[00:00:03] Jon Landis: Hey, everybody. Welcome to the BevNET podcast. This is Jon Landis, brand specialist. Just got back from the Summer Fancy Food Show, and I got a full table around me. I want to just welcome Jeffrey Klineman, our editor-in-chief, back to the show. It's great to be here, John. Thank you for that nice soundbite. And we have two new people that, brand new, you guys might not know who they are. Hopefully you do, though, because you read our sites. Carol Ortenberg. Carol, why don't you tell us a little bit about what you're up to in the office?
[00:00:32] Carol Ortenberg: Sure. I'm the editor of Project Nosh, and Nosh stands for Natural, Organic, Sustainable, and Healthy. And I cover all the unique and interesting food news that's going on out there.
[00:00:44] Jon Landis: Excellent. And to your right, we have another behind the scenes person, Jacqui Brugliera. Come on, Jackie. You're here all day, every day. What is it that you're up to?
[00:00:54] Jacqui Brugliera: So my title is marketing communications specialist, but I tend to dabble in a lot of different things. You can see me running around on the trade show floor with my head cut off, or you can find me here in the office spamming your mailboxes.
[00:01:09] Jeffrey Klineman: We're all just back from that trade show floor. And I know that the beverage guys tend to finish the day talking about what they're drinking, but let's start the day off maybe telling everyone what you guys enjoyed at the show. As hackneyed as custom as that may be, what were you guys most interested in?
[00:01:31] Jacqui Brugliera: Well, I think the most interesting things that I saw were a lot of new brands, new startups. I talked to this kraut company called Cleveland Kraut. They were really cool guys from Cleveland starting this fermented food brand. Got to interview them, a couple other fermented food brands. Also talked to this jerky company. They were doing this different thing. They were using dried beef instead of creating typical jerky with added sugar and all that crap in it. So they were really cool South African style beef.
[00:02:04] Jon Landis: Was it Bill Tong?
[00:02:06] Jacqui Brugliera: Yes, it was Bill Tong.
[00:02:07] Jon Landis: Love it. It's like the most traditional methods of preserving foods are now coming back. Drying meat and fermenting vegetables is how we used to do it thousands of years ago. And now, now we're moving away from the chemicals and back to the natural ends of things. It's true.
[00:02:22] Jeffrey Klineman: I've actually recently installed racks for drying salmon in my backyard. But Biltong is something that we've seen here in Boston as well. There's a Boston Biltong company. If you talk to anyone who's traveled in Africa, they all are either all in on Biltong or they can't stand it.
[00:02:41] Jon Landis: We don't really need to go all day on what we saw that was so cool at the show. I feel like every time someone stops me in the aisle, that's what I have to go through. And it's really just small talk. Unless Carol, you had something you wanted to talk about.
[00:02:52] Carol Ortenberg: I was going to say not specific to a particular product, but there were a lot of uses of cool, clear windows and packaging and making that really specific to your product. So the wine raisin company, their cutout is in the shape of a wine goblet. And then, you know, we had the matzah project and it was like the grandmother's glasses on the front of the package let you see the matzah. So, you know, definitely some new.
[00:03:17] Jon Landis: New trends in packaging and new innovation in the way that consumers are going to get to see the product before they buy it. Admit it, Carol, you liked the matzah best.
[00:03:27] Carol Ortenberg: I actually didn't get to try the matzah. They had a crowd too deep at their booth the whole time.
[00:03:31] Jeffrey Klineman: You tweeted me repeatedly. This is how the kids talk, by the way, these days.
[00:03:38] Carol Ortenberg: We tweet and Snapchat.
[00:03:39] Jeffrey Klineman: They tweet and Snapchat to each other. Human conversation is something that, as you can tell by the pace and rhythm of this podcast, is something we're all quite unfamiliar with.
[00:03:49] Jon Landis: Mr. Landis, what would you say you enjoy the most? Here's what I think. People often ask me what's new and exciting, and I saw a lot of new stuff. I saw stuff that I thought was exciting, but I didn't generally see a lot that was both. What I'm most excited about is a lot of these brands that we've been watching for the last two or three years at least that are still growing. They still have legs. You always hear Come back in five years and nine out of ten of these exhibitors aren't going to be here, but that's not turning out to be the case. We're seeing these entrepreneurial brands, maybe five or ten years ago, they wouldn't have lasted this long, but the landscape is changing. In fact, I was just reading another article online reporting on Nielsen that, you know, the top hundred brands had like 49% of market share, but they're not even responsible for most of the growth in the industry. It's the 20,000 brands below them that are responsible for more than half of the growth in the industry. So with all that kind of growth happening, I'm really excited seeing these really smart people with these great ideas, getting an opportunity to execute it for more than 12 or 16 months before they have to belly up. And that to me is the most exciting part of a show like this.
[00:04:55] Jeffrey Klineman: I agree with you there. And I think it's been true for a few years now that the sort of that the larger brands are all losing share to a growing food category, but one that is growing more at the lower tiers and the smaller producers. But what you get a snapshot of, particularly at the New York Fancy Food Show, where they're bringing in brands from all kinds of regions, and all kinds of incubators is a set of brands that's really working it out at the two, three, four, five store level. You know, a lot of them are sort of haphazardly thrown into bags and you get a lot of smaller sort of handwritten labels as well as stuff that's had a little more time to grow and mature.
[00:05:47] Jon Landis: Yeah, and I think that's always been the charm of this show. Well, it's always been the charm of that channel too. Of the channel, absolutely. And that kind of brings us to kind of like the main point that I wanted to talk to everybody about, which was where is a specialty channel going? We're seeing this show, this New York show has just grown year after year after year. We're seeing a lot of natural brands. We're seeing a lot of brands that you wouldn't traditionally think would be focused on specialty. What does that mean for the channel? Is channel bleed a good thing for both sides? I'm asking a lot of questions here, so someone feel free to chime in with any thoughts.
[00:06:22] Jeffrey Klineman: I don't want to dominate the conversation, but the one thing that I will say is that just as we saw at the natural product shows earlier this year, where what had been sort of moribund center store categories were getting updates, so things like the shelf stable juice aisle, the soda aisle, you're seeing premiumization and kind of a natural organic or GMO free makeover. You're seeing a lot of those same trends dominate the composition of new products that have traditionally been the kind of products on which the Specialty Foods channel has been built. Things like yummy indulgent chocolate spreads or odd composition snacks or, you know, there's a lot of chocolate that has different kinds of manufacturing or origin. There's a lot of chocolate that has different kinds of single origin or different kinds of manufacturing processes that are more specialized. I mean, we could delve into the single origin controversy surrounding chocolate. But I think the simple fact that there has been something that we would call the single origin chocolate controversy just shows you the kind of layered approach to some of these specialty food categories that we're encountering. It's almost like viticulture at this point.
[00:07:59] Jon Landis: So it sounds like you're saying the consumers are evolving, so the specialty channel has these indulgent products, but they're needing to become a little bit healthier because consumers are looking for healthy. Is that what you're seeing out there, Carol?
[00:08:11] Carol Ortenberg: That's primarily what we write about. So I may have a slightly biased opinion, but it seems like across all segments, you know, whether you're a young millennial or just starting out family or a baby boomer. You're thinking about health and how do you incorporate that in small steps, at the very least, into your day, whether that means your chocolate at night has a little extra oomph to it, or you sprinkle a little bit of flax or hemp in your granola in the morning, just trying to take it off and be healthy in bite-size, sort of manageable pieces.
[00:08:46] Jon Landis: Would you say that maybe the growth that we've seen in the natural channel over the last couple of years, maybe that's kind of leading to more of that in the specialty channel as well?
[00:08:56] Carol Ortenberg: Yeah, I mean, I think across all retailers, you see them revising their mixes to include more healthy products. CVS just announced that last week that they're redoing a bulk of their stores to incorporate more healthy products Target's been on that trend for a while now and as the big retailers do it the smaller sort of specialty brands are following suit they're also finding out that Healthy doesn't have to mean not indulgent.
[00:09:22] Jeffrey Klineman: It's just that what the buyers are finding out or are you know, really determined to remodel their stores after is this notion that even in indulgence, consumers are reading labels and they want to know the origin of their products and be able to trace it back and have it be simple.
[00:09:41] Carol Ortenberg: Yeah. I mean, healthy doesn't have to mean gluten free, high fiber, all protein. Certainly healthy means something different to each person, but at its basic level, it means clean ingredient labels with words you can pronounce.
[00:09:53] Jeffrey Klineman: Although at the specialty level, there's also a certain amount of prestige that they try and add to these products that matches the price point.
[00:10:02] Jon Landis: Right. And that's always been the forte of specialty. You're going to get these products in these smaller independent shops where you can't really find them in mass retail. And to that effect, I guess it's my opinion that it's always been a very popular channel for entrepreneurs that can command a higher price for their product, which they need to do because they don't have scale to get it down to compete. The convenience channel, for example. They put a lot of authenticity into a lot of their products and brands. So it kind of makes sense that Specialty has always been like an early stage channel for brands. Not all brands, obviously, but a lot of them. And with the emergence of the natural channel, it's kind of taken the place of that. I don't know. Do you agree?
[00:10:45] Jacqui Brugliera: I think when consumers go into a specialty store, they're expecting to find something different, which gives startups a kind of a leg up because they're already have consumers looking for something new, intriguing, and now they're looking for something healthy. So when they have a consumer looking for both things, they have that advantage. Whereas in a crowded shelf space, they kind of have to compete both on a price level and with like brand awareness.
[00:11:08] Carol Ortenberg: Right. But it is interesting also the big brands that are trying to crash the specialty space. There were definitely some big jerky companies with their secondary lines at the show. Dole was at the show with a chili spiced frozen mango and little mix in applesauce cups. And you know, a couple of years ago, not sure if you'd consider that to be specialty.
[00:11:28] Jon Landis: And wasn't that Larissa's Kitchen? Is that a Jack Link's? I think it's another large company that's doing a healthier for you jerky that I saw there.
[00:11:37] Carol Ortenberg: It's definitely a grass-fed jerky. Duke's was there. They're owned by the same folks that make big sunflower seeds that you see in a lot of convenience stores.
[00:11:45] Jeffrey Klineman: Yeah, the Thanasi Foods guys. It's interesting, you know, you have these products that might have been considered non-gourmet items like jerky. I mean, it always goes back to jerky. And all of a sudden, you have these $10, $12 bags of beef jerky made from prime rib or from single-origin cows. They all come from one mother, it's true. And I think a lot of it is consumer-driven and sort of diet-driven. If we're going to eat paleo, if we're going to eat high-fat, high-protein, then we want to do it in this. sort of foodie away as possible. But I also think we're seeing a lot of what they call channel bleed, where every kind of class of retailer wants to have items that consumers can discover, or they want to have high-end items that consumers are seeking. So you had Walmart brokers on the floor. You had TJX on the floor. And then you have sort of well-established companies that are coming out of this channel that are pushing into more conventional ones like our friends at Stonewall Kitchen. It's a confusing time, but I also think that premium products are very, very important in the food innovation space right now, be it products that are sold online or in really specialized stores.
[00:13:12] Carol Ortenberg: Yeah. And you know, a lot of those things you mentioned, paleo, gluten-free, it's interesting. Those diets may come and go, time will tell, but handmade and artisan, which are kind of the backbone of specialty have never really gone out of style. And there's still something about that connection to your maker that keeps the category going.
[00:13:31] Jeffrey Klineman: And it's funny because a lot of consumers kind of want to pay less for those same kinds of things. And that's where you see the bigger companies trying to move in and kind of innovate by acquisition. To that point, I wanted to ask Jackie, I mean, you talked with more of the people at booths than any of us. What's their mood? I mean, are they optimistic? Are they still struggling?
[00:13:57] Jacqui Brugliera: A lot of them are optimistic. They all said they had great shows, a lot of conversations. I think they're all just really excited and inspired and passionate about their brand, like a typical entrepreneur. They're excited. Obviously, at these shows, they get a lot of interest because you're standing there and people are walking by. Even if people might not be super interested in your brand, they're going to say, Oh, this tastes great. This seems great. So I think they're kind of on that high and feeling the entrepreneurial spirit with all the other booths and all these other products that they see at the show. Cause I was talking to a lot of them and there were buds with the booth next to them, talking shop, talking about their experiences. So I think it's also a really big learning opportunity for them at these shows to learn from other startups.
[00:14:40] Carol Ortenberg: Something that I was surprised by was some of that excitement was there are just so many retail channels now. You can go into the retailers you mentioned, like traditional ones like Walmart or TJX or specialty stores. But then I had some telling me that they were very interested in meal kits. and meal kit, putting in sort of more artisan handmade stuff to give that box feeling special. Subscription boxes was another one that was mentioned to me. And then just the number of new e-commerce opportunities for them totally just changes the marketplace and makes some of these specialty stores. Well, if you're on like the largest jam marketplace, it's great for you.
[00:15:19] Jeffrey Klineman: Jam.com.
[00:15:21] Carol Ortenberg: I'm not sure about that one.
[00:15:23] Jeffrey Klineman: I'll tell you, though, you know, we're sitting in this room and talking about e-commerce and, you know, Thrive Market picked up $110 million round of investment today to yet Carol is very precise. She's sitting here saying 111. I ran yesterday, I think. We're operating outside of time Recently as of the time of this recording acquired a nine-figure investment and a really really growing and Thrive curates pretty heavily, but they are probably Outside of the kind of craft level, you know the Etsy's and the Kickstarter's of the world They're probably one of the biggest online arbiters of taste and it's all about again natural and organic and curated for leading-edge consumer trends
[00:16:24] Carol Ortenberg: There's also these marketplaces that I think place the specialty food industry centered around global discovery of new foods. At the fancy Food Show, there's certainly a lot of different ethnic brands or globally influenced products and millennials want that travel taste. adventure, and they can get that through these online platforms. So we were right at the show launching was Umlicious, which is an Asian-inspired retail shop online. And so I think a lot of the specialty food players can also play in that space too.
[00:16:56] Jon Landis: That's a nice cue for me to set something up here. Now, if you're talking about outside of the country and uniqueness and how important all of the innovation is to the ecosystem of this entire industry, you know, only one word comes to mind is Brooklyn, right? And we were in New York. They did invent foreign cultures in Brooklyn. They did. I mean, they even invented a bourbon in Brooklyn now too, right? And child rearing. So, you know, I asked this question to John and Ray when we were recording at Gotham Market for the BevNET fancy food, kind of what we saw on the beverage end. But I want to know your guys' feeling because I think food is, it's obviously much larger, it's more diverse, it takes more to stand out, to be unique in food than it does in beverage. Do you guys think that we've reached peak Brooklyn? I can expand on that if you don't understand the question very well, but.
[00:17:49] Carol Ortenberg: I think there's always room for local brands, especially in an innovative space like Brooklyn. I don't know if Brooklyn has hit its peak of the number of food brands that can be in there, afford the rent on the storefronts, produce their products there. It may be that they can't fit in Brooklyn versus Brooklyn fitting in the space. I hear a lot about emerging marketplaces for CPG entrepreneurs. North Carolina, Nashville. These are all places where the cost of living is cheaper. You can get space to make your product easily. Even Detroit, I heard recently. I just don't know how Brooklyn's real estate market will impact the food market.
[00:18:28] Jeffrey Klineman: It's an interesting question. And I think Carol raises a good filter for it, which is these are these community, many of these communities that she's bringing up, the consumer base also values local homemade. I know the maker. You know, there are God knows how many small cold-pressed juice delivery options in Brooklyn that aren't, you know, your Suja's or your juice stores, but how many yoga studios per capita are in Brooklyn where these things are dropped off? So, the audience in these sort of what I call Richard Florida communities that are this combination of education and wealth and high income and also sort of strong ethnic currents allows for a lot of small businesses to pop up. But what they're finding in Brooklyn is that they don't have the manufacturing capacity to scale them. And that we joke about peak Brooklyn in terms of a branding element. But as long as there are smart yuppies in these areas, they're going to want these kinds of products. It's almost a status thing.
[00:19:37] Carol Ortenberg: I think also as people explore more and travel more, they're discovering new parts of the country that maybe didn't used to be as sexy and glamorous. I saw more brands from the South at this show than I had seen in the past. And I think part of that is just the emergence of other cities as becoming seen as cool as Brooklyn. There were tons of biscuit brands, I know, at the show.
[00:19:59] Jon Landis: Well, it's interesting to me, I talked to a couple different brands that have been around in Brooklyn for over five years, and they had either Brooklyn in like their brand name or in a flavor or skew that they're offering. And both of them were, you know, emphatically saying, I really hope that we've hit the top of this mountain on what Brooklyn means to people.
[00:20:19] Jeffrey Klineman: what exactly would you call Brooklyn flavored?
[00:20:22] Jon Landis: No, I'm not saying it's Brooklyn flavored. They use the name Brooklyn in one of their flavors. So like one of their SKUs, but they also are seeing tremendous more opportunity for sales of their product in Northern California or in other areas of the country. It's not making a product in Brooklyn to sell it in Brooklyn anymore. I mean, Jackie, what are your thoughts when you see a product with Brooklyn in the brand name or somewhere, you know, emphasizing Brooklyn?
[00:20:48] Jacqui Brugliera: Being from Boston, it might not be as big of a deal for me. I could see someone from New York or from Brooklyn having that tied to Brooklyn, but maybe like something from Boston, I would have the same inclination to buy. Whereas if I'm from Brooklyn, I'll buy something from Brooklyn. So I see it as like Carol was saying, different communities want to support their local brands. So yeah, it's cool, the whole Brooklyn thing. I spent a weekend in Brooklyn. Yeah, it's really, really cool. But again, I wouldn't go into a store and pick that over something from Boston.
[00:21:22] Jon Landis: And just to kind of bring this all the way around, when I say peak Brooklyn, and I'm talking about in that, when I'm thinking about it, it means something different. That question is very vague. But I'm always thinking of Brooklyn as like more of an abstract idea. Brooklyn has gotten to mean unique for uniqueness's sake and not necessarily uniqueness for a better product or something that's going to be really amazing. But you know, you just want to stand out. You want to move to Brooklyn so that you can be an individual.
[00:21:49] Carol Ortenberg: I don't know. I think Brooklyn has birthed a number of companies that are not trying to be unique for unique sake. Depending on when you move to that area, it was seen as more cutting edge or more adventurous to go there. But one thing that struck me was you said some of the brands had been around five, 10 years from Brooklyn, all had Brooklyn in their name. Do you need Brooklyn in your name anymore? Or can you just have like made in Brooklyn on the back?
[00:22:12] Jon Landis: And that's, that's the thing is they're not made in Brooklyn anymore. You get to a point where you can't manufacture in Brooklyn. You got to move.
[00:22:19] Jeffrey Klineman: In fact, the one who is condemning them, you're condemning them on both sides. No, no, no, no. to Brooklyn when they're in Brooklyn because they're too weird. But if they start to grow and they're manufacturing outside of Brooklyn, then they're no longer Brooklyn enough.
[00:22:36] Jon Landis: I feel like, you know, the idea of moving to Brooklyn or being part of like the Brooklyn community is kind of like the same thing as Portland, Oregon, like keep Portland weird. You have to be separate from the mainstream to be able to fit in in Brooklyn. Right. And to the other point, some of these companies actually changed their packaging to say born in Brooklyn or from Brooklyn, but they can't say made in Brooklyn anymore because they're not anymore. Anyways, I'm going off on a tangent at this point.
[00:23:03] Carol Ortenberg: I think it's kind of like, you know, made in New York or I heart New York. You know, it's just expanding the space of what that means, right? New York was thought of as this, if you can make it there, you can make it anywhere, contemporary, cutting edge place that expanded to Brooklyn. For me, now the rest of the world is being thought that way as well, because I could go off on that for a million days.
[00:23:21] Jeffrey Klineman: I can't wait till we reach peak Detroit.
[00:23:25] Carol Ortenberg: I think that's going to be great.
[00:23:27] Jeffrey Klineman: It absolutely will be our peak Buffalo too.
[00:23:30] Jon Landis: Well, it says a lot about the industry because there's more opportunity for entrepreneurs and they're starting in other places. You don't have to be from Brooklyn to start a craft olive oil, you know, whatever brand you want to be. It used to be you had to be from a weird place with a solid community in place that you could draw upon that would really help you along the way. But now, you know, we're seeing incubators in just about every metro area in the country.
[00:23:55] Carol Ortenberg: And I think part of what helped Brooklyn and New York get that association was that a lot of this first specialty markets were started in that country. Dean and DeLuca started off in New York. There's certainly a couple of these brands that started in the 60s, 70s and 80s and really set the pace for specialty markets that were started in that metropolis area.
[00:24:14] Jeffrey Klineman: Yeah, we were talking about that with a member of the family that started Fairway, actually, as you have. One pole is Fairway, one is sort of Dina DeLuca and Balducci's, and then way down just outside the city limits, you've got Stu Leonard's as being the kind of Mount Rushmore of specialty retailing.
[00:24:35] Carol Ortenberg: And now Whole Foods crashed Brooklyn as well.
[00:24:38] Jeffrey Klineman: Absolutely. So now, you know, peak Whole Foods would be the question.
[00:24:42] Carol Ortenberg: I think I heard they're just opening up in Williamsburg.
[00:24:45] Jon Landis: Maybe then the two converge, Peak Brooklyn and Peak Whole Foods. Right near the Williamsburg Bridge. Absolutely. Well, I think that this is pretty good. Really appreciate everybody listening to it. One other thing I want to add before we sign off, so many people came up to me at this trade show to tell me how much they enjoy listening to this podcast. It really means a lot to me personally. It means a lot to a lot of people on the team here. We put a lot of thought and time into it and glad to hear that people are listening and enjoying it. So if you do want to reach out with some Ideas, topics, suggestions, whatever, you know how to find us, BevNET.com, projectnosh.com. We look forward to hearing from you, and thanks for listening.
