ReGen Brands Recap #66

Kyle Krull & Anthony Corsaro

Expo West Recap: Claims, Capital, & The Fallacy of Competition

In this episode, AC and Kyle debrief their Expo West experiences. They highlight their favorite new products, celebrate some big regenerative wins, and share their key takeaways from the event. Overall, the two came away feeling both energized by the momentum around regenerative and grounded in the reality that there is much more that needs to be done around the stickier challenges of financial support, consumer education, and regenerative marketing claims.

 

 

The Highlights: Human Connection + New Flavors

Kyle and AC deeply enjoyed connecting with the community of brands supporting regenerative agriculture and trying new products from these incredible companies. It was also super energizing to meet ReGen Brands fans and hear how you all are enjoying the podcast – your support is greatly appreciated!

Three themes that stood out from making the rounds and taste-testing new products: 1) regenerative brands are winning with outstanding flavors (and converting AC into a plantain enthusiast!?), 2) they are making regen convenient for the consumer, and 3) they continue to up-level known product formats into new versions that are better for people and planet.

Below are a few of their favorite new products:

 Outstanding flavors

Making regen convenient

Up-leveling known forms

  

Regenerative Momentum

Regenerative brands made a statement at this year’s Expo West, taking home five NEXTY awards. Winners included:

  

Regenerative brands also made exciting announcements proving the opportunity to scale regenerative production. Lundberg Family Farms now holds the title as the leading US Regenerative Organic Certified (ROC) food brand with 70+ products made with ROC rice. Applegate Farms announced its goal to source its entire beef hotdog portfolio from 100% certified regenerative beef by 2025. Last but not least, Serenity Kids announced it closed $52 million in its Series B investment round with Stride Consumer Partners. Serenity Kids is the fastest-selling shelf-stable baby food pouch brand in all grocery channels, proving that regenerative sourcing can be a leading and scalable innovation.

The conversation around regenerative and sustainable supply chains was bolstered by strong Expo West programming during Climate Day, plus side events and tables from certification organizations including Regenerative Organic Certified®, Regenified, A Greener World, and Soil & Climate Initiative.

While there is significant momentum around regenerative, there is still more to do. Despite the awards and growth announcements, only a small fraction of the companies at Expo West are making goals or claims around regenerative sourcing. Anthony and Kyle also note that actions aren’t yet strong enough or big enough where they are needed most. There is a lot of hype around flashy innovations, but much more of a need for the less-sexy, hard work like collaboration and harmonization of efforts across the sector.

 

The Operating Reality For Regenerative Brands

Anthony and Kyle quickly debriefed a session Anthony moderated: “Winning Over Consumers With Sustainability Messaging: From Organic to Regenerative & Beyond”. The panel featured Sherry Frey from NielsenIQ, Guy Burgstahler from Vitacost.com, Brita Lundberg of Lundberg Family Farms, and Nick Wiseman of Little Sesame.

One key takeaway from the session: consumer preference for sustainable products has yet to translate into significant purchasing volumes. This means that despite surveys showing consumer preference for regenerative or sustainable products, these claims cannot be the key growth driver for regenerative brands. Claims can be a nice tie-breaker when consumers are choosing between products, but will not be the main reason an average consumer is choosing your product overall.

Another key takeaway is that while retailers want to carry more regenerative products, the current retail distribution model is not set up to compensate regenerative brands for their extra work without passing on a significant additional cost to the end consumer.  Plus, that consumer often lacks an understanding of the benefits of regenerative agriculture and an appreciation for the price increase. Kyle explained Whole Foods’ “good, better, best” pricing model which instantly slots the regenerative products as the “best” (and therefore most expensive) option in their category. In addition, Whole Foods is focusing on unit velocity as it looks to compare itself more with conventional retailers, which makes it even more challenging for regenerative brands to win.

“Any regenerative brand automatically becomes ‘best.’ So [Whole Foods] automatically takes a higher margin on a regenerative brand because they qualify as a ‘best’ brand, but they want to focus on unit velocity, which having a higher price point makes it harder to achieve…And it's another one of those pain points that regenerative brands just face – this massive uphill battle. And until we can figure out how to collectively solve some of these problems or maybe even individually to your point, it's going to continue to be that much harder as a regenerative brand.” – Kyle

 

The State of CPG Investment Capital

Next, Anthony shared his high-level thoughts on the state of investment in regenerative brands. His biggest theme is an increased focus on business profitability and paced growth. He foresees that more brands will need to raise smaller amounts of money more frequently with very clearly defined growth goals that create proof points for continued investment. There will be more of a need for businesses to show clear plans that they are focusing on the SKUs and retailers that are most profitable, and to develop a distribution plan that leads to profitability as soon as possible. He also sees investment shifting to later-stage growth, which will continue to exacerbate the already existing funding gap for younger, smaller brands.

“So you're going to see a lot more bigger bets, I think, in those later stage rounds… which is all the more reason why we need to continue to spotlight the needs of those sub five, sub ten, sub twenty million dollar brands because these are the folks that are building regenerative supply chains of the utmost integrity and we have to find a way to support them and scale them...” – Anthony

Ultimately, Anthony also calls for more innovative financing and appreciates the “alignment funding” approach that TIG Brands is championing. The sector needs more R&D for new approaches to investing in brands, which takes organized teams and capital to fuel their experimentation. Trialing these new solutions to develop scalable proofs of concept will take a collection of impact-first and philanthropic capital that has a higher risk appetite. 

In particular, Anthony is curious about testing debt and equity hybrid models, as well as bespoke inventory financing offerings for regenerative brands (like how Steward financed Lil Bucks) that also value the environmental and ecosystem benefits of regenerative production. He also proposes thinking through roll-up options with smaller brands in similar categories to leverage synergies across back-office, sales, and, marketing strategies.

 

 

The Never-Ending Arguments About Regenerative Claims

A truly stand-out moment for both Kyle and Anthony was the conversation around defining regenerative agriculture and validating brand claims during One Step Closer’s Regenerative Agriculture Roundtable. While there was clear tension between the needs and opinions of the different actors in the room, there was also a collective sense of empathy and understanding that each person, organization, and company is working hard and well-intentioned.

 

Kyle’s major concern is that if regenerative is too exclusive and unapproachable for brands and farmers operating conventionally today, then it cannot be a vehicle that delivers the changes we need for human and planetary health.

“If regenerative has to be organic and if people have to pay a premium for regenerative products, the impact the movement can make for both human and planetary health is going to be significantly diminished. And unless we can start to incentivize arable land in mass to adopt these principles and practices, we are not going to mitigate and or reverse climate change. And we are not going to make a significant impact on improving human health.” – Kyle

Understanding the need to come up with a solution that is clear for the consumer, accessible for the brand, and appropriately valuing various levels of regenerative practice adoption, Anthony suggested a three-tiered approach for regenerative claims:

Level one: practice adoption claim. This would be for something like Silk’s yogurt (owned by Danone) who currently claims on their packaging: “this product supports regenerative farming practices.” It incentivizes companies to start their regenerative journey, incentivize practice adoption in their supply chain, and engage the consumer - without overstating the level or impact of their actions.

Level two: significant sourcing claim. This tier is harder to define but would allow for a middle area where brands are doing more than incentivizing practice adoption but may not be third-party certified for some reason. They can transparently validate their regenerative sourcing through some auditing process that shows the farming systems they’re sourcing from are significantly down the regenerative path.

Level three: full certification. This claim would include existing regenerative certifications, such as Regenerative Organic Certified, Land To Market, Regenefied, A Greener World, SCI, and others. And there may even be a need to create a hierarchy of these programs since they have different standards and protocols.

Ultimately, there needs to be continued open discussion around regenerative claims, with a focus on finding the shared alignment and moving toward a collaborative solution. 

 

50% Market Share 4 Regen

This episode highlighted much of what is needed to achieve 50% market share for regen brands: great tasting products, consumer education, innovative financing, and improved regenerative claims. The congregation of people at Expo West also highlighted the need for continued empathetic and vulnerable conversations. It showed the continued need for real collaboration and multi-stakeholder problem-solving to overcome the unique challenges facing regenerative brands.

“It feels like the deeper you go into any of these problems, the more big and overwhelming and outside of yourself it becomes. And you lose agency and you lose motivation to make a positive change. And I think that's where the in-person connection and where the community piece comes in because you remember it's not just you. And it is all of us as individuals being relentless champions for this positive change that we want to see, but also it's this deeper understanding that it's so much bigger than all of us.” - Anthony

 

This ReGen Recap was written by Katey Finnegan

The illustrations were created by Stacey Shaller

You can check out the full episode with Kyle and AC HERE

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