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In this episode, Stu Landesberg, CEO of eco-friendly CPG provider of sustainable household, beauty and lifestyle products Grove Collaborative, shares how he has built a successful business that is also a positive force for human and environmental health. He chats about the role of purpose as a lasting competitive advantage, focusing on the needs of core customers, and creating an innovation flywheel that extends beyond tech.
Building a Double Bottom Line Business with Grove Collaborative CEO Stu Landesberg
Thanks for pressing play. Welcome to Conscious VC, where we have real conversations that explore how to build businesses that shape the future while making a giant difference at the same time. Hosted by Navin Chaddha, Managing Director of Mayfield, and me, podcaster and author Christopher Lochhead. On this episode, Navin and I welcome founder and CEO of Grove Collaborative, Stuart Landesberg. They’re on a mission to create eco-friendly home essential products and candidly, they are redesigning mega home product categories, things that we take for granted like soaps and body lotion and hand sanitizers, baby care, pet care, cleaning products, beauty products, and much more. Stuart is a powerful and inspiring example of an entrepreneur that’s creating a company that’s trying to do well by doing good and using core principles of conscious capital along the way. On this episode we have a riveting conversation about the future of home products, how to build a legendary business that makes a difference, and much more, enjoy.
Well, gentlemen, it’s a great to be here with both of you. How you doing?
Chaddha: Good.
Landesberg: So far, awesome.
Now Stuart, you folks are in a very interesting space because it’s a category that’s been around for a long time, but you seem to be doing some very innovative and dare I say different things. Can you tell us about that a little bit?
Landesberg: Sure. So I’m Stu Landesberg, excited to be here. I run a company called Grove Collaborative. Grove’s vision is that consumer products will be a positive force for human and environmental health, and primarily the space that we play in is home and personal care products. So think about laundry detergent, toilet paper, hand sanitizer, dish soap, shampoo, all of that stuff. And you look at this category and this is a category that puts tens of billions of plastic bottles into oceans and landfills every year. And there is no way that 20 years from now, 50 years from now, a solution that is as detrimental to human and environmental health as the products that honestly we all grew up with and are so familiar, that has to change for a lot of reasons, right? Environmental, human health, all that stuff.
And so at Grove we have tried to position ourselves in a way that we can build really consumer first innovation to products like laundry detergent, which have been around for a long time, but what you actually need a huge upgrade to be efficacious, good for human health and sold in a way that doesn’t damage the planet.
Chaddha:
And I think one of the things I love about Stu when we partnered with him right from his first institutional round of financing, is he has a strong set of not only mission and vision, but values. He believes strongly in building business for better than business for usual. This is a great example of a Mayfield investment which is doing good, but at the same time it’s doing well for everyone. And then they are looking at the social impact of technology. And one of the key pillars of conscious capitalism we have been evangelizing is how do companies invest in making the humans and planet better? And Grove is a living example of what they’re trying to do. And at the same time, they went after a trillion dollar opportunity. So this is an example of a company which is going to build business for better rather than business for usual.
And so Stu, you’re really redesigning the entire or a big chunk of the home consumer products, category or categories, really. And you seem like a nice guy. Maybe you don’t want to take a whack at the traditional companies, but I’m curious there are some of the largest companies on planet earth who make these sorts of products. What do you think they’re getting wrong?
Landesberg: I don’t blame the companies that came before us to responding to the incentive structures in front of them, right? There’s a fundamental problem today in society that businesses are compensated not based on the full cost of their product, right? There is a financial incentive for businesses to ignore costs to the environment and costs to human health that are not born by them. And we live in this ecosystem and corporations are set up to be responsive to shareholder demands as sort of the primary stakeholder. And so one of the things that I am a big believer in is what’s called a B Corp. And so Grove is obviously a for-profit business and growing, and we have investors who I think want us to accomplish our mission, but also want us to achieve financial returns as we do that. But Grove is what’s called a B Corp, which allows us to consider community environment and employees stakeholders as well as shareholders.
And so if you look at the world through that lens, we have an opportunity to set up a business where perhaps we don’t maximize our penny profit today, but we can bet on the future that we can build an ecosystem where if we take care of all of our stakeholders, better than any other company in the past, that we’ll be able to win because our employees will produce better innovation. Because our consumers will care about how we treat our communities and the environment. They’ll care about how we treat them. And so I think that a lot of the big companies that have come before us that have prioritized profit over human and environmental health, they’re just looking at the wrong set of incentives and they’re executing in many cases really well, but against an incentive structure that is just one symptom of a society that is obsessed with money over purpose like way, way too often.
Stu, you’re an entrepreneur though, right? You’re a capitalist, right?
Landesberg: Oh yeah. And I’ve got a bunch of Navin’s money tied up, like absolutely.
Well, and I’ll say it, because he’ll be too modest to say it. Navin and Mayfield are not exactly schmucks as it relates to funding companies will become category dominated companies that are worth many billions of dollars. And so how do you convince a venture capitalist who by definition, at least on paper, is there to produce returns, that we’re going to start a company and I would call you a category designer, design a whole new way of doing consumer products. And we’re going to have a set of things that we’re going to hold ourselves accountable to that are not going to be measurable from a returns or a market cap or earnings or a revenue perspective.
Landesberg: So I would say that the best investors understand that businesses are about people. And I believe… So I’m the founder CEO of Grove and I am not the best at any of the things, right. I’ve just been lucky to surround myself with an amazing group of people. And I think the best investors, the best business people understand that short-term results can be driven by a lot of different things, but longterm results are driven by the best quality people. And having a clear mission and clear objective of how you want to shape the world for better and leave the world a little better than you found it is in my mind the single most important factor in attracting the A-plus players, because there’s a lot of companies in Silicon Valley and across the country who can offer a good paycheck and a good lifestyle and an interesting set of work.
But what do you want to tell your grandkids you did? Right. Do you want to tell your grandchildren that you solved one of the most important problems of our day? Or no offense to other companies, do you want to tell your grandkids, hey, I made a bunch of money working on some ad tech product that helped people send more spam emails. There’s a real element of purpose as a core competitive advantage that I think for us has been a huge part of attracting the talent that’s allowed us to succeed. And I think the best investors realize that purpose is a durable competitive advantage.
Chaddha: Yeah. And from an investor perspective, I think Stu and the company are doing a phenomenal job of being a double bottom line company where they want to do great for the environment. One of the key Mayfield values is people first and these guys embody it and live it. But what I would say is there is a big shift that is happening in the market. There’s a huge awareness now around sustainable products, around products which are good for the environment. You’re seeing every day what’s happening with climate change, right? Whether it’s coal, whether it’s fires. So the world is becoming aware. And if you notice what’s happening with the millennials, they are willing to pay for this stuff. And it’s not only in the consumer goods category, we were investors in solar city, right? You look at EVs, Tesla, right? You look at one of our companies, Lyft, which is about ride sharing.
You look at a company that just went public, Poshmark, which is about, and Maneesh was on a panel with you and me. They’re doing good, right? And nobody thought 10 years back when they started that people will be buying clothes from each other’s closet. Right? So to me, this is the future, sustainability, sustainable brands making the world a better place. And one of the things I see as an investor is companies who have a high score on the ESG, the environmental social, and governance, their stocks are doing phenomenally well. And a lot of times what’s going to happen is it’s not just going to be the consumer, the government, and the regulators are going to step in and they’re going to ask, hey, so what is your ESG policy? And even VCs are being asked for that every day, we’re filling questionnaires. What do we do?
So for example, we don’t consume any plastic. We got rid of it, just the simple things. If each one of us doesn’t contribute, we’re not going to be able to make the world a better place and it needs the outsiders. It needs the dreamers and the visionaries like Stu to challenge status quo, to come in with a mindset and say, this is the need, not only today, but over the next decade. And I’m going to come in and from scratch create a company which is going to essentially service the need of what the customers want. But as a result, make the world a better place.
Now, the skeptic looks this and say, ah, this all sounds nice and everything, and wrap yourself in all this goodness and all that. But at the end of the day, business is business. And so if there’s a trade off between the environment or the community or any other sort of, let’s just call it more social dynamic and growth or earnings per share, or return for shareholders that it’s still business. And the reason public companies behave the way that they do, the reason the legacy consumer products companies behave the way that they do is to your point off the top Stuart is the CEO’s compensation is tied to a set of financial metrics. And so how do you deal with sort of, aren’t you just going to trade off all the goodness when there’s an economic outcome that is at stake.
Landesberg: I think that you don’t give the stakeholder community a lot of credit if you don’t believe that they can see longterm. And one of the really nice things about businesses, you don’t have to be in business with everyone. And if there are folks who want us to trade off our mission, our values for short-term profit we’re not going to be in business with them.
And I expect someday, I should say, I hope someday we’ll be an independent public company. And if people don’t like that like that we take a long-term view on issues like sustainability and mission and that we have strong corporate values? Sell the stock, right? People don’t have to be in business with us. And we don’t have to convince all of the stakeholders, but one of the things I think is really important and it’s great that you all do this show and we can talk about this is for companies to be really clear about the way that we make decisions.
Because I think one of the really strong pillars of partnership between capital and sort of operators, the mission oriented operators is for business leaders to be clear about, hey, what are the decision principles that we’re using? And as long as we abide by those decision principles I can’t imagine that any of our stakeholders would be surprised if we said, hold on. We were evaluating an acquisition this week for a brand really great organic formulations, but the product is packaged in plastic. We could roll it out. We could have it on our site in a few months, but waiting longer, getting it in a zero plastic format probably cost us a million dollars in profit, something like that in the short term. But we think we’ll make that brand more differentiated over the long term.
And importantly, what does it say about the authenticity of our mission if we’re launching brands in plastic, when our whole goal is to move the industry beyond plastic. If you believe in a set of values, you believe in it 100% of the time. And I think that value system creates the social contract that creates all the value. So I think that the great investors get that, the ones who don’t, we’ll miss out on the best companies of our generation.
Chaddha: Yeah. And then what I would say is every company doesn’t need to address the need of every consumer or every customer. And there are many, many examples, right? And Stu and the company have been very astute. You’re going after a customer base who cares about sustainability and you price that into the product. Because this is not selling soap by the pound, right? Basically people know when you go to Whole Foods, why do you go to Whole Foods? Because you care, you want organic stuff. When you buy Patagonia versus some other brand of a jacket, there is a reason why you’re doing it. Not only is it warmer, but it’s better for the planet. Same thing if you look at with EVs, right. They’re more expensive, let’s be honest. Right. But look at the market share, it’s small. But look at the market cap, it’s probably the sum total of the top five essentially car company. So I don’t think-
It’s actually a lot more than the total of the top five. It’s a stunner.
Chaddha: Yeah. It keeps going. Right. Who’s keeping count. Right? So I think to me what Grove is doing is you pick your customer who cares about your value. You price the product accordingly, delight them with what you’re doing, but I don’t think everybody’s going to be our customer if somebody wants to consume plastic, I don’t think Stu you plan to solve them.
So you are creating your own focus because startups need to become the king or queen of some help. They need to build trenches in their areas of focus rather than going six inches deep. And I think sustainability, I think making the world a better place, those companies are going to command a premium because the millennials and people who are conscious about giving back or about making the world a better place will place a premium on those products.
And history is teaching us that. And interestingly I’m a super consumer of market data, demographic data, as you might expect, given I’m a marketer. So one of the things I’ve seen in a lot of the market research is there’s been an acceleration. This was true before C-19 hit us, but there appears to be an acceleration of this since C-19 of dare I say, a higher level of consciousness. Particularly Navin to your point earlier of younger consumers, although the age demographic is edging up around thinking about what am I consuming and how am I consuming it and why am I consuming this? And so Stuart, I’m curious maybe tell us a little bit about your target consumer, your target customer.
Landesberg: I appreciate you asking this question and good investors will let you disagree with them. So this is perhaps a little bit different than what Navin just said. But so when I started the company, I knew for sure that we were going to serve high education, urban consumers who had progressive values, good incomes, and not a lot of time. And then when I got the data, it turns out that the thing that I knew for sure was completely wrong. Our core consumer, our three best zip codes to give you a sense, Lehigh Utah, Plano Texas, and Lawrence Kansas, right? Number four, I think is a Franklin Tennessee, right? None of those places are in the Bay Area or New York or LA or Chicago or Boston or DC. Our core consumer makes $70,000 to $75,000 a year.
Where did you shop for this category before growth? In order, Walmart, Target, Sam’s Club, Kroger. Whole Foods is number seven on the list. Our consumer is a young family that understands that what it means to be a good parent, a good – my team doesn’t like it when I use the word homemaker, but I still like that term. So I’m going to use it, good like you’ve to create a thoughtful space. It doesn’t mean what it used to mean. We used to believe the marketing BS that to create a good space you’re like killed all the germs ultra dead. And we understand now that that’s actually not what it means. And to be a good parent doesn’t mean you wash your kids baby bottle with the most industrial strength bleach. No, you want to use products that are safe for them.
We are starting to understand what that means. And we’re starting to understand that to be a good citizen, gosh, we really do all have to be accountable for the waste that we create every day. And so what it means to be the best version of ourselves at home is changing. And it’s not just changing in California, right. It’s changing for all of us. And I think one of the things that is really gives me a lot of optimism when I look out at Grove and I’ll be transparent, believe in climate change, started the company because I am freaked out about environmental devastation and wants to change the world. But we do as well in red States, as we do in blue, there is no political party that is pro plastic waste. There’s no one who’s against reforestation, right? These are fundamental things that actually we all really agree on.
And I think the thing that Navin like you nailed this is the consumer is finally ready. This is a really interesting anecdote for the first time. So Grove has, we sell a variety of brands. The majority of our sales come from the brands that we own, but we do sell third-party brands as well, that are often better known than Grove. We’ve been around for years and for the first time in January of this year, our sustainability oriented advertising outperformed our traditional retail advertising, for the first time ever.
Wow.
Landesberg: Totally right. And I view that as just like almost a watershed moment in the return on innovation in the category is actually higher than sort of the return on doing the status quo, which is a really, I think it shows where the consumer’s going. And I think the reason it’s going to work is it’s not because I can convince all the high-income folks in the cities. There are good people everywhere who want to do right by… Who wants to not contribute to the environmental devastation. Right. They may or may not believe in climate change, but they see their garbage. Right. And this is a problem we all can play a real role in solving.
Chaddha: And I think my feeling is, right. What Stu just said, the demographic is even bigger than the examples I was giving, but at the end for the customer base for home sustainability and doing well matters, this is a painkiller they’re offering, it’s not a vitamin, but for some customers, it might be a vitamin. That’s not their core focus and companies which do well they focus on their core customers and delight them and sell them more. And some of the metrics Grove has on basically serving their customers and how the reputation of the order happens is mind boggling. And that proves this is not just a one time try thing, right? This is a repeatable thing that people once they get hooked to it, they get it every month, they get it the next month and it just becomes part of their life. And that’s what companies, right? When you start seeing those metrics as an investor you know this is not a one-off thing.
Because I assume a subscription business model that’s growing. Right?
Chaddha: Correct. And your net dollar retention is just growing. So a customer who spent a dollar with you is going to spend more because they just try one product and they want to try more the next month, they want to try more. And that’s how CPG companies are built.
Landesberg: Yeah. I think important to say, it’s not because it’s a subscription model. The customer is not stupid, right? They’re not getting tricked into buying the same thing every month. People stay with us for… We’ve had customers who are eight, nine years into their Grove memberships now. They stay with us because they love the product that they get from growth. They know it’s the safest and the best for the environment of anything they can get anywhere. And we have great customer service and always take care of it. I think that combination is powerful. So it’s not the subscription element of growth is there to serve the consumer because they’re buying this all the time and it makes it more convenient. But the thing that makes people keep coming back to exactly what Navin been said, right? It’s they have to love something about growth. And it’s our job to earn that love day in day out and never take it for granted.
Chaddha: You should give some examples, right? Last year was a difficulty year for everybody. And I strongly believe that company building is a marathon. It’s not a sprint and crisis is an opportunity for the bold. Were there some key things like you did which weren’t obvious, which put you ahead? And moments of crisis, everybody needs to create the true north. So what did you do all the last 12 months that you feel is going to serve you well, not only in the last year, but for the next five years?
Landesberg: It’s a great question. And it’s actually a great example of values because when things change rapidly, what we found is that you don’t always have data, but what you have is your company values that tell you how to make decisions.
And a really great example of this was how aggressively do we invest in worker protections in our fulfillment centers, where we have thousands of people coming in every single day. And we invested aggressively. I mean, everything from we had nurses on site, testing machines onsite, obviously PPE, but UV lights to sterilize the stations, everything. And we invested in that way before, before business is shut down in San Francisco, right? We were the way ahead of the curve. And we did that because we have a people first mentality and wanted to make sure that our associates in our fulfillment centers understood that we were going to do everything possible to make this the safest environment that we could possibly make it.
And that we extended paid leave policies. We did everything possible to create the best environment for them. And we were ahead of the curve. And that meant that we had an unbelievably low incident of, I should say, have had the means obviously still ongoing have had an unbelievably strong safety record, knock on wood to date. But the biggest issue that a lot of companies through the course of the year was how do you make sure you maintain a consistent high quality sort of labor force in the e-commerce market that’s really heating up. And so we made a big investment in our people. You could see it in our P&L and it does cost millions of dollars and we’re not a big company, right. But what we got for that was stability and labor force at a time when people were turning over all the time across the industry and build a reputation with our employees and others in the areas that, hey, this is a company that there’s a lot of companies that didn’t take care of their workers, but this is a company that genuinely cared, right.
And dotted every I, crossed every T, always went the extra mile. And the return on that was a really high functioning operation in a year where, oh my gosh, was it challenging to operate a physical sort of people moving product operation. And so it’s a good example of you lead with values and I wasn’t expecting that return. I was just sort of like if we’re a people first company, this is an obvious answer. Anyway, that’s not a consumer facing example, but it is one where a lot of people got their packages much more quickly, right. Even when Amazon was shipping in two weeks or 10 days, we were still getting packages out in 24 hours because our team was still in place and as safe as they could be and I think felt supported.
Chaddha: Which is critical, right? At the end of the day, you’ll have to build companies with respect and people build companies, it’s not the other way around. People build products, products don’t build people. And you guys are a living example of what not only are you guys doing for your customers, but for your partners, for your employees. And it’s a playbook, I think is worth the book. And many people need to learn from this process.
It’s an incredible story for sure. Now, I’m also curious core to your business is of course really innovation in products, right? There is a tremendous difference between what Grove is doing and what the traditional consumer company is doing from a product perspective. So maybe could you sort of tease out how you’ve been able to create products that sort of tie to your values?
Landesberg: Yeah. So creating products that tie to our values, let me back up one level, right? Why is innovation relevant in this space? It goes back to the first thing we said, which is fundamentally the industry that we are in needs to change. Just like the car industry needs to change from the polluting combustion engine to the EV version or God-willing EV where the power comes from solar and not coal-fired plants, right? That mousetrap has to change, the mousetrap in laundry detergent has to change too. And so there’s a need for innovation in the industry. It’s not innovation for innovation’s sake. And then you get to the question, what is the thing that we can do that will give us the best chance of understanding how to create new versions of product that consumers love. And this is where the intersection between technology and consumer insight is so robust and wonderful.
A traditional consumer products company will go to market in a traditional brick and mortar retailer. And you put a product on shelf. Let’s say you get 10, you have the opportunity to sell 10 products into supermarket A. And so you sell 10 products into supermarket A, you may have to pay $100,000 a product just to get them there. And if you want to try your new product, we’ve got to give up 10% of your space for this untested format. And then you don’t get the data on whether or not that format works for six months. And even if you have a newer updated version, well, gosh, supermarket’s not changing out what they have maybe twice a year at the most, usually just once a year. And so the innovation cycle in our category historically is not months, it’s truly years. Whereas at Grove, we want to create an innovation.
I’ll give a great example. We launched a brand called Peach not Plastic, which basically takes your whole shower routine and turns it from plastic bottles to zero waste bars. Shampoo, conditioner, face wash, body wash. And this product is like it is the highest quality product on the market. It’s incredible, the product again is called Peach. If you don’t use it I cannot recommend it highly enough, awesome. And just for the price point, the quality as well. But we weren’t sure if it was going to work, but we can just launch it and see how it does. Right? The cost of failure is so low because we have our own baked in data generation engine. So we launched it to our consumers, our consumers buy it, or they don’t buy it. They give us reviews on why they like it, why they don’t like it.
And the really sort of interesting pieces of the second level, let’s say that the conditioner isn’t selling, is it all conditioners are not selling? Is it that the zero waste format is something that consumers not ready for or is another zero waste conditioner selling? Is it the price point? We have the data to repeatably push out really groundbreaking innovation and then understand quickly is this working and if it’s not working, why is it not working? A great example of this is we launched a tree free paper brand called Seedling in 2018 and adoption was okay. But there were a number of reviews on the product over time that made it clear to us that there were three or four big points of pain for the consumer with the product. And so over time we removed the plastic. So it’s a zero waste product. We changed the dimpling on the paper because it gave the impression of being rough instead of smooth. We changed from two ply to three ply. We changed the stitching on the bamboo. We use bamboo instead of recycled because don’t have time for it. But the overall footprint of bamboo is actually much better than recycled paper, which is like could do a whole podcast on this by itself. But for now just take my word for it. Anyway, we’re now on our fourth iteration of the product. And we took a product that sold really well, but got three out of five stars. And in two and a half years, we’re on our fourth iteration. And the fourth iteration has five stars, right? And to be able to iterate toilet paper four times in two and a half years may seem like kind of stupid, but nobody can iterate that fast. And the speed of iteration is the thing that creates the winners, right? Period of rapid change. Sorry, God, I get excited.
Chaddha: No, no, no. I think you’re right on, we are seeing as investors companies which have the massive market caps are no longer about just tech and product innovation. They are innovating across the value chain, the way they build the product, but especially the way they distribute.
And what you just mentioned, Tesla is another example in consumer, right? Similarly in enterprise software, the companies which are open source, which don’t depend upon legacy distribution, end up amassing massive market cap. So what you guys are doing it’s not accidental, right? What you guys have heard upon, what innovation truly means? That’s the future, just deck and putting it in retail shelves is not the answer. You need faster cycles. You need to use data science and you need to control your distribution. And you have in software, agile product development. I think that’s what you guys are doing in the CPG industry which can be done in software. This is a living example of a company which is doing it in physical products.
Landesberg: Yeah, that’s exactly right. I mean, it’s the same thing that lean engineering teams figured out, right? Launch and iterate. And that culture of continuous deployment and launch iterate is a competitive advantage. And amazingly I happened to accidentally stumble into a category where we’re the only game in town that has scale and has the ability to launch and iterate.
And so there is two components here that are very interesting, we see a lot of as study emerging category designers in the consumer space. We see two things that you share, which is A, there’s a huge direct component and B companies where the data flywheel have a massive, massive competitive advantage. Does that feel right to you for your business?
Landesberg: 100%. I think the ability to control your own distribution allows you to control the message, right? And ultimately all of us are reliant on the simple concept of what do people think about the product, right? And building a company direct means that you can tell the full story. Whereas if you build a company in someone else’s distribution you ultimately become an item on a shelf. And I think that a data flywheel is just a nice way of saying you’re able to learn and react really quickly. And any good business person understands that. The whole key to business is not complicated. Right? You ask the most important question, you get the data and then you do the thing the data says. And as long as you do that against a market that is meaningful and in line with your values, it’s a good company until I view data advantage and data flywheel is just another way of saying, how do you create a machine that learns quickly? And that can repeatably learn quickly in a repeatable and predictable fashion.
And I would be remiss if I didn’t ask you, I would call you a category designer. You are redesigning mega consumer categories. And so how do you think about it at the category level?
Landesberg: So I just want to be clear. Stu is not a category designer. The great people at Grove deserve 100% of credit for any innovation that comes out. And I would say the way our team approaches it is sort of a fundamental we try to drive three things, higher quality, which is often defined by higher efficacy. But also if there’s a product let’s say it’s a bathroom cleaner and used to use a bleach based one. And by the time you were done, you had a headache and you’re like light headed, need to lay down, right? What’s happening there isn’t just a headache. You also just ingested a bunch of stuff that’s bad for you. Right? The headache is just telling you you ingested stuff bad for you. So better quality. We often try to find better price point, which we can do either by concentrating solutions.
So for example, an all purpose cleaner for Groves is under three bucks. Whereas many of our competitors are at 3.99 and that’s because you’re only buying the concentrated solution from Grove, right? You add your own water. And so it’s a lower cost, higher quality, later environmental footprint. And we are in a zero plastic format that’s 5% of the size and is zero waste versus something that’s got a ton of plastic in it. So we see the magic in places where we can find higher quality, lower price point, later environmental footprint. And we think that because big corporations have prioritized profit over human environmental health for so long, we can win on quality. We can actually win in all three of these dimensions in a way that is exists for those who’ve read Clay Christensen’s work because of the innovator’s dilemma, right?
For the industry incumbents, it’s much more profitable to not innovate, right? It’s much more profitable to operate almost as though there’s an oligopoly, right. And suck the profits out of the existing business because the margin structure of selling water and a giant plastic bottle. I mean, that’s like, I’ll tell you a secret, you buy a $20 bottle of orange laundry detergent, that’s 90% or 70% water, 80% water, that plastic bottle of what costed a dime. I mean, paying 20 bucks for a giant bottle of water. The margins on that thing are insane. And that’s a great business, but thankfully we’re not tied to it. And so we can innovate in a way that I think is both consumer and environment first.
Chaddha: And I think this is an example of what I was mentioning earlier, how this company is innovating across the value chain. This is not only about doing good for the environment, but by innovation on all the fronts, it is a higher quality product, cheaper than the incumbents and better for the planet. So if you can win on all those three metrics, you’ll want to get rewarded by financial investors.
Well, and this leads me actually to my next question, Navin, which is, it’s almost like we rehearsed this. If I’m a traditional consumer CPG company, I’m in a world of pain now because of you, this isn’t just, oh, you have a better product. You came out with a more softening fabric softener. Most companies compete on a domain of comparison and a domain of better, in a domain of incremental. You’re doing something that is what I would describe as exponentially different. And re-imagined the products and therefore the category. And if I’m a pick your big consumer CPG company, I need to re-engineer a huge chunk of my business to even try to compete. And if I do that I’m chasing you, you’re setting the agenda, you’re doing what category designers do, which is setting a whole new agenda around a different set of criteria than the criteria that was historically used to evaluate what’s a good product and what’s a bad product in these categories you play.
Landesberg: Yeah. I think you’re giving us a little more credit than we deserve in terms of how big of an impact we’ve had on the industry. I think that we are day one and I think that it is human nature for people with multi-billion dollar P&Ls to look at disruptors like us as though we are niche and we are fringe. And they may listen to this podcast and be like, that guy he’s going to sell the crunchy moms in Oregon, but they’ll never come for my Kansas Walmart shoppers. And that’s fine. Right. I think that people can and will underestimate the importance of these trends until it’s too late. The frog in boiling water is an analogy that’s often used with good reason, but fundamentally, right. If you think about the economic incentive for a lot of these folks, it’s very natural to say, I can make a bigger change in my business next year, by making the using oral care as an example, the opening in the toothpaste tube is 10% bigger.
So my customers who buy whatever toothpaste brand buy like 5%, use 5% more toothpaste. And therefore my sales go up by 5%, right. By the way, that’s like why toothpaste tubes have a big hole and sit on the top, right? Because you want as much toothpaste squeezing out as possible because more usage is drives… Everybody uses toothpaste. How do you grow the category? Right. That type of innovation is always going to be more profitable on a one-year basis than saying, we’re going to scrap the whole idea of toothpaste. We’re going to move to zero waste toothpaste tabs. That’s going to be a money loser for maybe decades, versus selling more of the traditional highways toothpaste. So I do think there’s an economic model that creates opportunity for companies like us to make a big change and get pretty far before people actually react.
It’s amazing how intoxicating a multi-billion dollar revenue line is. And the thing I love about companies like Grove is you’re a small niche player that doesn’t matter until you’re not. And by the time you’re not, it’s too late for the incumbents. You’ve redesigned the category. You’ve got this whole new distribution model. So your business model is super compelling. You’ve redesigned the packaging. And most importantly, you’re helping to educate the consumer on a whole new set of criteria for why I should choose one fabric softener or one soap or one toothpaste versus another. You’re changing the definition of what toothpaste is.
Landesberg: Yeah. It’s not us, right. Society is changing the definition of what good is, right? The presidential administration, it’s not like I’m not a political guy, but they’re starting to talk about climate change. Right. They’re starting to talk about plastic waste. This is a societal movement. We are aligned with the trends in society and deliberately so. I started the company 10 years ago because I was freaking out about climate change before it was cool. But it’s important to note that one company alone would struggle to change the tide. But I think what you’re seeing in the rise of companies I mean, gosh, to put Grove in the same sentence as Tesla and Patagonia. So why we like the Mayfield people, right? They say nice things about you.
Chaddha: But no, it’s true, right? When those companies started, nobody believed in them too. And this is right. You fast forward another four to five years, it’ll be too late because I have seen again and again in my 20 year career, it’s the outsider, the dreamers, the visionaries, and the disruptors who come and reimagine and redesign industries and the incumbents thing, oh, it’s a niche. And you want them to keep thinking that till you get to a point where it’s too late for them.
Landesberg: Totally agree.
That’s right. Stu, I know we don’t have you for a ton of time because you’re busy changing the world and saving the environment. If I was an entrepreneur starting a business today, and I wanted to create a conscious capital company, a company with a double bottom line, a company that cared about its footprint in the world, community, all the things that we’ve been talking about, all of these things that are beyond the traditional financial metrics. And I wanted to be a very successful business and grow and deliver those financial metrics. I didn’t want to have that trade-off, what advice would you give me?
Landesberg: It’s a great question. And I will say first thing I would say is do it. I think the biggest problem that we have as a society today is too much of our best talent is chasing financial returns, not going out and trying to change the world for the better.
There are too many brilliant people that should be out there, curing cancer, solving climate change, who are, I won’t pick on any job in particular, but Lord to use their amazing talents, to do things that are only lucrative and don’t make the world better. And so any mission-driven entrepreneur is good in my book. The world needs you, business is the fundamental organizing principle outside of the nuclear family. We have to use it for good, period. So that’s the first thing I would say. The second thing I would say is in my experience, I mean, Navin said this businesses sometimes is good, sometimes really sucks.
And in the times it’s good, it sort of doesn’t matter if you’re believer or not. Right? Because the business part is fun. In the times it’s really bad belief in the mission and belief in the worthiness of the endeavor is the thing, at least for me, that always helped me get through. It helped me get all of my team members fired up even in the dark days because we just believed that we could create the future in this category and that we had to, because somebody has to solve this problem.
And so I would pick a problem that you feel like, oh my gosh, somebody has to solve this freaking problem. And ultimately most problems are actually not that hard to solve. They just require a smart human to spend a bunch of time on it for a while. So I would start with a problem that you have that how is it possible no one has solved this problem and then go solve it.
Chaddha: It’s amazing. That’s what we love about you Stu, basically not only are you mission oriented, a people first person, but you’re a conscious leader who wants to make the world a better place. And we need many more of you.
Landesberg: And it’s as you say, there are far better people than I who are going to come after me. And after this generation who are going to make me look amateurish, I am certain of that.
Chaddha: Good. No, this has been awesome.
All of us have to stand on the shoulders of greats and you are a quintessential missionary entrepreneur. Gentlemen, anything else before we wrap?
Chaddha: Well, this has been good. I want to thank both of you for an excellent conversation. And a lot of learning every time I do this with you, Chris. And it’s a pleasure having you Stu.
Landesberg: It’s great to be here. I love the program. And honestly, I love that you’re doing this because I mean, I just said it. I think that conscious businesses can solve so many of the world’s problems. And it’s also just a lot of fun to come to work every day and get to do stuff like this with people like you. Gosh, what a privilege.
