#146. Every week on the podcast we’ll challenge a recently-announced business strategy to understand the upside and downside of the brand’s approach. We discuss KIND Snacks’ expansion into four new product categories and if the brand can be more than just a snack bar company.

Check out the full transcript below.

Richie: [00:00:01] Welcome to the Loose Threads podcast, where we challenge a recently announced business strategy to understand the upside and downside of a brand’s approach.

Richie: [00:00:09] I’m Richie Siegel, the founder of Loose Threads, which analyzes and advises next-generation consumer companies, and FaceLift by Loose Threads, a retail incubator and accelerator for leading brands and retailers. For our latest analysis and insights, check out our free weekly newsletter at LooseThreads.com.

Richie: [00:00:24] Joining me for our discussion this week is Rebekah Kondrat, a partner at FaceLift by Loose Threads and Caroline Tibbetts, who leads our research at Loose Threads. This week, we analyzed KIND Snacks’ big product expansion into chocolate bark, vanilla clusters, frozen desserts and refrigerator bars. The move is a massive increase in the company’s product offering as it aims to be more than just a snack bar company. But will the new product offerings bring in new customers, expand the loyalty of existing customers or simply confuse shoppers with too many options? Here’s what we thought.

Richie: [00:00:58] High level, I think, yes, this is a good idea. I think the risk becomes that they already do so much. So, for example, at like, JFK, they have these breakfast clusters, they have their normal bars, they have their kind-of-healthy bars. They have so much to offer this point that it’s like, very hard to keep track of, and it starts to become blurry of what each bar or product does that the others don’t. So maybe that’s like, specific to the bar category itself, but like, they’re all in different shapes and I have no clue what they do, and they all like, kind of tastes good or the same, but they also aren’t that filling, at least for me. But they’re like, good to snack on. So I think it makes sense, but I think they’re starting to verge into like, brand confusion.

Rebekah: [00:01:35] But I guess, then, what’s the alternative? Because they’re in Whole Foods, they’re in Starbucks, they’re in mom-and-pop shops, they’re in airports. They’re kind of everywhere already. So what is the alternative than expanding into these various categories? Which, if they’re looking around, and I’m sure they are, are already really popular.

Richie: [00:01:52] I guess I’m just reacting to the naming. And like, the differentiation between the different bars. I think it’s a great idea and, arguably, actually, the four new categories they’re moving into are the easiest for them to differentiate in, because they’re not actual bars. So like, “We make granola clusters.” Okay, that makes so much sense. Bear Naked Granola, other companies out there have been in there. You trust KIND because they taste good and they seem healthy. “Therefore, we’re gonna go make granola.” Okay. That makes sense. Frozen desserts still makes sense. It’s a bar, but it’s frozen, so then it’s like dessert, basically. That makes sense and translates. The bark, I guess, again, makes sense. It’s something baked and crunchy and sweet. The refrigerated bar, which I guess I personally know the least about. But again, it’s a differentiated product offering within what they do. I guess I go back to their existing offering of all the like, non-refrigerated frozen normal bars now seems really confusing.

Caroline: [00:02:41] I feel like this leads to cannibalization, inevitably, in the sense of the bark and the clusters, because those are super-similar to me than the bars. And that’s the bonus of having a bar, that it’s like a grab-and-go.

Richie: [00:02:55] Like a thing to snack on.

Caroline: [00:02:56] And they’re not chocolate aficionados. Yeah, all of their bars already have chocolate, but bark is owned by the chocolate brands, right? For the most part.

Rebekah: [00:03:06] Yeah, but I feel like if you have a customer that’s like, not a granola bar customer, but they’re a trail mix customer, that’s where the clusters come in. And if you’re like, “I just need my dessert-y chocolate, pick-me-up at four o’clock every day,” that’s where the bark comes in. Because there are some people who just, they don’t like granola bars. They’re like, not that into it.

Richie: [00:03:26] It’s interesting, I guess, now through the lens of like, what does KIND stand for, or kind of, who are they? Because you’re going from being what was pitched as a relatively healthy thing—although I think there’s some debate about whether that’s actually true—as something to snack on, something a little bit like sweet and savory, etc., etc., to, “We’re now making desserts. We’re now making, chocolate has sugar, you can’t get away from that,” etc., etc. There’s also, I guess, risks to the brand perception of who do they stand for and who are they for. And I understand from a market perspective of, yes, we want to get into a bigger market. It probably will have some cannibalization to their existing business, but it seems risky to get into sugary stuff.

Caroline: [00:04:05] Because, aside from this social mission that we can get to, they also were among the first to be highly nutritious breakfast bars, and then going into these other categories… I mean, Kashi is doing something similar, and I think maybe they’re trying to eat into that business. But, again, they started as a bar with a highly nutritional marketing scheme, which we find out that it’s not actually true.

Richie: [00:04:31] It also, though, reflects how much competition there is now in the bar space. I think it is fair to say they were the earliest, if not one of the earliest players in this quote-unquote “all natural” kind of snack bar situation. There are startups doing it, there are big companies doing it. Everyone’s kind of trying to get to the space, and so I think they’re probably feeling competition on many fronts, needing to differentiate, break out into new categories.

Richie: [00:04:50] I wonder if we’re over analyzing the fact of like, people eat healthy things, people eat sugary things, like, that’s just how humans consume stuff. And so to have a brand that crosses over is probably fine, but I wonder how far they go with it. I wonder if like, the perception now in the freezer aisle is like, “Oh, that’s that snack bar company.” Like, “I should try this.” Or it’s like, “Oh, I thought they made healthy things. Like, why are they in the freezer aisle?” Or like, “Why are you in the dessert aisle?”

Rebekah: [00:05:17] Or, “This is a healthy dessert? Now I’m gonna eat it.”

Caroline: [00:05:21] But I would just feel from a business perspective for them, yes, expansion into new categories makes sense. Everyone does it across the entire consumer economy. There are currently 5% of all bar purchases. So why not enhance that and focus on that and make your bars stand out, more so than focusing on like, new categories that you’re not an expert in, perhaps?

Richie: [00:05:45] Do you think they feel that it’s probably really hard, if not impossible, to do that today, given all the competition that’s there? Or to put it differently, wouldn’t they have done that already if they could have?

Caroline: [00:05:54] Well, that’s why I’m standing behind this refrigerated bar situation, because I think that’s the best next bet.

Richie: [00:06:00] What’s the premise of those bars, for those who don’t know?

Caroline: [00:06:03] So Perfect Bar, I eat those every morning, I’ve been doing that for about 6 months. They are all natural ingredients. A family company—literally on the back of the wrapper is a picture of like ten family members who made it in their kitchen. I’m pretty sure they were on Shark Tank, to be honest. They have like six flavors, they’re $2.50, $3.00 apiece, and they’re just larger than KIND bars and they just feel healthier. Larger, like, in density. And I guess it feels a little different that they’re in the refrigerator, and that I’ve been eating like Think Thin bars or KIND bars. I’m a huge bar person, largely due to the convenience. So I’ve just seen more brands surface over the past six months as Perfect Bars. Like, at the grocery store they’re often sold out, so that’s how I’ve known that other people have joined this trend. And I found them at Starbucks originally, and then they started being at Trader Joe’s, like, for a dollar cheaper, so I was obviously in heaven over that. It changed my breakfast routine. So I think there’s opportunity there.

Richie: [00:07:00] What’s interesting is like, convenient for you, logistically a mess for the company to be in the refrigerated aisle. Right? Because it’s a lot easier and cheaper to be just on a shelf with no refrigeration or freezing required. One of the only lessons I ever learned from Shark Tank was like, how hard it is to be and succeed in frozen or refrigerated aisles, because it’s such limited shelf space, because it’s obviously frozen or there’s a motor, whatever. So it’s arguably actually harder to succeed in that category than it is to just be on a shelf somewhere.

Caroline: [00:07:29] Yes, it’s cheaper to just be on a shelf. However, in the refrigerator, you have less competition right now, so you have less people next to you. You really just have like, two brands at this point in time. Although I don’t know Whole Foods’ situation.

Rebekah: [00:07:42] Yeah. I think also being in the refrigerator means that it’s perishable, which means that it’s fresher. Now, whether that’s true or not, I’m not sure. As a consumer, that is the message that it’s sending to me that like, “Oh, this is fresh. Like milk. I can’t leave it on the counter. I can’t put it in the pantry. It would spoil. So this bar is somehow fresher, which means it’s healthier.” Which, again, not necessarily true, but that’s like, what my brain thinks. The other thing I think that is interesting about KIND is they are still privately held. I’m not sure what they’re looking at here, but this expansion could be kind of a play at some sort of exit.

Richie: [00:08:24] Right. Of saying they’re not just a snack company, or they’re not just a snack bar company anymore. “But look, we’re a modern food/lifestyle company”, etc, etc.

Rebekah: [00:08:32] Right. If a food company could ever be a lifestyle company, I suppose this is the way to do it.

Caroline: [00:08:36] Just based on the founder’s story, I think that the goal is to reach more than a billion dollars in sales. They are currently at $800 million and I just think he wants to continue to grow.

Richie: [00:08:46] I’m just curious what either of you think. Do you think it’s going to hurt their brand and/or do you think it will work? Like, is the risk worth the reward of going into more sugary stuff? Or has it always been sugary, and it just looks more sugary on the surface, but really it’s not that different?

Rebekah: [00:08:59] I personally think it’s always been sugary. I mean, sure, there’s like, blueberries and almonds and stuff in it, but then it’s like, coated in this, like almost Caro-like syrup.

Richie: [00:09:10] They use honey to preserve it, too. Which is, again, more sugar.

Rebekah: [00:09:12] Yeah. And even though it’s natural, it’s calories, it’s sugar. So I think they’ve always been sugary, and I think they’re just giving the people what they want, to be totally honest. Like, people will eat it. And maybe even more so because it says KIND, they’ll think it’s a little bit healthier and that’ll influence the purchasing. But I think they have to do this. I think they need to diversify their offering in order to continue to grow. If, in fact, the goal is to reach a billion dollars in sales and to increase their valuation and all of that.

Richie: [00:09:39] That they can’t do that just staying in the lane as they have now. And I think even, looking at that lane, you see there are like, I don’t know, a half dozen if not more mutations of just the snack bar already.

Caroline: [00:09:50] So that’s my feedback, actually. Based on that, I think it’s normal and natural that they would expand into new categories, but I would suggest that they scale back their current bar offering. There’s over 20 options on their website. They have minis, they have for kids, they have fruit options.

Richie: [00:10:05] It’s up to that many?

Caroline: [00:10:07] Yeah.

Richie: [00:10:07] ‘Cause I don’t even know what those do.

Caroline: [00:10:09] And 22 flavors of bars. It just seems like, okay, it’s fine. Expand into other categories. I think they’re just trying to own breakfast in general. And I think they have a good shot. But just scale back on the bars.

Rebekah: [00:10:21] Own convenient breakfast, I think.

Richie: [00:10:25] Or convenient eating? ‘Cause I never eat them for breakfast, I only eat them in the afternoon. But it sounds like you eat your bars for breakfast.

Rebekah: [00:10:30] I don’t eat bars for breakfast. I do eat them in the afternoon, though, so.

Richie: [00:10:33] The last thing I would just say that’s kind of interesting is like, from a market-sizing perspective, they’re going into four of these at once, which is clearly a very aggressive push. And I’m not saying they think this, but it’s interesting that the opportunity as they see it of launching these altogether is that frozen dessert bars, bark, refrigerated bars, and then the granola clusters are somehow like related a market size that they warrant launching together. Do all those things have a similar market? Because I would say the bark opportunity seems really small. Granola clusters feels pretty niche. It sounds like refrigerated bars are growing, but maybe smaller, and then frozen dessert is frozen dessert. I’m sure that’s a huge market ’cause it’s a huge part of the freezer aisle.

Richie: [00:11:16] It’s just interesting to see that mix of offerings. And that they want to launch them all together, ’cause the other risk is they all cancel each other out, and no one pays attention to the four different things versus every three months launching one of the new categories, or every six months, or… The concerted push is interesting, which I think also goes back to your [point]—are they looking at an IPO or are they trying to really diversify quickly? That seems unique, given each of them is like a big kind of move or a medium-sized move in and of itself.

Rebekah: [00:11:43] It is different customers, though. I don’t know that the same customer is buying all four of those items.

Caroline: [00:11:48] Well, they’re different aisles of the supermarket, right?

Richie: [00:11:51] But even so, if they’re different customers, that requires different marketing strategies. If they’re different aisles, that doubly requires different marketing strategies. So I guess the question is operationally, like, I’m intrigued [in] what gives them the confidence to go, “We’re gonna push four new categories at the same time to potentially different customers and it’s all gonna work.” Versus, I would not be surprised if two of these work and two of them fail, because they just can’t do all these things at once on top of the other 20 things that they’re already doing.

Rebekah: [00:12:15] Or, is that okay, that two of them work and two of them fail, because it’s essentially the same ingredients, give or take a few small things? But like, the core ingredients, I bet, are the same across all of these things. And so to kill two of them, you’re not at that much of a loss.

Richie: [00:12:32] I guess it just gets to a larger question from a product development perspective of like, “Are we gonna release a lot of things and experiment, and do small runs and then maybe kill some things that don’t work? Or are we the Apple of the world that goes, ‘We only release what is absolutely gonna work, hopefully.'”

Caroline: [00:12:48] Well, I think one component, too, would maybe be the distribution aspect. Maybe they’re doing Whole Foods or luxury grocery stores for the frozen bars and maybe the clusters in bodegas. Who knows? So that’s something to look out for, too.

Richie: [00:13:03] And I guess the other part is, like a lot of third party distribution, they want newness from these brands. And so I’m sure that is a huge driving force behind this, of, it’s working well enough that these stores want more, ’cause that’s where the vast majority of KIND products are sold. So it has to be working in retail for this to be happening in the first place. Which I guess is a really good sign. The question then is, can KIND support all of this expansion? Are there retail partners going to help support all that expansion? And maybe the answer is yes. Maybe the more KIND is pricing the grocery store, the more stuff sells. Maybe it is like a “rising tides lift all boats” kind of scenario. Although, again, there’s gonna probably some cannibalization at some point, because I don’t need all those things in my house. I don’t think there many like, “KIND-lifers” out there.

Richie: [00:13:49] Thanks for listening to Espresso, a Loose Threads Podcast. You can read full transcripts of the podcast and join the newsletter at LooseThreads.com. Feel free to leave a review on iTunes, we always appreciate it, and thanks to George Drake Jr. Junior for editing this episode. We’ll be back with more.