How Algorithms Feed Customer Creation at Daily Harvest
How Algorithms Feed Customer Creation at Daily Harvest
Rachel Drori (Founder & CEO of Daily Harvest) has built a network for farmers to bring fresh-frozen products to consumers across the U.S. And she's co-creating with customers through the use of algorithms -- developing right down to the personalized flavor profiles of Daily Harvest users.
We talk with Rachel about what is Daily Harvest -- walking us through her initial pitch meetings to her recent hires in data and algorithms.
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Alexis Gay: You're listening to The Shake Up, where we explore the business decisions that dare to be different and the leaders who are shaking up their industries. My name is Alexis Gay.
Brianne Kimmel: I'm Brianne Kimmel. On each episode, we'll bring in research and data backed insights to dig into the minds of business leaders and learn how they make the decisions that challenge the status quo.
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Brianne Kimmel: We'll be there, hanging out, talking business, ready and waiting to shake things up with you. Are you ready to dive in?
Alexis Gay: Absolutely. Today, we're talking about the ready- to- eat meal delivery market, a multi- million pitch, and what data science has in common with milk alternatives. You guessed it, we're talking about Daily Harvest. Later, we'll interview Rachel Drori, the founder and CEO, about how she grew the company to$ 250 million in revenue in under five years.
Brianne Kimmel: Yeah, that's right. We'll ask Rachel how she pitched her way to$ 42 million in 2017 alone, how she's fixing the broken food system with transparent, farm frozen ingredients, and how she's using data to co- create with her customers.
Alexis Gay: Absolutely, so let's set the table a little bit. Did you like that? That was a pause for laughter.
Brianne Kimmel: I liked that. That was funny.
Alexis Gay: One thing the pandemic has shown us is that the food system in the US is on a precarious ledge. From items being completely impossible to find to occasional drops of different items whenever they could find their way into stores. I had no idea how seemingly haphazard everything is.
Brianne Kimmel: Yeah, absolutely. It's been so fascinating to uncover how Daily Harvest has entered such a competitive space with really a fundamental, new approach. If you look at Hello Fresh, they launched in 2011, then Blue Apron in 2012, then Daily Harvest and Sunbasket launched a few years later in 2014. It's so interesting because today, Hello Fresh is the largest meal delivery provider. It's been great to see just how these companies have really thrived during the pandemic. It's a less obvious category that's really benefited from the rise of remote work as well. I was recently thinking about Hello Fresh and doing a little bit of research. The CEO had said that the trend towards eating more meals at home accelerated during the pandemic, but they expect that these key drivers will continue to be permanent.
Alexis Gay: Totally. As much as I would love to literally never hear the word pandemic again, we have to acknowledge that a lot of the trends and phenomenon that came out of that time period are going to have implications for the future.
Brianne Kimmel: It's an interesting one with these in- home meal kits. It's aligned to many different trends that we're seeing broadly. There's this cultural shift that's happening and it's moving more towards experiences and away from traditional consumption. These kits have essentially become in- home entertainment for couples, for families.
Alexis Gay: That's really interesting.
Brianne Kimmel: For friends that want to come over.
Alexis Gay: Actually, Americans aged 25 to 40 spend 55 minutes less per week on average cooking and washing up than Gen X adults. I know I have the youthful pizazz of a 20 year old, but spoiler alert, I am actually between the ages of 25 and 30.
Brianne Kimmel: That makes a ton of sense. We're also a generation that has been very fortunate to eat oftentimes, breakfast, lunch and dinner at the office, so I find that a lot of during the pandemic, it was the first time that we were at home for three meals a day. I think a lot of us are learning new life skills like cooking for the first time.
Alexis Gay: That's a really good point. Right when we all started working from home full- time, I had some people in my network, they felt very entitled to that food that was provided by work. I heard requests for meal stipends, for example, because we're not getting fed at work, we should be paid more, or our food should be in someway provided, which is really interesting.
Brianne Kimmel: I think what's interesting is in the context going back to the work example. Historically, there are these catering companies and a lot of these food suppliers that sit in between the office and the employees. For something like Daily Harvest, they actually have completely cut out their grocery relationships and they're selling direct to consumer, which is not easy at all. Ultimately, it gives the company more control over the quality of the product and the delivery experience as well, which I think today matters more and more because people want that whole experience. Quite frankly, a lot of people want it to be very Instagramable as well. It's really fun to have friends over, do something that's really beautiful, and more exciting, and different than the average Uber Eats or take out. I think the quality control of the whole experience has been something that's very differentiated.
Alexis Gay: Wow, that's a really great point. It's funny the point you made about things big Instagramable because I, in my lifetime, I think have received conservatively, 10,000 to 20,000 Instagram ads for Daily Harvest. I'm honestly very flattered that they think that I'm cool enough to be marketing this product to. When I saw their ads I was like, " Oh, no. This is for cool people." Everything looked so beautiful and I was like, " They don't know who they're marketing to right now."
Brianne Kimmel: It's interesting. It's cool but it's also very easy to understand.
Alexis Gay: It seems like they built a brand that really targets who they want to be reaching. In 2017, Daily Harvest raises$ 43 million from a bunch of investors including some celebrity investors like Gwyneth Paltrow, Serena Williams, Shaun White, Bobby Flay, Haylie Duff, and also some VC funds, Imaginary Ventures, and VMG partners. Brianne, here's a question. You're a venture capitalist. That's not the question, that is a statement. If you could take yourself back to 2017, not knowing that COVID and any prolonged work from home period was coming, would you have made the investment in Daily Harvest?
Brianne Kimmel: What's interesting is that I read on Rachel's first day at Columbia Business School, the dean asked her incoming class to articulate the purpose of starting a business. Rachel was the only one in the class to say to make money. That's very controversial in today environment. I find that the politically correct answer is to say you want to do good in the world, you want to solve the world's problems. She from day one has been very adamant about building a very lean, very capital, efficient business, and long term, really wants to set the entire team up for success. That's the type of founder you want to back because she's absolutely unstoppable.
Alexis Gay: Totally. Not to mention, I completely agree with you that I think there is a lot of pressure on businesses today to put aside making money, as a driver and a motivator for the business and instead, focus on some of those more impact, focused statements like, " We're here to do good, and we're here to serve X, Y, Z." I really think that, to your point, if you want to set your business up for success in the long term, I don't see why we're hiding the fact that you also want to make money. If you, as a business, are profitable and you're able to put that profit back into the business, you'll ultimately deliver a better customer experience. Obviously, that's not true for everybody but I really respect that she came out and said, " No, that's the purpose of business."
Brianne Kimmel: Absolutely and that continues to be true for the company today. They have raised venture capital. In talking to her early investors, the team is very capital efficient. They were very early in doing a lot of micro influencer campaigns and really making sure that they were connecting with not only celebrities and many of those celebrities were early investors. Also, this next level down of every day people who are healthy, and active, and work, and would serve as just great brand ambassadors for the company. They've done some really experimental things from a marketing perspective as well.
Alexis Gay: Yeah. What do you think the value is of a celebrity investor, more than just capital?
Brianne Kimmel: Today, this has become a very common trend. It's an effective strategy for consumer companies to establish themselves using known celebrities and known celebrities across different categories. It's also a trusted way to access celebrity fans as well. I find that it brings a lot of business credibility, experience, strategic partnerships. There's a lot of value in bringing in people who are outside of traditional Silicon Valley or traditional investors because they bring a new perspective and access to a new network of people.
Alexis Gay: Totally agree on all of that. I just think that every once in a while, it's important to remember that having a lot of money doesn't necessarily make you a good investor. As a founder, I guess I would feel a little bit more hesitant receiving an investment from someone that was maybe only playing in that space for the flash of it and not really to be that long term strategic partner I think you need if you're going to give away a piece of your company.
Brianne Kimmel: Yeah, absolutely. One thing that I'm seeing is oftentimes, celebrities will invest in later stage companies and the reason for that is as someone who's incredibly busy, that has a full- time thing, whether it's a touring musician, or a professional athlete, there's not as much time to meet companies throughout the week to do the diligence.
Alexis Gay: Yes, totally.
Brianne Kimmel: To help with customer development, to do the day- to- day of an investor. They'll oftentimes write a smaller check once the company is already working. The founders typically view that as an extension of their marketing strategy.
Alexis Gay: Obviously, Rachel crushed this pitch to some extent because she got$ 43 million of investment. I know all pitches are different, but is there anything that you've seen that all good pitches have in common?
Brianne Kimmel: Yeah. One thing that Rachel has really nailed and this is something that not a lot of companies have. The world has shifted from a growth at all costs mentality to a growth with profitability. Rachel has been very thoughtful from the beginning and really stressed the importance of big capital efficient. As an investor, it's important to not only back great ideas but rather evaluate and find highly capable people who are ready to build an enduring company. A lot of people have great ideas but it ultimately comes down to the execution and Daily Harvest really nailed this in a crowded space.
Alexis Gay: That makes a ton of sense, especially because we didn't know COVID was coming. We didn't know that suddenly, this huge curve ball was going to be thrown the way of most, if not all businesses. Investing in a founder that you believe will be able to pivot, and survive and thrive no matter what comes their way, can be way more important than just investing in a business that" seems solid" in a market today when we have no idea what's coming down the pike.
Brianne Kimmel: Yeah.
Alexis Gay: It's funny. Something I was thinking about today in giving a good pitch is that in comedy there's something that my favorite comedian, John Mulaney said once about having confidence on stage. He was saying that it's sort of like you're flying a plane. You know when you fly a plane, everybody in the seats wants to know that the pilot is going to land the plane. You don't want the pilot to come on the loud speaker and be like, " Yeah, I think I got this." When you're doing stand up comedy, you don't want, even if it's true, you don't want to show the audience that you're like, " Yeah, I think this joke is going to land." If you approach it with confidence, it puts the audience at ease in a way that helps them enjoy the humor and not worry on your behalf. I feel that must be true in giving a good pitch. If you're talking to a founder and the founder themselves doesn't believe in the idea or they don't believe in themselves and their ability to execute on the idea, that would be a massive red flat to me, as somebody receiving the pitch.
Brianne Kimmel: Yeah, absolutely. I think it's helpful to keep in mind that founders are not only pitching investors. They're also pitching future hires. That confidence is something that's really important if you're trying to convince someone to join your company or as you think about scaling the team, ultimately, the role of the CEO is hiring people that are smarter than you and experts in certain parts of the business. Ultimately, you want to land in a place where everyone on the team is smarter than you, there specialized. You have to really trust and delegate, and so that starts with first, having a lot of confidence. Also, having authority to jump in when you need to but also trusting the team to do the hard work.
Alexis Gay: Wow. Talking about a CEO needing to hire good people, segue of a lifetime, baby. All right, we've talked about food delivery, we've talked pitch meetings and now it's time to get analytical. Data, algorithms, et cetera because in March of 2021, Brad Klingenberg joined Daily Harvest as Chief Algorithms Officer after nearly eight years at Stitch Fix and prior to that, Netflix. Holy data background, Batman.
Brianne Kimmel: Yeah, this is amazing. I'm really exciting to dig into this because Rachel's ability to pull someone out of Netflix to a modern food company is really impressive. It's one of these things where it makes sense for Netflix. It would have been much less obvious for a direct, consumer food company to make this sort of hire.
Alexis Gay: It's interesting because going back to the fast food category for a second, the Domino's CEO, Patrick Doyle said for a few years now that Domino's is a software company that sells pizza. What do you think about that?
Brianne Kimmel: It's wild. If you track the growth of Domino's, I always joke that this is actually one of my favorite tech companies.
Alexis Gay: Really?
Brianne Kimmel: They have consistently delivered quarter after quarter on their numbers. It's very impressive.
Alexis Gay: Yes. I remember when they introduced the Domino's pizza tracker, putting technology to good use. Where's the pizza, when is it arriving, et cetera. We've seen a similar approach from Starbucks as well. Starbucks app, great app.
Brianne Kimmel: It's true, it's true. I think there's this greater shift where every company will ultimately be a tech company. It doesn't matter what industry you're in. If you look on LinkedIn, they're hiring engineers, they're hiring data scientists. I think we've entered this world where even the most successful and known offline businesses are now increasingly getting pulled online. Many traditional businesses are now mirroring tech companies. A question that I have in this regard is when does a company need someone in charge of algorithms? Does a food company need to invest this much in technology?
Alexis Gay: Absolutely. I was going to say when I hear food company, I don't necessarily think algorithms but honestly, that's not true. I think any company right now needs to be investing in technology. In the back end, it will help them learn about their customers and how the customers are interacting with their product. Unless you plan to build and launch one thing and never change it for the entire life cycle of your company, you're going to need to know what your customers like, what keeps them coming back for more, and how you can keep your costs low, as a result.
Brianne Kimmel: Absolutely. It's interesting too because one of the most difficult things to solve is delivery. To do delivery well does require a lot of data. They continue to iterate on their customer experience. They continue to optimize their ad campaigns, but they're also solving this delivery piece. One way that they have a really awesome team is also thinking about market expansion and where do they go next and in which country? Do they go international? If so, at what point do they go international? I think across the board, it's important to have this team built out. It's also great to see that they've been able to really maintain brand awareness through a lot of these community efforts that they're doing and through a lot of the paid marketing, which Daily Harvest is essentially everywhere. it requires a team to do that.
Alexis Gay: I think you're right. I also think, though you and I think it's everywhere because we're right in the target demo. I bet if you ask people who aren't in the target demo, they wouldn't know what Daily Harvest is honestly.
Brianne Kimmel: It's a great point.
Alexis Gay: That speaks to a lot of things and a lot of trends. I also think it speaks to the way that data and algorithmically enabled decision making on your marketing spend does help you drive efficiencies when it comes to your spending. Wow, did you like that sentence?
Brianne Kimmel: That was great, that was great.
Alexis Gay: That was good, right?
Brianne Kimmel: You're tech days are coming back.
Alexis Gay: God, it never leaves you. You can take the girl out of the blazer, you cannot take the blazer out of the girl. Brianne, here's the thing though about algorithms. Do you think that there is good and bad to using algorithms to learn about your customers or do you see it only as positive?
Brianne Kimmel: Yeah, it's an interesting question. This is something that I've thought a lot about from a Netflix point of view. Sometimes when you over personalize, you lose the surprise and delight that comes with discovering something new. In the case of Daily Harvest, I think they're in a really strong position. They're able to experiment with new ingredients. I've noticed that in a couple of their meals, they do have avocados and so you can start to see pieces of pop culture show up in many of the things that they're doing. It does seem like they're analyzing broad, consumer trends and what's about to become popular. They're integrating many of those ingredients into future items, which was really cool.
Alexis Gay: Absolutely. I really like your point about potentially losing the surprise and delight aspect. If your decision making is too algorithmic driven, in terms of what you're showing your customers because sometimes you don't know what you like until you see it. I guess what I would think a business like this could do, I don't know if they do, but I almost wonder if you could build an imperfect algorithm, an intentionally, imperfect algorithm. One that gets it 90% right on what it knows that you like and then leave that extra 10% of the time and randomize it.
Brianne Kimmel: I agree with that. I think there's a couple of interesting things that you can do here as well, as far as going back to the cauliflower example. If you're experimenting with a new product, it would be fairly easy to send samples in the next box to someone. Maybe you get something for free as a way to really try before you buy and experiment with maybe a food type or ingredient that you wouldn't typically buy. I'm sure they're thinking about ways to upsell, and cross sell, and introduce a lot of these new ways of discovering your new, favorite meal.
Alexis Gay: Sounds like a good money making opportunity to me. After the break, we'll talk to Rachel to learn how she's taken Daily Harvest to$ 250 million in less than five years. We'll hear just what it takes to be a pitch meeting pro. Today's episode is sponsored by those fine folks over at HubSpot. Managing conversations with prospects, and customers, and creating a remarkable experience can be tough. HubSpot wants to change that. That's why they created a CRM platform that makes it easy to align across teams.
Brianne Kimmel: It's so much easier. With HubSpot's unified system of record, all teams can create a better, customer experience without missing a beat.
Alexis Gay: We love a unified system of record. We always say that. You can install live chat on your website and allow sales or support to get in touch with prospects directly.
Brianne Kimmel: Or send marketing emails on behalf of sales reps or customer success managers.
Alexis Gay: Not to mention, it allows prospects to book meetings with reps without wasting time.
Brianne Kimmel: Best of all, teams can get access to all of the contacts history so they can have more informed conversations with prospects, and customers, and design a better, overall experience.
Alexis Gay: The result? All your customer people can align around the same goals, consist in great customer journeys that drive growth and lifetime loyalty. Learn more about how you can scale your company without scaling complexity at hubspot. com. If you like what you hear, tell a friend and leave a review. If you don't like what you hear, tell a friend anyway.
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Alexis Gay: I am so excited that we're here with Rachel Drori, the founder and CEO of Daily Harvest.
Rachel Drori: Thanks for having me I'm excited to be here.
Brianne Kimmel: Awesome, Rachel. Thank you so much for coming on The Shake Up. We have been talking about the growth of subscription meal kits and in particular, Daily Harvest approach, which I truly love. I love the latte pods. You can add your own milk, which I know milk preferences are so controversial. That's become the new rage is what kind of milk are you using so I've become obsessed with the latte pods.
Rachel Drori: Absolutely. We actually just launched milk. Just thinking about that insight, which is also a really innovative format and way to make it. It's been fun.
Alexis Gay: Rachel, we've been locked up inside for over a year. We weren't really able to go to restaurants to the extent that we used to. The meal kit delivery market definitely seems to be skyrocketing. Before I ask you about the Daily Harvest business model in particular, I'm curious. Why meal kits? Are you a foodie? Are you an amateur chef?
Rachel Drori: We're actually not a meal kit. We're more like a modern CPG than a meal kit. Our food doesn't rotate, you don't have to really cook it, it's already prepped. We're really trying to shake up all of it.
Alexis Gay: Would you say you're defining a new category?
Rachel Drori: Absolutely. I got into it because I'm absolutely a foodie. Will do anything for a good meal. That sounded weird but you know what I mean. I didn't want to compromise. I wanted food that was convenient because that's what makes fruits and vegatables hard. I also wanted food that was jampacked with all the stuff that I know is good for me. What I like to say, as Hypocrites has said, " Let food be thy medicine." Well, we've ended up with a Hippocratic Oath for medicine being thy medicine, whereas food has lost it's way. We're really here to change that. Here is, in my opinion, what's so broken with food. There are a lot of things broken but one of the biggest challenges is that the way that big food is set up is very systemically broken. The way that, starting with the investors. Investors in big food companies, the big CPGs of the world, are really focused on things like margin discretion and slow, steady returns, dividends. When you think about how that translates to food, to squeeze out margins out of food means to squeeze out nutrition. It's pretty ugly. The way that they're structurally set up is not to innovate. I think case in point is Kraft in recent years. Their big innovation last year was launching a pink macaroni and cheese. They've just completely lost touch with the customer and they don't have the structural agility to be able to move with modern times. Daily Harvest is really a platform that allows us to innovate and iterate, co- create our food with our customers. The structural agility to get our food to our customers when they want it, which spurs this virtuous marketing cycle, which means that customers are getting what they want. The reason you see us all over Instagram is because if we're co- creating our food with the people who are eating it, when they eat it they're excited that we listened.
Brianne Kimmel: That's amazing.
Alexis Gay: This might be a big question but I'm very curious. What drives the demand for your product? Is it that younger generations are focusing on healthier food options? Is it the traditional family dinner is not as much part of our culture? Is it because of the struggles of the restaurant industry? What do you think about?
Rachel Drori: I think there's a few things. We're at the crossroads of a bunch of, I hate using this term but here it is.
Alexis Gay: Let me hear it.
Rachel Drori: Mega trends. I did it, I said it. Now, it's a business podcast. Really thinking about the journey of health and wellness that we're all on. Going back to a lot of our roots, I always think back to the Snackwell. I don't know if you guys remember the Snackwell was this big, health innovation. It was like sugar. I think people are just smarter and there's enough education out there where people are realizing that if I stick to the basics, things my grandparents ate, things my great- grandparents ate, then I'm going to be okay. Our whole food ethos is really based on this idea where we're not going to tell you what not to eat, absolutely not. We are including everybody's eating habits and everybody's values, but we're going to provide a base of fruits and vegatables. Our goal is to get everybody to eat more fruits and vegatables. Then if you want to add a piece of chicken to your harvest bowl, if you want to add, to your point earlier about milk, almond milk, coconut milk, oat milk to a smoothie. If you want to add bone broth to a soup, we think that's great.
Brianne Kimmel: In 2017, you had$ 43 million in investment, which in incredible. In order to get that type of cash infusion, it starts with a pitch. I want to hear a little bit about one of those pitch meetings. Back then in 2017, how were you approaching crafting the pitch around Daily Harvest?
Rachel Drori: 2017 was, I'd say, the point when we felt like we reached true product market fit. Fundraising previous to that point, I'd say was incredibly difficult. People didn't understand how the collections that we had laddered up to this bigger picture, to this platform. There's a lot of friction in the fundraising process especially because the people from who I was trying to raise money just didn't see that there was a problem. They were like, " Well, why wouldn't I just buy Jamba juice?" I'm like, " I don't even know where to begin with that."
Alexis Gay: Did you ever feel discouraged after meetings like that?
Rachel Drori: Discouraged don't even cover it. I think that fundraising is the most demoralizing process in the entire world.
Alexis Gay: In those pitch meetings, before you went in the room, what was the key message you were really trying to land with the people you were seeking investment from?
Rachel Drori: There were two things. The message I was trying to land was just this big picture, that big food is completely broken, and that there's this opportunity, and that big food is not meeting customer demand. Where I would say it got really tricky wasn't necessarily with the problem statement. A lot of people got tripped up on the frozen piece.
Brianne Kimmel: Really? Why do you think that is?
Rachel Drori: They still do.
Brianne Kimmel: Really?
Rachel Drori: Everyone would go, " You're disrupting frozen food." I'm like, " Soup is not a frozen category, lattes are not a frozen category, breakfast cereal is not a frozen category. How is that your logic?" Frozen is how we make food incredibly clean, unprocessed, and convenient, and sustainable also. It is the means to an end. Really trying to focus on that big picture to paint this story that we're not going after frozen food. The market is so much bigger than that. Our lattes compete with Starbucks just as much as they do with Keurig. Our soup compete with Hale and Hearty just as much as they do with a Campbell's. It really is, food is a general category. Then it was hard to get people to wrap their head around that being our North Star, but eventually we did it. The other thing that I was really looking for in that round was values alignment from our investors because when you're innovating in something like food, which is something that people eat and ingest, I wanted to make sure that we were never going to end up in a position where some of the investment community in big food has caused a lot of health challenges for humanity. There was a lot of ensuring that our investors were going to be values aligned as well.
Brianne Kimmel: Wow, that's amazing. How did you actually reverse the pitch and ask those investors questions to give you a real feel if they were going to add value and be a valuable person to help you scale Daily Harvest?
Rachel Drori: One of the tricks on your pitching is that you're also always selling. One of the things that I did was I showed that there was great customer demand for these things like sustainability is now table steaks. It wasn't five years ago. Just showing where the customer demand was going and showing that there was also a business revenue opportunity tied to everything that we were hoping to do on this sustainability side, I think was really an important part of the story. Some of the questions that we asked just to make sure that people were aligned actually weren't asked to the investors directly.
Brianne Kimmel: Really?
Rachel Drori: It was always to other companies that they invested in and not the ones that they introduced us to.
Brianne Kimmel: Yeah, of course.
Rachel Drori: Those back channel calls where you ask about a time where there was a really difficult decision that you had to weigh margins versus doing what was right for the customer. For me, that's one of the hardest tensions. I was always going to focus on what was best for the customer. What's best for the earth is also best for the customer. I think it was really in those back channels where I learned about people's values. When somebody's trying to close a deal, they'll say lots of things.
Brianne Kimmel: I think a lot of people, outside of the tech industry, this notion of a lot of key information is passed through back channel, through text messages, through phone calls. It almost feels as much as our industry is so progressive and so innovative, most of the important conversations and the critical information that you need to scale your company, actually sits through person to person dialog that's very separate from that pitch meeting and very separate from a lot of the direct conversations that you're having.
Rachel Drori: It goes down in the DMs.
Alexis Gay: Absolutely. I don't have a very large network. That's never been one of my strong suits. Exactly like sending people messages on Instagram and reaching out to people on LinkedIn, people are willing to talk, people are willing to help.
Brianne Kimmel: I wanted to spend a little bit more time on your positioning Daily Harvest as a platform because there's a lot of complexity in how to operationalize and turn this into a true platform and something that's very scalable. At the series B, what were some of the bullet points or what were the key next steps that had to happen to make Daily Harvest truly scalable?
Rachel Drori: A lot of it sat in our supply chain. Then there's also the collection expansion. The proof point was that we had multiple collections through multiple data parts. The way that we had built our supply chain to that point was we had a lot of amazing farmers that we engaged directly with. We still, to this day, do all of our own sourcing and work directly with everyone. A lot of that story was very idealistic, I want to say. It was a hard thing to do at that scale. Even our packaging. We had these grand plans to have completely, whole, compostable packaging and there was a lot of storytelling there because there's a scale problem. You always have this chicken or egg problem when you're talking about visible goods. In order to make something cost effective so that you can think about things like profitability, for example, you have to have the scale to be able to justify those big swings. I think that the most important thing and the most important part of the vision to wrap people's heads around was this idea that we were disrupting food as a category. Here were our proof points. I think it was showing that there was so much more to it that we had planned, as far as not only making sure that the business was scalable from a supply chain perspective. Making sure that we were able to maintain our agility. Also, layering in this sustainability piece to it. Finding a way to distinctly put it all together into one, neat package without having any comps in the market.
Brianne Kimmel: But a lot of companies that are offering food delivery in some capacity are keeping their offering really simple focusing on just dinner or just one type of food. You have over 60 items for breakfast, lunch and dinner. Was that a conscious decision you made to offer so many more than other companies?
Rachel Drori: Yeah, so we're almost at 100 now.
Alexis Gay: Oh my gosh.
Rachel Drori: Our brand affords us an incredible amount of co- creation with our customers. Our customers love us, they love to share with us. Because we have this direct link with our customers, what we're able to do is we actually phenotype taste buds. We understand what every, single customer wants and needs down to an incredible level of detail that allows us to create food for each individual. We don't look at customers as averages. We really look at each individual and we create food to meet the needs of those customers. The reason we have so many smoothies, there's no customer that's ordering all of our smoothies. We have smoothies for different taste preferences, and different eating values, and different profiles. As we expand into this collection depth, we see different groups consuming over different day parts. It's really systematic the way that we think about it. It's really served us well. An increase share of stomach over time as we've been able to take this data and turn it into meeting the needs of our customers.
Brianne Kimmel: Wow. I'm so curious. How did you build that?
Rachel Drori: We have an incredible algorithm's team, who has really been a key part to our food development. Then the personalization tied to that development to make sure that we're matching the right people with the right food that was created for them.
Brianne Kimmel: Wow, that's really incredible. I have so many questions about the way that you, as a company, that is providing healthful food options for people, uses data. The way, that you mentioned, algorithms to help you in your product development decision making.
Rachel Drori: Then we have the supply chain that allows us to be really nimble and respond in six to eight weeks, which is completely unprecedented in food.
Alexis Gay: Help us understand this because a lot of other people might be thinking this, too. You recently brought on Brad Klingenberg, the former head of algorithms at Netflix and Stitch Fix, which are not food companies. You could say are both a little bit outside the food industry in general. Can you tell us a little bit about the need for a chief algorithms officer with such a background?
Rachel Drori: Algorithms are the center of our platform. Without the algorithms that help us really turn those insights into something that's actionable, the rest doesn't matter. That co- creation all lives in that world. Our personalization, our replenishment platform, which is our goal is not to send you food every week. We don't want to do that, which is very different from a lot of the businesses out there. Where the period between purchases matches the period in which you're meant to consume. Daily Harvest is nonperishable. We are frozen. Our goal is to keep you stocked. We really have to get deep into customer behaviors to understand when you need to be topped up and when you need to get another box that's going to help keep your freezer stocked. So that at that moment when you are hungry, you have what you want there, and helping you find the right thing that is that thing that you're going to want all lies in our algorithms.
Brianne Kimmel: How do you balance qualitative insights as well? Do you have a great team that's reading customer support tickets? Do you have focus groups? How do you collect a lot of individual insights from each Daily Harvest user?
Rachel Drori: There's two way in which we do that. One is we have an incredibly passionate care team. One of my areas that I'm really passionate about that touches on my background is I started my career at Four Seasons Hotels. For me, Daily Harvest is not about marketing, is not about meeting customer needs, it's about anticipating them. That to me is true hospitality. A part of that is how are we anticipating customers' needs? We really embolden our care team to be a part of this co- creation journey and adding the context behind what we're seeing in the data, that's a huge piece of what we do. Then we have an in- house research team that takes the data that we see and ties it together with the emotional, the psychological, the why behind what we're seeing. And it's an incredibly powerful combination when you put all of those pieces together under one roof with the same goals.
Alexis Gay: Rachel, I don't think most leaders would be able to see the connections between such disparate parts of the organization or potential parts of the organization like your focus on hospitality and then this passion for data and algorithms. When you were building out your team, were you actively trying to pull from such diverse backgrounds or was it something that came up over time? Tell me a little bit about that process?
Rachel Drori: Look, if my belief is big food being broken, it would have been very hard for us to hire people from big food so we had to bring in people from different areas of the business world to really be able to do something different. We have people from all over the technology, commerce, consumer landscape but very few people who actually come from the world of big food.
Alexis Gay: Brianne, does that sound similar to the approach that you see in most tech companies?
Brianne Kimmel: I hate to use a buzz word, but to disrupt an industry- crosstalk
Alexis Gay: We said disruption. All right, let's go. Now it's started, everybody.
Brianne Kimmel: We're disrupting the disrupters at this point. What gets me really excited about something like Daily Harvest is the fact that you're applying so many start up and tech related concepts to an industry that is so antiquated and I would say not on behalf of the average person. I get so frustrated when I go to the grocery store and you see things that are packaged as healthy but they're filled with sugar. One of the challenges there is for the average American, myself included, you want to eat healthy but it's really hard to tell from the packaging and from the labels what is actually healthy.
Rachel Drori: 100%.
Alexis Gay: I want to talk a little bit about your marketing mix and some of the data personalization things that we touched on earlier. In a world where start ups rely so heavily on Facebook, Google and Amazon for sales, you have invested in TV ads, in influencer partnerships. Actually, I just saw on your Instagram a friend of mine in one of your influencer partnerships. I was like, " Good for him." Subway ads and event pop- ups. That all sounds expensive but it seems to have paid off. I would love to know what was your decision making process like in making some of those maybe heftier bets?
Rachel Drori: Growing up through the world of marketing, one of my goals early on was to not be beholden to any one channel. It's really easy to scale, or was easy to scale on Facebook. Now it's a whole different ball of wax. It was really easy to scale marketing on Facebook, and on Google, and to use the unique, arbitrage opportunities to grow a business. The landscape has changed significantly but knowing because I had a lot of experience in this, knowing that the landscape is always changing, it's a complete moving target. Something that works today will not work tomorrow. Something that works tomorrow will not work next week. It's just how you have to live in this world. We wanted to make sure that we were equally reliant on all channels. We went out really aggressively into every channel you can imagine to give us that optionality and that agility, where we can change our spend in different channels based on what happens to be working at the time. Influencer marketing, it's a part of our mix. TV, it's a part of our mix but I think the most important thing is that even if one thing is working really well, is that you keep your spend, you keep the other channels engaged enough where if something changes, you can always pivot and change that mix.
Brianne Kimmel: That's really interesting because I would assume that because you're essentially going after really, large, known brands that have a ton of spend. If you're a modern CPG and you're creating lattes that compete with Starbucks, in my mind, Starbucks will always outspend you. A lot of these big brands are so down to spend money. How did you think about some of these brand activations and more brand building exercises? Plus, when you first got started and to where we are today, I feel like the whole influencer marketing game has just completely changed. How do you think about some of the branded Daily Harvest stuff versus competing with influencers and people that are likely to use Daily Harvest anyway because it falls into this new category of just easier, healthier eating?
Rachel Drori: One of the things that ties to this platform that we've created and the importance of the agility in our supply chain, people always say what's the secret to your really fast growth? I actually talk about our supply chain, which is not the answer that people want to hear. The reason why is I don't know if you've ever seen a Rogers' Bell Curve. It's a normal bell curve like a normal distribution.
Alexis Gay: I haven't but I'm picturing it. I can picture a bell.
Rachel Drori: It's a bell.
Alexis Gay: Great.
Rachel Drori: If you think about the way normal product development works, you have an insight and it can take up to a year to bring something to market. If you think about early adopters going into the early majority and then the late majority, climbing up that curve. By the time you get to the top, that's usually when big companies are going to market.
Brianne Kimmel: Sure.
Rachel Drori: Our supply chain agility, our data allows us to go to market when an early adopter is interested in something. Our early adopters, because we listened to them, become these evangelizers. What's really powerful is that it spurs this virtuous marketing cycle that rides itself up that curve, as opposed to facing headwinds on the way down where you have to hire Justin Timberlake to shake his tushy on television. I just said tushy.
Alexis Gay: You didn't come on expecting to say tushy, did you?
Rachel Drori: I can't believe I said tushy. I have a four year old and tushy is the word.
Brianne Kimmel: That's okay. This is The Shake Up, anything can happen.
Rachel Drori: Having to hire somebody like JT to shake his butt on television is because you've missed the moment where you've just given the customer what they want. You've anticipated their need. A lot of people think that we have this really expensive, really robust paid influencer strategy. Of course, we pay for some influencers but really what you're seeing is us co- creating with our customers and our customers being so glad that we listened to them and gave them what they want. We've also given them this opportunity to align Daily Harvest. We provide the fruits and vegatables. You align Daily Harvest to your eating values. That milk that you talked about earlier, Brianne, Daily Harvest smoothies or lattes with your oat milk then become your platform to evangelize for your beliefs and your eating values. That is just endemic to what we've created. That's just a part of the platform. Then the other side is brand marketing. We will only do brand marketing when we feel like it is going to further our narrative. When it's going to point out how we are really differentiated from others in the market. That's the goal of brand marketing. For us, it's not about brand awareness. We're never going to outspend Starbucks. Everybody knows Starbucks. Not everybody knows Daily Harvest, but we really focus on those points of differentiation.
Brianne Kimmel: Wow, Rachel, I'm so blown away by what you've built. Just being able to hear some of those insights, especially what you just said about essentially having a fast enough iteration process so that you're actually able to anticipate the needs of your early adopters. That I think is an incredible insight that I don't see a lot of other companies adopting in the market. Massive kudos to you and I'm so excited that we were able to have you on. If people want to find Daily Harvest products and learn more, where can they find you?
Rachel Drori: At dailyharvest. com.
Alexis Gay: Look at that. Rachel, thank you so much for coming on the show today.
Rachel Drori: Thanks so much for having me. This was fun.
Alexis Gay: This has been a pleasure. Hey, Brianne. Are you ready to do that thing we practiced?
Brianne Kimmel: Oh my gosh, is it time? I'm ready.
Brianne, Alexis together: Three, two, one. Don't forget to subscribe and leave us a review.
Alexis Gay: Pretty good. Today's episode was written and produced by Matthew Brown. Production support comes from Lauren Shield. Our engineer is William Low, with research from Corey Broccolini. Special thanks to Kyle Dunhoff and Lisa Toner.
Brianne Kimmel: Word of mouth is the best way to help people discover our little podcast. Be sure to subscribe in Apple Podcast, Spotify or wherever else you listen to podcasts.
Alexis Gay: Don't forget to leave a review to let other people know how awesome we are.
Brianne Kimmel: We have some amazing guests coming up this season that you won't want to miss.
Alexis Gay: See you next time.