Kind LLC, the US snacks maker, is seen as one of the more successful challenger brands in the US, having out-maneouvred some larger rivals to grab a chunk of the market since its formation in 2004. But how does founder and CEO Daniel Lubetzky believe the company can continue to grow? He discusses his plans with Dean Best.
Kind’s first decade has seen the privately-owned US snacks maker become held up as an example of a fledging brand that has successfully ridden the wave of changing consumer trends in the country and carved out a foothold in a market previously dominated by bigger, well-established competitors.
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The New York-based business is among a group of smaller companies that has tapped into increased interest among US consumers about what goes into the food they eat and has benefited from the rise in the digital sphere, which has driven shopper demand for transparency from businesses, making it easier to market products without having to spend a hefty amount on advertising. Throw into that mix the boost of the coming-of-age of the so-called millennial cohort, who tend to be less loyal to brands than previous generations. Many brands and companies that focus on products with a simpler ingredients list have gained ground, as others – often, the larger, legacy players in the market, have seen their more processed portfolios suffer.
“Kind snack bars have risen to an 8% market share from practically nothing in 2011,” analysts at US investment bank Sanford Bernstein wrote in a report published in May entitled Has US Food lost that growing feeling? – Why volumes could worsen. “Meanwhile,” the analysts added, “Kellogg’s share has fallen from 23% in 2011 to 15% today.”
Sanford Bernstein estimates Kind’s sales are around US$390m in measured channels. Kind declined to provide data on its sales and earnings for 2015 but said it experienced “healthy growth” last year.
Industry watchers have seen some competitive response to Kind’s incursion into the market. “Interestingly, General Mills seems to have seen Kind coming and responded with a big round of innovation in its Nature Valley line, which has worked fairly well as a defence mechanism,” Sanford Bernstein said in its report.
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By GlobalDataIn that context – and with new snack bar brands being launched onto the market – Kind cannot afford to rest on its laurels. With founder Daniel Lubetzky still at the helm of the business, there seems little prospect of that happening.
Speaking to just-food, Lubetzky indicates Kind is looking to distribution and innovation as its two main ways of continuing its growth in the US. “I think for us one of our key priorities is for more people to discover us. Of the people that have tried Kind products, they become Kind fans and then become very high-frequency users but there’s still so many more consumers that have never even heard of Kind, let alone tried our products,” Lubetzky says.
However, Kind’s strategy for the US seems based more on deepening its business with its current customers, rather than specifically targeting white-space opportunities. Asked if they were channels in the US where Kind is under-represented, Lubetzky indicates foodservice could be an area to look at but says: “We’re very proud we’re for example in certainly hundreds, maybe thousands, of foodservice accounts, whether it’s a hospital or a corporate cafeteria. But when I was talking to a friend of mine at Pepsi a couple of years ago, I think they had something like 350,000 foodservice distribution points. We are a baby still. I think our focus in the United States is … there are still distribution opportunities but our overwhelming focus is with our current partners, doing more for them and deepening our business with our current partners. That’s the key priority.”
To deepen Kind’s business with its retail customers, the company is turning to innovation, developing products to target more eating occasions. The Kind portfolio numbers 60 SKUs across seven lines. “We’ve just launched a line of fruit and chia bars and fruit and veggie bars, which are awesome, we have a line called Kind Breakfast, which is whole grains for the morning,” Lubetzky says. “We have Kind Healthy Grain bars, with super grains and no refined grains. What we want to do is get more people to discover us and get more people to discover that there’s a lot of different Kind options.”
The company’s Kind Breakfast bars have been launched into a segment against the likes of Mondelez International’s Belvita and General Mills’ Nature Valley. Lubetzky says “broadly speaking” Kind’s biscuits are “in the same space”, with, in a separate statement, the company touting “a unique 100% whole grain blend that includes five super grains” in the products. Overall, product development will be central to Kind’s plans for the US market over the rest of 2016 and into 2017.
Lubetzky also put forward “another driver” – Kind’s expansion outside the US. The company is present in markets in western Europe, Dubai and South Korea. However, Kind has identified what Lubetzky calls “three strategic markets” – Canada, Mexico and the UK.
“Canada is very similar to the United States in terms of the market so we understand that space, maybe not as well as the US, but we have been committed to Canada for several years. We have a couple of dozen team members that live and breathe the consumer interest. We’re very well positioned there,” Lubetzky says.
While Kind has a nationwide presence in Canada, the company’s position in further south in Mexico, a country that was Lubetzky’s birthplace, is, he says, “much more spotty”. Kind has secured listings with Wal-Mart’s stores in the country, in Starbucks’ local outlets and with local retailer Chedraui. “Mexico is a very big country, I understand it and it’s a neighbour to the United States. They have a big enough middle class, the market is big enough and the consumer is sufficiently educated and aware about the need to start eating more healthfully that we felt it’s an important market,” Lubetzky says.
However, he adds: “In Mexico, we just hired our first team member. The United Kingdom is going to leapfrog Mexico in terms of distribution, sales and infrastructure because we have a staff, we’ve made millions of dollars of investments in our team there.”
Kind entered the UK market last year with a deal to sell its snack bars in Tesco stores. Since then, Kind says it has won listings with Sainsbury’s and Waitrose, plus Whole Foods Market’s local stores. Asked how Kind has performed so far in the UK, Lubetzky admits he is “not extraordinarily close to the day-to-day” in the country, saying he “tries to get over a couple of times a year”. However, he says: “From what I hear the bars have been very well received in the market.”
Nevertheless, Lubetzky does offer his thoughts on the competition for Kind in the UK. “I am very impressed with the quality of the competitors in the UK. I have been very impressed with the options and the innovation I have seen in the United Kingdom. I would like to think we anywhere in the world distinguish ourselves by doing the most premium product and … we tend to be more expensive because we use the most premium ingredient. In the UK, it’s so much tougher because there’s less shelf-space and there’s more consolidation for manufacturers. The US is also very competitive but the UK takes it to another level.”
After the interview, Kind tells just-food its strategy in the UK and its performance so far has echoed that seen in the US. “As in the US, this growth is due in no small part to the focus that we place on being a strong partner to our retailers. Our pricing is comparable to the US and, just as in the States, our merchandising strategy includes building grassroots awareness through sampling and public relations geared to drive trial and generate word-of-mouth buzz,” the company says.
However, Kind outlines the different ways it has sought to build its brand in the UK. “More specifically, we’re catering to both functional and lifestyle consumers and our snacks can be found in the “free from” and “food-to-go” sections within stores. Additionally, to meet consumer demand for lower sugar options, we have also shifted our packaging to communicate that our bars are lower sugar – Nuts & Spices have 40% less sugar than similar snack bars – and the high content of fruit and nut ingredients, which is unique within our competitive set.”
For Lubetzky and Kind, the belief is there are many opportunities for further growth. That said, Kind’s success in the US means the company is likely to have attracted takeover interest. It has been two years since Lubetzky regained his majority stake in Kind after accepting investment from private-equity firm VMG Partners in 2008. Lubetzky is the largest shareholder in Kind but each of the company’s full-time employees are also investors in the business.
Nevertheless, with the so-called challenger brands eating into the market shares of larger rivals, there are an increasing number of examples of Big Food acquiring their faster-growing rivals as a way to improve their own growth prospects. How long does he see himself owning Kind? Has there been interest in the business?
“Truly and sincerely – and it’s going to sound like a BS answer – what drives me is changing the world and having a positive impact. We have been very fortunate to receive those offers but I don’t wake up in the morning or go to sleep at night thinking: ‘Hey, can I maximise my economic stake by selling out?’ I wake up thinking: ‘What can I do to change the world?’ whether it’s a non-profit effort or a new delicious product that’s going to make people happier,” Lubetzky says.
Lubetzky’s career interests also involve leading the non-profit OneVoice Movement, which campaigns for a two-state solution between Israel and Palestine. However, reflecting on his continued interest in Kind, he adds: “As long as we think we can do that better independently, we’ll continue doing it independently. I’m also not against capitalism or big companies – there’s a lot of great big companies I respect a lot – but as long we think we can do it better, we’re going to continue doing it our way. If that ever changes, we’ll explore other options.
“I’ve never been on this journey. In my prior job, I had ten years of miserable failures and I didn’t realise bad I had it until Kind was launched and then I realised how blessed we were to grow much faster. If at some point we look at the map and we feel like it’s something we should not be doing alone, then we’ll revisit it but right now we feel like we are contributing more to our investors, my team. That for me is what’s really exciting, to be able to give ownership to my team and for all of us as a family to work to build something that’s going to be redefining how people see foods.”
