Nutrition Business Journal

Honest Co, ChromaDex and Dang build sales in complicated market

NBJ Growth Award

Our industry had an interesting year in 2014, with lots of glass-half-full-or-empty trends helping some companies while hurting others. The economic recovery finally felt solid, and sales in the natural products industry were up a whopping 9.4 percent, but the supplement industry continued to face credibility issues that weigh down sales. Walmart and Target made major moves into organic, but that threatened to disrupt an industry built on established channels with natural specialty retailers. And tech money brought science into food as legacy companies worked to tell a story of transparency and straight-from-the-farm products.

Navigating an uncertain landscape has never been easy, but in an industry moving into the mainstream faster than ever, things can be even more complicated. So the companies honored with the NBJ Business Achievement Awards in the large-, medium- and small-growth categories deserve recognition for making the right product and marketing choices in a tricky landscape.

Large Company Growth

“Explosive” and “meteoric” seem insufficient superlatives to describe the growth of a company built on diapers and baby wipes, with sales that reportedly popped from $50 million to $150 million in 2014. That would mark an incredible third year for any business, but Honest Co. says that success was built largely on four years of planning before the company even launched.

Of course, a bit of celebrity shine has helped, as well. The company was founded by movie star Jessica Alba, who got the idea for a toxin-free product line in 2008, when she had difficulty finding natural products following the birth of her daughter, Honor. Judging by the success of the Honest Co., it seems she had no such difficulty finding the right partners. Alba teamed with Brian Lee, whose startup resume includes, internet executive Sean Kane, and Christopher Gavigan of Healthy Child Healthy World, a non-profit focused on protecting children from toxic products.

An ambitious launch in early 2012 offered dozens of products, and the catalog now boasts everything from the ubiquitous plant-based diapers to an “aromatic soy calendar” and the Honest Crib. A retail presence that includes Whole Foods Market, Costco, and, as of June, Target, shows Honest built a high-profile brand. But it may be the online subscription model that has made the business work, accounting for 80 percent of sales.

Online customers sign up for monthly bundles that include a $39.95 health and wellness selection of whole food supplements or $79.95 for a month’s worth of diapers and baby wipes. Diaper subscriptions are nothing new, but Honest Co. hits a surprisingly friendly price point. A similar quantity of similarly earth-friendly Seventh Generation diapers via Amazon subscription would cost $76.56, without the wipes.

Venture capitalists obviously like the model. Honest raised $70 million in August, with a valuation approaching $1 billion. An IPO is rumored to be in the works.

Alba’s celebrity status obviously helps garner extensive media coverage for the company, while a philanthropic program that includes diaper and crib donations keeps the maternal glow bright. Honest benefits from a strong Facebook following, as well, with more than 1 million followers. But it’s Alba’s 7.8-million- strong Twitter followeing that gives her a social media channel where she can tweet product highlights to a hyper-targeted audience that advertisers would be hard tasked to match.

Medium Company Growth

ChromaDex’s founders established the company as a service for testing products from other manufacturers. That proved to be a solid strategy and remains so. More companies are seeing the need for even more testing as the clean label movement gains momentum. CAGR on testing comes in at 12 percent over the past six years. Still, testing means watching other companies innovate, and ChromaDex co-founder Frank Jaksch didn’t want to remain on the sidelines. He saw in-house research and development as a growing opportunity.

ChromaDex launched its first branded ingredient in 2010. The company now has four on the market, with the strongest growth coming from Niagen, an anti-aging ingredient released in 2013. Jaksch says two new ingredients will hit market in 2015.

The ingredient side of the ChromaDex has caught up with the testing services and is ready to overtake it. “Next year I would expect that the ingredient business would be close to 75 percent,” Jaksch says. The strong showing from ingredients, including a 160 percent spike in the third quarter over the year before, pushed ChromaDex to a blended 50 percent growth rate in 2014. Jaksch estimates total sales for 2014 in the $15 to $16 million range.

Jaksch says the company achieved that success, in part, by keeping a close eye on a graying population not satisfied with the established model of aging. “If there were a box that we looked to fit things into broadly, that box would be in the aging category,” he says.

It helps that the Chromadex ingredients are not only new but based on new science, he adds, particularly action within the cell mitochondria. “Real science is starting to come out that can move the needle on aging,” Jaksch says. That makes aging a new game.

And that has enormous value in an industry always on the lookout for the next blockbuster ingredient. “New meaning really new, not just putting some shoe polish on an old ingredient,” Jaksch says. “Something that really never was in the market before.”

Despite the growth, however, Jaksch looks back at 2014 as a hard year for supplements. The effects of the December 2013 “Stop Wasting Money on Vitamin and Mineral Supplements” editorial in the “Annals of Internal Medicine” clearly spilled into 2014, he says. The “Dr. Oz goes to Washington” debacle didn’t help either. The impact, he says, was another signal that the industry needs to be more serious about quality, transparency, efficacy and science.

Jaksch has long been predicting a reckoning for supplements, particularly ingredient makers, and 2014 provided clear evidence that such a reckoning is coming, he says. He predicts that most of the pressure will come from a combination of regulators keeping a more watchful eye, retailers assuming a greater gatekeeper role, and consumers becoming more educated. “The rest is the industry on its own,” he says.

Small Company Growth

Vincent Kitirattragarn attributes much of the success of his Dang toasted coconut chips to his mother’s recipe, one shaped on the streets of Bangkok, where she grew up eating food from the Thai capital’s ubiquitous street vendors.

He attributes the rest to a combination of a smart and very lean team and, perhaps most importantly, timing. “If we had waited another year, I think we would have been on the back end of movement toward coconut chips,” Kitirattragarn says from his Oakland office.

Regardless of how it all came together, it did so—and in a big way. Dang Chips grew from $1.7 million in sales in 2013 to a projected $4.2 million in 2014. 

Much of that came from a move into 600 Kroger stores, as Dang became a prime beneficiary of the chain’s stated goal of owning natural and organic in mass grocery. Of course, hitting the shelves in 250 Target stores didn’t hurt, either.

While the rapid uptick in distribution tested the young company, Kitirattragarn says his team met the challenge, especially impressive considering the fact that his team consists of three people. The chips are produced by a copacker, but everything else happens in the Oakland office on a bootstrap budget. Dang has no outside investors.

“All these roll-outs happened in the last two months, and we’ve avoided any disasters,” he says. In fact, he says the sudden surge provided a great opportunity “to see how buttoned up you are.”

Dang benefited in part from good timing. The boom in coconut water, Kitirattragarn says, helped give coconut chips an aura of health. “Earlier they may been seen as a faddy food,” he says. Instead, coconut chips are the fastest-growing category of fruit and veggie chips, a segment that grew at 30 percent last year.

Knowing numbers like that became crucial, Kitirattragarn says. Young companies with new products can’t approach chains like Target and Kroger without the statistical bona fides.

“We’re using data to tell a sales story, he says. “It’s a lot of late nights poring over minutia. But that’s something that the big grocery stores really look at.

Kitirattragarn says two new flavors, to be introduced at Expo West, will stick to the best-selling savory category, bringing Dang to seven SKUs from just one in 2012. But the target remains overall growth, and for that, Kitirattragarn says he’s looking to one retailer in particular. “Once you have a Costco region, you can really grab a ton of volume.”

RUNNER UP (Large Company)

With a supplement industry wringing its hands over media and consumer skepticism, the high-touch space in the practitioner channel could be an opportunity to move consumers past the negative headlines. That approach helped Ortho Molecular Products grow in 2014, even in categories beset by challenges. The Clean 14 Program and LifeCORE shake mix, matched to the Mediterranean diet, position the products closer to food, an increasingly important link in the supplement industry, but Ortho President Aaron Bartz says more foundation products also helped Ortho sales grow 15 percent last year. Bartz says fish oil and multivitamin sales defied industry trends to perform well for the company, more evidence that the practitioner channel may have been the safest place to play in 2014.

RUNNER UP (Medium Company)

Research from NBJ and NEXT Trend suggests that consumers are buying products as much for what they don’t contain as for what they do. The “free from” trend that first found traction in the food-allergy category has found its way to a broader audience with gluten-free and Non-GMO verified foods. Enjoy Life Foods is perfectly positioned to capitalize on such trends with cookies, snacks, and cereals shoppers can eat without worries of peanuts, gluten, eggs, dairy, sulfites and more. That’s not just potential. The company enjoyed 41 percent sales growth in 2014, closing a third year of 40-percent-plus growth and making “Inc.” magazine’s list of the 5,000 fastest-growing companies for the eight consecutive year.

Runner up (Small Company)

Keith Lauver wants competition. His Cooksimple boxed “meal starters” are a sort of healthy update to Hamburger Helper, and he’s wary of being the only company sharing shelf space with that iconic brand. “The center of the store has become a bit of a ghetto,” says Lauver, who left a career in tech to work for a natural beef company before founding Cooksimple. “We can’t be the only one on the shelves in those shadows, or we’re going to get robbed.”

The shelves are brighter in the Whole Foods Markets that stock Cooksimple. Those stores helped the company hit $1.6 million in sales last year, up 60 percent over 2013. Lauver believes a bigger presence in conventional mass is the logical next step, but he still thinks demand will grow best with more competitors helping to legitimize the segment and get more consumers looking for healthy options. “We have to do better than Manwich for this country,” he says.

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