, and still is now, a purpose-driven enterprise and endeavor.
SM: You’ve experienced extraordinary growth. What’s driven your success?
SL: We were lucky. It didn’t seem like it at the time I started. I had no experience. I did not know what I was doing. So, we didn’t make progress.
Over the first four years we were unable to raise institutional capital. That meant I couldn’t spend time hiring and managing a big team and scaling. All we could do was spend time with our customer and try to make the product better.
Over those first four years, I probably gave away more than $10,000 in $5 Starbucks gift cards, just getting people to click through prototypes of the product. We took four years of hand to hand contact with our customers to understand what our position in the market was. How can we serve our consumer and serve our mission over the long term? What are the assumptions that are wrong and what are the assumptions that are right?
We were lucky to be in a market that has a lot of growth where there was an opportunity for disruption. We came out of those four years a different company with a different consumer.
Our consumer is a young family in a second tier city or suburban market. It’s Topeka, Kansas, Franklin and Tennessee. It’s 30-year-old moms with two or three kids living on one and a half incomes with a minivan, white picket fence and a small backyard. They want to do the right thing for their family and the world.
The other thing I didn’t understand was how big the opportunity for innovation was. As we’ve grown, we’ve gone from being a retail house to building our own brands. We used the data from that retail platform to lead the next generation of Consumer Packaged Goods.
For example, we have a number of product lines where you get a reusable chassis and a concentrate or a refill. Through that program, we saved a million pounds of plastic. There was a huge opportunity to create a product that was better for the consumer, better for the environment, and could be made at a reasonable price point.
The economies of scale are there now. For a long time, that was a real barrier to being responsible. When I look back now, I’m like, ‘How did we do it?’ But when you’re there, you just make it happen.
I think the barriers helped us find the product market fit. We had to understand what our long term differentiation was going to be. Then it became clear that the next big CPG company was not going to be one that’s built strictly offline. You have to understand your consumer in a direct way. And once we understood that, it became clear what we needed to do strategically.
That was an unlock that took us four-plus years to find. So, the thing I would recommend to people who want to see strong growth is that there’s no substitute for real time with your consumer to understand the market.
SM: What is your purpose and what makes you different?
SL: The company’s mission statement is to help all families create a home that reflects the best of themselves. We do that by making it easy to find home and personal care products that are good for you and the planet.
We differentiate on curation, product quality, customer service and assortment. The soup tastes better when it’s made with love. Every product that you find on Grove is a good choice. That’s not true everywhere.
We never sell out our values in terms of curation. I’m talking about health, safety and sustainability but also efficacy. Natural products need to work or consumers are not going to come back.
The other thing is trust, which starts with product quality and ends with hundreds of Grove guides who are passionate about the mission to take great care of our customers. They talk to something like 40,000 people a week. They’re helping with order problems or recommending new laundry detergent. Whatever it is, they talk to our consumers about value.
From an assortment perspective, north of 50% of our sales are brands that we own. Most of which are only available at Grove. I would say the last piece is that our prices are very good. I don’t believe price is a sustainable competitive advantage. I’m proud of our pricing, but I don’t like to talk too much about it because you have to win on other things.
SM: The brand voice and identity are hard to forget. How did you achieve that?
SL: We definitely didn’t have a clear sense of who we were out of the gate. I originally named the company Pantry. The current name actually occurred to me when I was on a camping trip in the middle of the woods. Grove is not a single tree. This is a problem where we could only solve it if we work together. That’s why I liked the name Grove Collaborative.
The vision statement is that consumer products will be a positive force for human and environmental health. That has steered our long term strategic thinking.
This year, we will be one of, if not the only, plastic neutral retail outlet in the world. It will cost us seven figures. For every ounce of plastic that we ship, we will pull an ounce of plastic out of ocean bound streams or waterways. You can think about it as paying a tax for plastic pollution and paying to recycle it. Society usually pays for negative externalities. We feel good knowing that there’s no net increase in the plastic in the world because of our growth.
SM: Is there an ambition to go further and be net positive?
SL: One hundred percent. You can’t get positive without going through neutral. Our goal is to be plastic free by 2025. We have a real economic incentive to do that and so do our partners. They pay the plastic tax because we pass it back to them for the plastic they sell through Grove. We’re not going to get to a net positive society or consumer product sector unless there’s actual economic incentive.
SM: With that in mind, how do you compete with the Amazons of the world?
SL: One customer at a time. The lifeblood of our company is long term customers. If you believe in a long term relationship, you don’t need to make all your money on that first sale. You can make a couple of sales at a loss. You can do things to invest in building trust. We believe that those folks will stay with us and that’s really valuable.
SM: What lessons would you share with someone looking to grow their business?
SL: The number one lesson to me is, it’s all about people. I thought that businesses were about spreadsheets. Now I understand that they’re about people. Any success we’ve had has been because of the team that I’ve had on my side. It’s everyone from my two co-founders who are still at the company to the intern who started last week.
The second lesson is that anytime I try to take a shortcut it doesn’t work. There’s a direct correlation between how hard we work and how lucky we are. Short cuts never seem to be as effective as actual boots on the ground doing the work. That’s an expensive lesson that we’ve learned a couple of times.
SM: What would you say to a business owner sitting on the sidelines in terms of purpose?
SL: It’s a sustainable and competitive advantage to have a great mission. A lot of the talented people we’ve been able to attract only work at Grove because they believe in the mission. If people are the number one determinant of success in business, a strong mission is the number one determinant of getting the best people. The more authentic your mission, the higher quality your talent will be.
SM: What’s the long term vision for growth?
SL: I believe that this problem is too big to be solved by any one entity. It has to be a partnership. There’s the green chemists who made natural products work. There’s the early pioneers in the industry who invested all those dollars. There are consumers who are willing to give up a brand that their mother used in order to make a change that’s better for their family. There’s all of the people who work for Grove. There’s all of our partners who spread the message.
We own a brand called Seedling, which is in the paper industry. It’s tree-free paper. For every few units we sell, we plant a tree. I’ll plant a million trees in the U.S. through 2022. This is one of the first places where we have a brand that doesn’t just do less bad, but actually does more good. We’re just using some of the profit to plant trees. When mom pulls out a piece of paper towel to wipe off whatever spills on the floor, she’s making the world better. There are many steps of partnership in the chain. We work with the Arbor Day foundation who in turn partners with local foresters who often partner with local communities. That’s why we can’t do it alone.
SM: What role would you like to see the business play in the world?
SL: I want Grove to be a large, thriving, independent business that can exist for a hundred years internally. One of our internal sayings is, ‘build a hundred year company.’ It’s really easy to take short cuts, but if you think about building a hundred year company, you build the thing to last.
I believe the business is the single strongest organizing principle in modern society, outside of the nuclear family. It’s certainly the single strongest organizing principle that gets folks to do stuff. Therefore, it’s the biggest engine of positive or negative change in the world.
You look at everything from climate change to pollution to advancements in medical science; almost all of it has been driven by market forces. I am a huge believer in the power of business to shape history. I am hopeful that at some point we get our act together and force businesses to take into account not just the hard dollar cost, but to the true cost to society of what they produce.
SM: What keeps you optimistic for the future during these challenging times?
Stuart : Over the last 200 years, the smartest people have not focused on improving society and the human condition. Most of them have focused on making money. It doesn’t have to be mutually exclusive. We are now seeing the smartest people in mission-driven activities. That will be the thing that drives and inspires us all forward.