Grit Grocery is on a mission to disrupt the grocery supply chain
Dustin Windham of Grit Grocery knows that eating healthy is hard, so he wants to help – by bringing fresh produce right to customers’ doorsteps. To streamline the process and eliminate waste from the supply chain, he and his team are implementing an old-school model with a tech twist.
So what is Grit Grocery?
Think of a farmers market on a food truck parked right in your neighborhood. Currently we have one truck operating in Houston, but if we reach our Wefunder target, we’ll launch ten trucks in 20 neighborhoods around Houston.
What was the inspiration for the company?
I was raised on Rotel – most meals began in a box. It wasn’t until I lived abroad with the US Peace Corps that I realized processed is not progress. Without an alternative, I ate unprocessed and cooked from scratch, which completely changed the way my body functioned and felt. Grocery shopping outside the US looks very different—neighborhood bakers and butchers across the street from fruit stands and flower shops; small store formats where you are greeted by name and get to know your neighbors. Processed goods are rare, because most countries lack the centralization and focus on shelf-stability that has defined the US food industry. I was inspired by what I experienced during my time abroad and want to provide Americans with the same opportunity.
What’s your ‘why’?
It’s a worthy cause… and I’m mad. Mad at big food for sacrificing our health to increase their wealth. Mad at big food for replacing real food with formulas. Mad that most meals begin with peeling away plastic instead of dusting off dirt. Grit’s about getting mad – mad enough to inspire action. This is our action.
How do you source what you sell and where do you source it from?
We’re focused on local and unprocessed offerings. Local to us means products from within a hundred-mile radius of the city. It depends on the products – some of it is from Texas, and it’s local by that definition. But we’re dealing with local, regional, small producers which is different than most big box groceries where their supply chain starts with huge operations in Mexico and California.
What are your most profitable products?
We’ve got several hundred products, and it depends on the neighborhood. But our meal bundles are really popular. When you walk up to your neighborhood Grit Truck, you can buy groceries à la carte – everything from wild-caught, Gulf red snapper and shrimp, to artisanal bread, cheese, honey, pasta, dry goods, condiments, coffee, fresh fruit and veggies – or you can buy a meal bundle. It’s like a Blue Apron offering, but you get to do it on the fly. These are our favorite pairings from the truck – we throw in the raw ingredients and a simple recipe for a quick, simple, delicious meal.
The fresh-baked bread and the cheeses sell themselves. We also sell a lot of seafood here in Houston because of the access to the Gulf – it’s an incredible resource in our local supply chain.
What’s your USP?
The disruption is in the supply-chain. It’s not about selling fruits and vegetables out of a truck. It’s about onboarding, working with small, regional producers and buying locally. That means I buy in the morning, and I sell in the afternoon. We’re developing a local, flexible supply chain that doesn’t currently exist. So that’s the real innovation and one that we can duplicate easily when we move to other cities.
It’s really the backend that’s going to be the innovation. But it’s bringing all the pieces together and making it work on a day-to-day basis that’s going to be the real game changer in Houston and other cities around the country.
How have you implemented tech into Grit Grocery?
We’re much more than a grocery store on wheels…in addition to a mobile app, the tech part of our solution involves predictive analytics for inventory and a bot vendor management system. I’ll let Jamal elaborate a little more on this…
Jamal Ansari, Grit Grocery head of finance and technology:
Our firsthand experience of working with local producers is a blessing and a curse. It’s an intimate relationship that provides confidence about quality and helps us to be aware of the needs of our vendors and suppliers. But it’s also a challenge when turning up the volume and scaling to a regional or national level.
So we wanted to use AI bots to integrate everything from our communication with the producers and our inventory management systems, all the way to the targeted promotions we run to attract customers. It will allow us to predict and navigate any variability in supply while asynchronously ratcheting up or down demand via social media promotions.
What this means is that we can integrate the output of our local farmers and tie in our inventory management and marketing efforts, thereby reducing waste in our supply chain. This is critical when working with a perishable commodity such as local grocery. We can systematically influence sales if our farmers need to send us more of a certain product, or reallocate inventory in our system rapidly to account for mismatches in short-term supply and demand.
We haven’t really advertised this as the thought of ‘bots-meet-broccoli’ may scare people. Our innovative approach to tighten the supply chain will enable us to manage key cost drivers while benefiting our local suppliers and customers. We’re confident this will create a win/win for both Grit and our suppliers. Our model is all about being nimble, and we believe our tech strategy is conducive to achieving that goal.
Back to you Dustin, can you tell us about how you’ve handled funding so far?
I started the business in 2015 and just invested a small amount myself to test the concept, basically to find the Minimum Viable Product (MVP). Then I got a small business loan for $65,000, and that was our pre-seed. That gave us the runway to conduct concept tests for a longer period of time, to generate some revenue and confirm that the business had legs. We completed that in December. We ran for about eight months, earned $50,000 in revenue and proved that there was traction and a loyal customer base. Now we’re raising half a million via the equity crowdfunding site, Wefunder. That will allow us to expand our number of trucks and locations and make a bigger splash in the market.
How did you get validation from the market?
The great thing about retail is that you know immediately, right? It either works or it doesn’t. We were able to play with the product offering. We changed what we put on the truck and learned what worked and what didn’t. We played around with the meal bundle offerings as well as the locations where we were selling.
What we were measuring was obviously the number of people who came to the truck and their average transaction price. That trajectory was up throughout the trial. We generated about 50K in revenue from about 1400 transactions. What we were most proud of was that we had a customer return rate of about 70%. That was one of the indicators that this is real.
What have you learned through the process of procuring and selling the products? I obviously understand that you must have gone through a lot of struggles through the nascent stages but could you just tell me a story of how you persisted?
Everyone understands that as an entrepreneur you do things that don’t scale in order to scale. That’s what we did. We drove around and picked up small volumes from local farmers and producers and made 30 stops every couple of days for six months. That was hard. These farmers don’t have a purchasing or sales department. It’s one or two people that are doing everything; they’re small entrepreneurs themselves. But over time, we learned a lot about how we’re going to build this supply chain. Now we’re focused on using bots on the backend to onboard, manage and communicate with these small, fragmented producers. And again, that’s what’s unique about what we’re doing versus conventional big box groceries.
What have been the biggest challenge and lessons in understanding the market?
We’ve learned a lot about what locations work. Because we’re in the truck, we can go almost anywhere and test different sales locations. We’re selling an unprocessed, healthy food offering. We wanted to test out a gym – with some of these, you’re talking several hundred people attending in an evening. So we tried a CrossFit/Yoga studio, which we thought would be a good fit. But what we found is that people were there with a very specific goal in mind – their workout. They were far less likely to engage with the truck, because it didn’t fit into their pre-planned goals for their evening.
It was just a better fit with residential areas. People would come out while they walked their dogs; they would walk over with a beer to check out the truck. We didn’t anticipate that going into it. They were already more invested in the concept and willing to engage with the model simply because we were in their neighborhood, on their street, at their homes. The model is truly community-driven, so it just makes more sense at a residential building or in a neighborhood.
What’s been the biggest takeaway from all the reviews and feedback you’ve gotten from customers?
As far as negative feedback, real pushback usually revolves around what we have on the truck. Our approach is different to conventional grocery, where the mentality is, let’s put everything in a big box and let the consumer choose. What we’re doing is curating. So if someone walks up, and we don’t have what they want, that’s where we usually get feedback around, ‘Hey, you should put this on the truck’, or ‘I want this type of mushroom’. We’re going to have to figure out how to capture that feedback and interpret it as we grow in scale, so we can customize the offerings for these trucks in every neighborhood. That’s really our challenge but also something that will differentiate us from competitors.
What are your plans for expansion?
Right now we want to make Houston happen and prove the model first. But if it works here, it will work in other fast-growing cities.
We just need enough trucks and enough traction to flesh out the complete business model. And then we’ll start moving over the next few years to cities like Austin and Dallas and San Antonio, and then across the country to similarly fast-growing Sun Belt cities.
What have been your biggest pain points so far? How do you hope to overcome them?
Scale is critical in food, so that’s the challenge. We need a certain volume in order to get our costs where they need to be. That’s what we learned in our MVP concept tests. We need enough trucks to allow us to buy the volumes we need to get the costs down. Like I mentioned earlier, we have to do things that don’t scale in order to scale. It means going around picking up small volumes at thirty or forty different vendors around town in an effort to flesh out the supply chain – so that later, when we get volumes, they start delivering to us. You’ve just got to start small.
In your startup journey, have you had mentors?
Certainly. This idea was born in the Rice Business School. There were several faculty members there who have been guides and mentors for me along the way. Also, I’m part of a group called The Station Houston. It’s a launch pad for entrepreneurs and lets you network with other founders and get access to mentorship opportunities.
The value of a mentor is honest, objective feedback – somebody that cares about what you’re doing but is outside of the day-to-day and can provide a perspective that is sometimes hard to see when you have your head down in the midst of it.
What’s the best piece of business advice that you have received so far?
The concept in entrepreneurship of creating the ‘Minimum Viable Product’. Don’t talk about what you’re going to do, just go do it with a stripped down, distilled product offering; test it, make changes and then test it again. That whole fail fast, stay lean, stretch your resources, MVP mentality… it was pounded into our heads at Rice, and it’s become Grit’s mantra.
Expect failure – in fact, plan for it – and try to learn from it.
So to wrap up, why the name Grit Grocery?
Grit means a lot of things. It takes a little grit to take back control of the way we eat and of our health. But the image that comes to mind around Grit for me is the farmer handing you a bundle of carrots that he just picked from the fields – he’s got dirt under his fingernails… It’s about reconnecting with an authentic food experience.
For more information visit Grit Grocery or their funding campaign.