Private label to account for 20% of sales at Thrive Market by year end, predicts SVP: ‘But we’re not trying to be an online Trader Joe’s’

By Elaine Watson

- Last updated on GMT

Private label to account for 20% of sales at Thrive Market by year end, predicts SVP: ‘But we’re not trying to be an online Trader Joe’s’

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One in every five dollars spent at online natural and organic membership club Thrive Market is likely to be on private label products by the end of the year, predicts merchandising chief Jeremiah McElwee. “But we’re definitely not trying to be an online Trader Joe’s.”

Los Angeles-based Thrive Market​ -​ which was launched in 2014 and now boasts paid members in the ‘mid-hundreds of thousands​’ (who pay an annual fee of $59.95) - originally focused on a delivering a curated selection of top-selling shelf-stable natural and organic brands at 25-50% below traditional retail prices.

However, the platform – originally billed as ‘Whole Foods meets Costco online’ - has been steadily building its own brand over the past two years, offering everything from coffee to frozen meat and poultry, Jeremiah McElwee, SVP merchandising and product development, told FoodNavigator-USA.

“We love brands, and we definitely view ourselves as a launching pad for young and emerging brands that are highly differentiated well as more legacy natural and organic brands. 

“But we view private label as a great option in categories where there isn’t much differentiation and where we can cut out a lot of the overheads and lower the retail price for our members and offer really high quality organic staple food items.

“We’re at around 18% ​[of sales from private label] now and we’ll probably get to around 20% by the end of the year.”

Co-founder Gunnar Lovelace recently predicted​ that revenues at Thrive Market would grow by 50% this year, with growth coming from a combination of new members and bigger baskets as the platform expands its range.

Thrive ghee

We thought our core audience would be affluent Millennials on the coasts; we were wrong

As for the heaviest users of the platform, McElwee, who spent 16 years at Whole Foods before launching his own natural products consultancy and skincare brand, anticipated that Thrive would prove most attractive to affluent Millennials on the coasts, but quickly began to see that it was also attracting a broader consumer base.

“When we launched, we all thought we’d see a disproportionate amount of just cannibalizing the LOHAS ​[Lifestyles of Health and Sustainability] Whole Foods consumer, but what we found was quite the opposite. 56% of our audience is in the Midwest or the Southeast.”

Jeremiah McElwee: '56% of our audience is in the Midwest or the Southeast'

]As for demographics, he said: “Our heaviest users also skew a little bit older than what we originally thought. We thought it would be Millennials, but our core customer is in the low to mid-forties with children, the thought leaders in the family, but not super high income, more middle-income. It’s more Gen-X Mom than Millennial Mom.

“We also have a disproportionate number of special diet members in our audience, Whole30, Paleo, keto, plant-based, people looking to avoid allergens…

"As an ecommerce platform, we’re able to track what people on our site are searching for, and being able to search by values​ [as well as by product categories] was something we got right from the beginning."

Frozen: We’re looking at frozen fruits and vegetables, meal kits, frozen smoothies  

So where is the platform going next?

Thrive made its first foray into temperature-controlled foods via a new range of frozen meat, fish and poultry​ sourced from suppliers using “ethical and regenerative raising practices​” a couple of months ago, and progress to date has been encouraging, claimed McElwee.

“It’s been doing exceptionally well. Our audience loves the ethical guidelines and the higher level of quality we’re offering. We also brought on Mike Hacaga as our frozen meat and seafood innovation lead. Mike spent 20-plus years at Whole Foods where he pioneered a lot of the industry standards around the humane treatment of animals, so he has been an amazing resource.

“He’s been criss-crossing the world, whether it’s in Chile or meeting with small fishing communities in Alaska and talking about how we can go direct to market and drive some positive change for communities that are struggling… and in the process bring truly exciting, differentiated single point of origin fish from really sustainable sources.

“But we are also looking at frozen fruits and vegetables, meal kits, frozen smoothies. Nothing is off the table at this point.”

Chilled food: Tougher nut to crack

But what about chilled food?

“We did some early pilots on chilled as we’ve had so much demand, but we struggled mightily with the controlled temperature supply chain, especially the last mile,” ​admitted McElwee.

We never say never and we hope to revisit chilled in the future, but for now we’ll focus on frozen and shelf stable and let some other folks do the heavy lifting on chilled for the time being.”

Whole Foods could be really hard to work with

When it comes to dealing with Thrive Market as a supplier, McElwee said the team has also worked hard to make the experience as painless as possible.

“I was part of the global team at Whole Foods that created the ‘We practice win-win partnerships​ with our suppliers’ core value​ and I told them when I signed on at Thrive Market, hey guys, I’m actually partly embarrassed by that core value at Whole Foods, because we were actually really hard to work with.

“We worked really hard to make that core value prominent, but Whole Foods was expensive, decentralized, and hard to work with and I told the guys at Thrive, We have to really live up to that value.”

Thrive is far from perfect, he said, but it has some inherent advantages that make it easier to deal with for suppliers: “We’re ecommerce, we own our own fulfillment centers, we don’t outsource anything and we are able to make decisions and honor them without anyone in the middle, so to speak.  We try to make things as painless as we can for suppliers. No drama, no games, and we’ll pay you on time.

“Execution is the biggest thing,” ​he added. “Retailers are notorious for saying hey we’re going to do this, you’ll be on every end cap by this date, but it never happens. When I was at Whole Foods we never agreed to things without the intention of honoring them, but it’s just the nature of the beast operationally, there are always challenges, and it’s very frustrating for suppliers. You can set someone back years through your lack of execution.”

The hidden costs of doing business

The other thing that frustrates suppliers about retailers is the hidden costs of doing business, he added: “The free fills, the marketing. Some of it is just poor communication going in, but you see it at online platforms as well ​[as bricks & mortar]. People are always being hit over the head with additional fees. Hey, if you want to be on the homepage it costs more, if you want to be on an email, it’s this much more.

“We try and make it as painless as possible at Thrive, so we don’t have any obligatory slotting fees out of the gate that put up roadblocks at the beginning. It’s more a case of we can do more together and here’s the menu of options, but it’s not mandatory.”

Inventory management: It’s historically been a weakness

But what about supply chain and inventory management? Does Thrive really walk the talk on this front?

“I’d say honestly that this has been a weakness of ours in the past because we scaled so fast and spent the first two years just playing catch up,” ​conceded McElwee. “But subsequently we’re built a supply chain team and we’ve got a lot better.

“We communicate pretty well to suppliers about how well things are selling, but it has been pretty manual. We have a vendor portal on our roadmap, where suppliers will be able to log in and see their information in real time, but we have been scaling so quickly that with some things it’s been a case of, We’ll get to that.”

“We really believe that the success of brands in the 21st​ century will be driven by organizations that build positive externalities into their business and are good at telling those stories through omni-channel communication strategies that build community and awareness... and consumers will reward them for that behavior. ​

“The most valuable thing we have as a company is trust. Consumers trust us to offer products that take a stand on the issues that they care about. It’s the right thing to do, but also the smart thing to from a business perspective.” ​

Gunnar Lovelace, co-founder, Thrive Market​  ​  

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