Grove Collaborative says it aims to be “a brand that conscientious customers can trust by creating and (+) carefully selecting products that are wallet-friendly, effective, and planet-first.” CEO Jeff Yurcisin said.
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On Jeff Yurcisin's first day as CEO of Grove Collaborative last August, he accepted the challenge of a lifetime. Founded in 2012, Grove has built a digitally native business centered on green and sustainable products for home cleaning, personal care, health and wellness, laundry, clean beauty, baby and pet care. did.
However, despite growing environmental awareness among consumers, Globe's business was suffering. Ironically, a company that only sells clean products was in a lot of turmoil.
In 2021, it merged with Virgin Group Acquisition Corporation, backed by Richard Branson, and went public in July 2022 at a valuation of $1.5 billion, but its market capitalization plummeted by the end of the same year and currently stands at 5,000. It remains in the million dollar range.
“We used to be unicorns, now we're microcaps,” he told me. “But I'm not here, and the board isn't here to run a small $50 million micro-cap company.”
With revenue down 16% from $384 million in 2021 to $322 million in 2022 and an adjusted EBITDA loss of $80 million, Yurshishin's priorities on day one are: The goal was to establish a financial structure that would allow the company to pursue its founding mission. Transforming the consumer products industry into a force for positive impact on people and the environment.
“Given that we are a company that aims to transform the consumer products industry from a sustainability perspective, we have to be sustainable ourselves,” he said.
The beginning of reconstruction
Yurshishin was able to produce results in his first year in office. Due to significant reductions in advertising costs and other operating expenses, the company has delivered positive adjusted EBITDA for the past four consecutive quarters and generated positive operating cash flow in three of the past five quarters.
And with the new $15 million investment from Volition Capital, which follows last year's $10 million investment, Globe will be able to repay the remaining $30 million of its outstanding term debt facility after repaying $42 million in July of this year. It will be possible to repay.
Larry Cheng, managing partner at Volition, said: And we believe the elements are in place for a return to top-line revenue growth in the coming quarters. ”
Chen's firm specializes in investing in disruptive e-commerce and consumer brand companies, with Globe co-founder Stuart Landesberg serving as executive chairman and former top executives at Seventh Generation and Burt's Bees. CEO John Leplogle has joined Globe's board of directors as lead independent director.
growing confidence
Yurshishyn still has work to do to turn around the company's top-line performance. Revenue continues its downward trend, dropping nearly 20% from 2022 to the end of 2024 to $259 million, and dropping 23% year over year to $138 million to $106 million in the first six months of 2024. It became a dollar.
However, Yurushishin sees new growth starting to emerge in Green Customer's core customer base, which currently stands at just shy of 1 million active customers, but whose net revenue contribution per active customer is expected to increase in 2022. It increased 35% from $225 to $293 in the second quarter.
The company has identified approximately 57 million “conscientious consumers,” but the total addressable market is likely much larger. For example, YouGov found that 27% of U.S. adults (approximately 97 million people) are people they call “Planet Protectors” who have a strong commitment to environmental issues and want to spend more money on sustainable products. I discovered that.
“Someone has to be a leader to help customers who care about human and environmental health make the right decisions for their families,” Yurshishin explained. “As a first-time participant, you're going to get a little bloodshed, but our customer segment is large and growing every week.”
Yurshishin expects to show sequential quarterly growth through the fourth quarter of 2024 and raised its profitable full-year adjusted EBITDA outlook by 1%.
it all starts with people
Yurshishyn, who spent nearly 14 years at Amazon, including as CEO of the ShopBop platform, learned from the greatest of all: Jeff Bezos. He adopted Bezo's Day One mentality.
“Day 1 is a culture and operating model that puts customers at the center of everything we do at Amazon,” the company declared. “We strive to deeply understand our customers and work backwards from their pain points to quickly develop innovations that create meaningful solutions.” in their lives. ”
Grove had already discovered pain points in the lives of its target customers, but in order to create more meaningful solutions for customers, Yurcisin first needed to understand Grove's culture. He met personally with everyone on the Grove team to understand their career journeys and learn what they think the company is doing right and wrong for its customers. .
We then looked at customer feedback by reading their comments about the good, the bad, and the ugly. This resulted in two important changes to improve the customer experience.
First, Grove removed so-called “gated access” to the site that required customers to enter their email address before they could browse or shop. Then the subscription was removed as the default option. Rather, it encouraged customers to subscribe through a 5% discount offered on participating items, which covered nearly two-thirds of the products available.
“This change represents a significant shift in our business model, but more importantly, it is the beginning of how we will rebuild the front end of our business,” he said at the time.
Replatforming to improve customer experience
To further its transformation, the company is moving its technology stack to industry-leading models, including Shopify for e-commerce, Ordergroove for subscriptions, and Tapcast for mobile apps.
Moving from homegrown systems to these high-performance partners reduced costs, increased efficiency, and allowed the company to focus on its core retail mission rather than redirecting staff to software development. It will be.
The replatforming will begin in July and is expected to be completed by the first quarter of 2025. The move promises to improve the customer experience and provide Grove with more backend tools and analytics to expand its connections with current and future customers.
Expanding product provision and distribution
While Grove's more than 300 in-house brands make up a large portion of the company's revenue, the company continues to expand its portfolio of like-minded, eco-friendly and sustainable brands, and now has more than 150 partner brands. has reached.
These third-party brands have contributed to the development of beauty, personal care, pet, gardening, kitchen tools, and baby products.
Vitamins, Minerals, and Supplements (VMS) are next on the expanding list because they are a recurring category. Additionally, customers who purchase VMS have more than 20% higher average tickets per order and nearly three times greater lifetime value than customers who do not purchase VMS.
And to take advantage of the so-called “halo effect,” where a digitally native brand's presence in brick-and-mortar retailers can increase awareness and sales, Grove is currently working with Target, Kohl's, Amazon, CVS, Walmart, and regional chains such as HEB, Harris Teeter, Giant Eagle, Meijer, and Hannaford.
Strengthen the defensible outer moat
One thing that hasn't changed under Mr. Yurshishin's leadership is the defensible environmental bunker that Globe has built around its operations.
Specifically, we are a public interest corporation and one of the few Certified B Corporations that have maintained certification for more than 10 years.
Additionally, the company is the world's first plastic-free retailer, with plastic being the Achilles heel of the consumer packaged goods (CPG) industry, with nearly half of all plastic coming from single-use plastic packaging. This means that for every ounce of plastic purchased from any of Grove's brands, the company removes and recycles the same amount of plastic pollution from the ocean.
The statistics are convincing:
According to Statista, the United States produces more than 73 million tons of plastic each year, and 80% of it ends up in landfills. And, according to Greenpeace, only about 5% of all plastics are recycled. Marine plastic pollution has reached crisis levels. At current rates, there will be more plastic than fish in the ocean by 2050, according to the Center for Biological Diversity. Nanoplastics are ubiquitous, contaminating the air, soil, and water and potentially affecting our health. According to the NIH, a liter of bottled water contains, on average, about 240,000 tiny pieces of plastic. And because it's virtually impossible to avoid nanoplastics, they may be linked to Parkinson's disease, heart attacks, and strokes. American consumers perceive ocean plastics and climate change as environmental issues about equally, at 57% and 59%, respectively, but overall plastic pollution is a bigger issue than climate change. (65% are concerned/very concerned) According to a survey of 1,000 Americans conducted by ERM Shelton (58%).
Plastic is an issue that Globe hopes will get more consumers interested in the brand. The company is committed to avoiding plastic wherever possible and offering customers the opportunity to shop 'beyond plastic' through a digital badge system on the platform.
Approximately 63% of Grove-branded products are plastic-free, and more than 240 of our partner products have reduced plastic. Using the 'Beyond Plastic' search feature, shoppers can find products that are 100% plastic-free, 95% or more plastic-free, or contain no single-use plastics.
sophisticated business goals
Grove Collaborative was founded with an incredibly ambitious mission to transform the CPG industry. Yurcisin has made its objectives more specific from a business perspective. His vision is for Grove to become “the trusted brand for conscientious customers by creating and curating products that are wallet-friendly, effective and planet-first.”
It won't happen overnight, but it's a more achievable business goal than when your company started. “Frankly, we believed Grove was not well managed for several years prior to our initial investment,” Volition's Cheng told Retail Dive.
But with his company's $25 million investment in Globe, Chen is now fully on board, “recognizing the underlying quality of the company” and confident that Yurshishin will successfully turn around. I have it.
