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How Grove, an eco-friendlier household-products company, justifies sel

Fast Co.Exist 2019-10-08 15:30:55
[Photo: courtesy Grove]

A bottle of nontoxic wood cleaner has been keeping me up at night.

A year ago, I started freaking out about how my shopping habits were helping destroy the planet: the plastic bags, the packaging, the throwaway fast fashion, the chemicals. Coincidentally (or not!) Instagram soon served me an ad for a new online retailer called Grove Collaborative that sells eco-friendlier cleaning products. I signed up and have since been filling my home with more sustainable products, like Grove’s bamboo paper towels, which fund the planting of new trees; Grove’s laundry system, which cuts down plastic waste by 80%; biodegradable single-use cutlery; and reusable sandwich bags and straws.

But here’s the thing: Every time you check out, Grove induces you to spend a little bit more by offering you a free gift. And even though I am trying to consume consciously, I found it hard to say no to a free full-size bottle of nontoxic wood cleaner. So I added an extra lip balm to my cart to hit the $59 threshold to nab the gift. It’s only when the  package arrived at my house that I realized I don’t actually have any wood to clean. So that plastic bottle is languishing away under my kitchen sink, eroding some of the good I do by using Grove’s low-plastic laundry system. Of course, I really should have declined it, but studies show that free gifts are deliberately hard for consumers to resist.

[Photo: courtesy Grove]

In some ways, my experience with the wood cleaner is a microcosm of the tension between environmentalism and consumerism at the heart of three-year-old Grove, which just raised $150 million Series D round, bringing its valuation to $1 billion. Stuart Landesberg, Grove’s founder and CEO, sees an opportunity to cut down on the waste and pollution created by traditional consumer packaged goods companies like Unilever or P&G. For instance, Grove has already planted 100,000 trees this year and expects to divert a million pounds of plastic from being sent to landfills thanks to consumers buying its products versus, say, multiple bottles of liquid detergent.

But to make a real impact and meet the expectations of investors, Grove must scale quickly, which means acquiring more customers and getting them to buy more products. “This is a giant, giant market,” says Landeberg. “The big players who have won have done so over 150 years of building up a shelf presence. When we think about going after the laundry market, which puts close to a billion plastic bottles in landfills and the oceans in the United States every year, how do we go after that market?”

In the quest for growth, though, it’s easy for eco-friendly brands to encourage consumers to buy more than they really need. And this is bad for the environment. Even though sustainable products generally use fewer resources than their less-sustainable counterparts, they still have an environmental footprint. And ultimately, the most sustainable thing you can do as a consumer is to consume less. It’s a paradox that Landesberg often thinks about. “Our opportunity is even bigger than helping people change their consumption habits, but to make consumer products a force for human and environmental health,” he says. “The tension I wrestle with is that I’m trying to create progress fueled by consumerism, but I also know that consumerism is one of the leading challenges we face.”

[Photo: courtesy Grove]

The VC-fueled eco-economy

Landesberg is far from the only CEO grappling with this issue. Over the past decade, eco-friendly startups like sneaker brand Allbirds, fashion label Everlane, and plastic-free cleaning brand Blueland have mushroomed thanks, in part, to growing awareness about how our consumption habits are harming the environment. A recent McKinsey study found that 75% of global consumers think sustainability is important, and the strongest trigger for conscious consumerism is climate change.

These brands began as small, scrappy upstarts, but they’ve grown quickly thanks, in part, to VC funding. Allbirds has raised $75 million and is valued at $1.4 billion. Everlane doesn’t share funding figures, but it generates upwards of $115 million in annual revenue. Blueland launched this year with $3 million in the kitty. Grove has landed $210 million in total funding.

This flood of cash comes with new pressures: these brands now need to produce a return on their investments. But Landesberg says the funding also creates new opportunities to steal market share from the enormous brands like Procter & Gamble, which will rack up $67.7 billion in sales this year through dozens of brands. Grove can now go beyond the niche market of eco-friendly consumers and steal market share from the industry leviathans. “Our ambitions are large,” Landesberg says. “I believe there’s an opportunity to dominate the online world in a way that some legacy CPG companies have done an excellent job of dominating in the offline.”

[Photo: courtesy Grove]

For Landesberg, the most exciting opportunity is converting consumers who would normally buy traditional products. From his research into Grove’s consumer base, he believes about half of Grove’s customers are trying eco-friendly products for the first time. These are people who were previously buying cleaning products from Target or Walmart without much concern about the environmental impact. “Our goal has been to making folks who have historically not participated in conscious consumerism to feel welcome,” he says. “A lot of people wanted to make good decisions but didn’t because it wasn’t convenient or clear how do do it. Now, we really are taking consumers from CPG brands.”

This is no easy task. It often involves getting customers to change their behavior and try out new products. For instance, Grove just released reusable paper towels. The little bamboo cloths look and feel like regular paper towels, but they’re designed to be used repeatedly for a week before getting thrown out. Then there’s the laundry system that Grove spent two and a half years designing in-house. The starter kit comes with a pouch of highly concentrated detergent and a reusable glass bottle that doses the two-thirds of an ounce detergent required for each load. The system is designed to cut down on your plastic footprint, since the pouch uses significantly less plastic than a traditional laundry bottle. The highly concentrated formula also means fewer carbon emissions because you’re shipping less water around the country. “We knew that most Americans use liquid [detergent], but that the average orange bottle on the shelf is somewhere between 60% and 90% water,” Landsberg says. “Only 10% to 15% of our customers buy laundry detergent from us today. There’s a ton of opportunity to educate the consumers we have and move them from whatever the conventional product they are using to a product like our laundry system.”

[Photo: courtesy Grove]

Buying better still means buying

Grove has many tricks up its sleeve to get consumers to try out these eco-friendly products (and by extension, increase revenues). It draws from the playbook of modern retail: sending emails full of new products to existing customers, targeting new consumers, and yes, offering free gifts with purchase, a proven tactic to increase sales and loyalty. Landesberg explains that the free gifts don’t just spur customers to spend more, they also introduce them to new items. “It’s product discovery,” he says “We have such a small share of wallet, so if only 15% of our consumers are buying laundry detergent, how do we get that number to 25%, 30%, 40%? The way we do it is by giving them a great product to debunk the myth that natural and eco-friendly doesn’t work.”

Grove also turns all of your purchases into subscriptions, automatically refilling your cart every few weeks and requiring you to manually remove items you don’t want to buy. For instance, that free wood cleaner appeared in my cart for my next order, so I had to take it out because, well, I still had no wood to clean. Landesberg says that about half of the items in an average purchase were generated by algorithm, while the customer manually selects the other items in their cart. The system is designed to encourage repeat purchase behavior. “If someone makes a one-time sustainable purchase of a product, it doesn’t really have a big impact,” he says. “You need people to change their habits forever, which is why we built a flexible replenishment system.”

All of this makes sense, but in practice, it means sometimes nudging the customer to buy something they wouldn’t have otherwise, and may not even need. Consumers—particularly those in the developed world—are prone to overconsumption. We buy far more clothes, shoes, and cleaning products than we really need. And this behavior has helped deepen the environmental crisis we’re in. Grove is trying to offer less-polluting alternatives than the ones that dominate the market, but it’s hard for a for-profit company to actively decrease consumption.

Landesberg isn’t naive to the fact that doing business means having some sort of environmental footprint. But he argues that the best way to effect change is to replace our polluting purchases with less-polluting alternatives. “The way I think about it is that it’s going to be hard to stop consumerism at this point, short of changing the whole structure of the free economy,” he says. “You have to make change inside the systems that exist.”

[Photo: courtesy Grove]

It’s a complex problem, one that may CEOs of eco-friendly companies wrestle with. I recently wrote about Everlane’s effort to replace all plastic in its supply chain with recycled plastic. Shoes and garments made from recycled plastic are better for the environment, but they too will eventually end up in landfills. The best thing to do is to keep wearing the clothes you already have. And yet, the brand sends out a constant stream of emails highlighting new products, encouraging subscribers to keep refreshing their wardrobes. Founder Michael Presyman acknowledged the contradiction at the heart of the business. “It’s what you call cognitive dissonance,” he told me. “We’re here to improve things, and we’re also selling things.”

When I spoke to Allbirds’ cofounder and co-CEO Joey Zwillinger, he said he too was worried about the dangers of encouraging overconsumption. For him, it comes down to math. There are currently 20 billion pairs of shoes sold every year, and the average American buys eight pairs annually. But he doesn’t believe Allbirds is actively increasing the number of shoes on the market; it is simply displacing a more polluting shoe. “I don’t think we’re going to make them buy a ninth pair,” he says. “I think we’re going to replace one pair they would have already bought, and every instance that happens, the consumer is making a positive impact on the planet.”

Landesberg is making much the same calculation. He believes that every time a consumer buys Grove’s laundry system rather than a competitor’s bottle, it diverts a chunk of plastic from from a landfill. And every time someone converts to their nontoxic wood cleaner, it prevents harmful chemicals from ending up in the waterways. But you have to break some eggs to make an omelet: Sometimes, Grove might end up giving a customer something they don’t like or need on the path to getting them to convert. That’s a trade-off he’s made peace with.

“Trying to get people to reduce their consumption habits may lead to a smaller impact than helping the 60 million people in our target market to make more conscious choices,” he says. “Our goal is to bring as many people into the fold as possible.”