Now Playing



The Little Startup That Wants to Kill Amazon. And Target. And Walmart. And…

In the future, we will all buy the same premium products for the same low price at the same online store. Step into the fantasy world of Brandless.

 

Tina Sharkey and Ido Leffler are plotting. Seated in a secluded section of Leo’s Oyster Bar in the financial district, the entrepreneurs are describing their plan to take on America’s most dominant consumer brands. Whole Foods Market and Amazon. Target. Procter & Gamble. These behemoths, they say, are failing their customers. Why? They’re overcharging for grocery staples, things that don’t have to cost so much: organic goods, natural beauty products, dishware. “I woke up in the middle of the night one night with this feeling in the pit of my stomach that people don’t realize how much they’re paying for the stuff they’re consuming every day,” says Leffler, a soft-spoken Aussie who splits his time between Melbourne, San Francisco, and Los Angeles. His prior startups—natural beauty brand Yes To and a line of whimsical school supplies called Yoobi—taught him about the real cost of goods, before bloated marketing budgets and supply chains choked with middlemen conspire to inflate retail prices. “It’s almost nauseating,” he says.

After ordering rounds of brussels sprouts and Marlowe burgers on greens (no bun), Leffler and Sharkey—who until last year was CEO of the business-to-business matchmaker Sherpa Foundry—deliver their pitch. It’s for a new company called Brandless, which sells a pared-down line of high-quality household staples, from organic peanut butter and fair trade coffee pods to premium face cream and porcelain-rimmed dishware, that each cost no more than $3. Brandless keeps the prices for these everyday items permanently set below Big Mac levels by streamlining the supply chain and cutting down on traditional marketing. Instead of wending through multiple distributors and brokers and then racking up retailers’ many fees, products move straight from the manufacturer to Brandless distribution centers in Lebanon, Indiana, and Stockton, California, before being shipped to online shoppers’ doorsteps. The company officially launched in July with 165 products, with plans to add more. Success is not guaranteed.

Brandless’s beef with the traditional retail game played by the Targets of the world isn’t new, nor is its direct-to-consumer strategy. Customers have already rallied around startups like Dollar Shave Club, for calling BS on Gillette’s $4-a-pop razor blades, and Warby Parker, for undercutting high markups on eyeglasses. Rather than focus on only the most obvious offenders, Sharkey and Leffler are looking to shake up the entire $797 billion consumer packaged goods industry. “We’re unleashing a movement,” Sharkey says. “Everyone deserves better, and better doesn’t need to cost more.”

Brandless founders Ido Leffler and Tina Sharkey have made it their mission to sell high-quality basics for less. With their line of $3 pantry items and household wares, they’re betting that they can outshine Jeff Bezos.

Brandless’s voice—shouting into the wind about the wastefulness of establishment retailers and the inequality they support— feels outsidery. Yet its founders are plainly insiders, having built their careers in the trenches of the corporate world. In the 1990s and 2000s, Sharkey delivered tens of millions of women to advertisers like Procter & Gamble as the brains behind online communities such as the AOL-funded iVillage and Johnson & Johnson’s parenting hub, BabyCenter. Leffler’s other businesses work with, not against, the status quo. A company called Beach House Group, of which he is chairman, develops products for traditional retailers—which then apply their traditional markups. And Cheeky Home, which Leffler cofounded, sells stuff like disposable tableware and water bottles through Target. (Brandless, by the way, has a lot of Target in its DNA: Alums of the big-box store staff several positions in Brandless’s Minneapolis office.) One minute, Sharkey and Leffler are working alongside the giants. The next, they’re fantasizing about slaying the giants while munching on fancy platters of brussels sprouts. So what gives?

For the first 45 minutes of our meeting, I have trouble telling whether they’re sincere or just slick. Sharkey talks a mile a minute, answering single questions with thousand-word monologues that take sharp left turns from Steve Jobs announcing the original Macintosh to Malcolm Gladwell’s 10,000-hour rule to the idea of hacking pretty much everything: life, your day, trail bars, the way you display K-Cups in your kitchen (perhaps in “a great apothecary jar you found at the flea market!”). A favorite topic of Sharkey’s is her conviction that an authentic brand is one that the company and its customers “cocreate.” This happens, she says, when shoppers take to social media to share their own stories about how they like to use and display the brand’s products (accompanied by a proud snapshot or, in Brandless parlance, a “shelfie”). Take granola: “It’s not what we say on how to make granola into a trail bar; it’s what the great trail bar hacker on Instagram said,” Sharkey says in her breakneck patter. “It’s about, How can we create a narrative and a product that feels fundamentally created for the people, by the people, where they’d be proud to have it on their shelves and put their own personalities behind it?”

That’s the idea behind Brandless’s understated logo, the white box on every label. The white space—which the founders made a point of trademarking—stands for the customer’s voice. But wait: Do consumers really think this way? Have you, gentle reader, ever been so inspired by your granola hack that you’ve not only made a loving Instagram post of it but opted to tag the granola brand too? What sort of person channels her identity through coffee pod display in the first place? Just what kind of movement is this?

 

As we’re talking, Sharkey does something that finally pierces the fog of buzzwords and lets the genuineness of her message shine through. Sounding more like No Logo–era Naomi Klein than a former venture capitalist, she says this: Products should be great, they shouldn’t cost a lot, and companies shouldn’t insult us all by concocting fictional stories about them. Oats should just be oats, and syrup should just be syrup—nobody needs the Quaker Oats chap or Aunt Jemima to be convinced of a brand’s authenticity. Quality should be self-evident; cartoon avatars should shut up. Gesturing at an iPad displaying the lineup of Brandless products, Sharkey points to the company’s own bottle of maple syrup, her voice rising with conviction: “The only story this maple syrup wants to tell you is that it’s organic, it’s pure, it’s amber, and it’s Brandless!” Yes. My Adbusters-toting, Klein-reading inner 20-year-old is practically vibrating with excitement. I feel an overwhelming urge to raise my fist in assent.

The big question is whether Brandless can get millions of consumers to raise their fists, too. Sharkey thinks it can. She rattles off stats about how in 2015, 90 out of 100 big U.S. brands were in decline, and how 77 percent of millennials evaluate brands by different criteria than their parents do. (The younger generation places more importance on value and price, for instance.) By Brandless’s calculation, these weaknesses make the entire consumer packaged goods, or CPG, sector vulnerable to an attack from a 40-person startup based in the Presidio, powered by $50 million in investments from venture capital firms including New Enterprise Associates and Redpoint Ventures. Sharkey and Leffler’s big bet: Brandless can win millennials’ loyalty by marrying Whole Foods values with a $3 price point and a what-you-see-is-what-you-get approach to branding. The packaging is strikingly minimalist: Each product announces its attributes—organic, non-GMO, no sugar added, for example—within that otherwise empty white label in an easy-to-scan typeface that saves shoppers from having to hunt for information. Sharkey likens this design choice to the predictable user interface of mobile apps. “Can you imagine if every day you woke up and the button on your toaster was moved?” she asks. “That’s what it’s like navigating products.”

She’s got a point. Still, Brandless faces an uphill climb, says Jill Avery, a Harvard Business School senior lecturer and veteran of the CPG industry. According to market research company Euromonitor International, the percentage of total packaged food and personal care business now sold online is low, between 1 and 8.4 percent. Meanwhile, the proportion of shoppers who aren’t loyal to national brands is also a subset of the market, and those shoppers have plenty of options—among them Whole Foods’ economical 365 Everyday Value line, whose prices only stand to drop further now that Amazon has taken over the grocer. “Brandless will have to find and fight for the small segment of consumers who are buying CPG products online, competing with an increasing field of emerging brands trying to do the same thing,” Avery warns.

So how will it find its customers? Asked how someone like me, a 36-year-old mom-to-be, would discover Brandless, Sharkey is surprisingly flip. “Since you’re a journalist in San Francisco, some version of your network will aid in your discovery of knowing Brandless is here,” she says from her perch on a tall chair in Brandless’s Presidio office. She’s sporting the Marin-mom version of startup casual: jeans and a flowered tee. The room is set up like a general store, with the requisite wall of reclaimed wood alongside neat white shelves stocked with maple syrup, granola, canned beans, and coconut oil. “There’s obviously earned storytelling”—media coverage—“ like we’re doing with you,” Sharkey continues. “Your news feed, your Instagram feed. Because you like design, you’re more aware of new things.” I’m waiting for more, but she digresses into an anecdote about how she didn’t notice the tire place near her house in Marin until the moment she needed new tires. Part of the Brandless rollout strategy is, apparently, kismet.

As for the products themselves, they are of a reasonably high quality, albeit nothing that I’d turn to Facebook to fawn over. The coffee pods make perfectly acceptable (for coffee pods) coffee. The salsa stands up to anything in the Trader Joe’s snack aisle. Crunchy types will find the granola a bit sweet, but it’s on par with the non-bulk-bin, impulse-buy stuff at Whole Foods. The peanut butter is the natural runny kind that needs stirring. But I’ll concede: Coffee from a pod tastes a lot better when you’re paying $3, not the nearly $5 it’ll cost you at Whole Foods. “Ido likes to say that if people really understood how much they’re getting ripped off, they’d be rioting in the streets,” Sharkey says.

This sounds like a call to arms, but it’s also a pretty good description of what Brandless is up against. The startup faces the double challenge of informing Americans that they’re being shaken down and convincing them that a brand they haven’t heard of is the solution. No one is currently rioting about granola. There are no late-night comedians mocking the ridiculous hubris of coconut oil companies the way Rob Corddry, in a deadpan Daily Show segment, once skewered Gillette with an over-the-top (and terrifying) design for a 10-bladed spinning razor. Even Dollar Shave Club, which Brandless sees as a kindred spirit, wasn’t pitching cold. Back when it launched in 2012 and its gag-filled ad, “Our Blades Are F***ing Great,” went viral in 24 hours, the startup was tapping into a well of deep rage over outrageous razor blade prices. Avery sums it up: “It’s unclear whether consumers have the same pricing concerns about peanut butter.”

 

Here’s something that Brandless unequivocally has going for it: Many of its prices are much lower than its competitors’. Brandless’s housewares—knives, basic porcelain dishes, cooking utensils—undercut Amazon’s by 30 percent, according to a San Francisco analysis of prices (which covers its first 165 products, accounting for variations in quantity and serving size). Overall, Brandless’s packaged food and beauty items are 26 percent cheaper than comparable products at Whole Foods. And they’re nearly 20 percent cheaper than comparable Walmart products (though “comparable” is a bit of a stretch in the case of Walmart’s Great Value house brand, which has faced multiple food recalls in recent years). Brandless actually puts its savings at an average of 40 percent across all categories, though this estimate is pegged to the prices of similar national brands; it ignores popular private labels like Whole Foods’ 365. But the shipping fee delivers a blow: It’s $9 unless you spend at least $72 to qualify for free shipping. (That drops to $48 if you buy an annual membership for $36.)

Still, even eager repeat buyers have to wonder: How can Brandless sell high-octane stuff at bargain-basement prices? Three bucks is the kind of price point that doesn’t inspire a whole lot of confidence. The company maintains that all of its products are high quality, sustainably sourced, and made with fair labor practices. But it declines to explain how it sources every product (it keeps its suppliers and their processes secret for proprietary reasons). After some pressing, Brandless’s product team handpicks a few partners to tell me how they make the numbers work. A representative of its Italian olive oil supplier, for instance, explains that it sells its organic extra-virgin olive oil to Brandless for less than it sells the same stuff to distributors. This is because getting distributors to agree to carry the olive oil costs money—in outlays to attend trade shows and in marketing expenses—to the tune of $15,000 to $30,000 per year. Working with Brandless, the supplier says, “We don’t have any costs.”

Perhaps the place where Brandless is asking for the biggest leap of faith is in the household aisle. Justin Sirotin, an adjunct professor of manufacturing techniques at the Rhode Island School of Design (RISD) and the founder of Octo, a product and software design consulting agency, raises an eyebrow at the $3 chef’s knife and the $3 pizza cutter. “You can’t make a pizza cutter for $3 that works like a $20 pizza cutter, because steel is steel,” he says.

To assess the chef’s knife, San Francisco sent one to Galen Garretson, owner of the Lower Nob Hill shop Town Cutler, which hand-makes high-end culinary knives. His verdict? “It’s definitely a $3 knife,” he says. “It’s really kind of awesome that someone can sell that for $3.” But how does it cut? Rather than try it out on food, Garretson put the knife to a more sensitive test: “I tried shaving some hair on my arm with it. It didn’t seem to cut at all.”

Steel tools aside, the company’s quality-at-a-bargain claims pass the smell test for RISD’s Sirotin. “They’ve  been extremely selective with the product line,” he says. “There is a threshold where if your stuff is too cheap, people won’t buy it, but most of what they have doesn’t require a lot of performance. That ceramic mug will hold fluid. The silicone spoon will scoop stuff. The can opener will probably open cans.”

That’s a less sexy, more matter-of-fact version of what Brandless has been saying all along: Commodities are commodities, and we shouldn’t pretend that high prices and made-up narratives endow them with mystical powers. Back at Leo’s, Sharkey returns to the topic of retail brands that talk too much, filling shelves and ads and heads with sound and fury, signifying nothing. “We’re being barraged all day with things that don’t matter,” she says. “We’re saying, ‘Balsamic vinaigrette is just awesome, it’s organic, it’s non-GMO.’ That’s really it. We don’t need to tell you anything else. Go live your life.”

Just so long as you remember to Instagram about it.

 

Originally published in the October issue of San Francisco

Have feedback? Email us at letterssf@sanfranmag.com
Email Lamar Anderson at landerson@modernluxury.com
Follow us on Twitter @sanfranmag
Follow Lamar Anderson on Twitter @srslynow