CPG Playbook   //   December 18, 2023

How startup CPG brands are balancing boutique retailers with chain expansion

Independent retailers and so-called shoppy shops — boutique grocers carrying trendy startup brands have become a go-to for online-first brands dipping their toes into physical retail.

Many of these specialty shops’ businesses rely heavily on unique offerings to keep local customers coming in to discover products. So much so, wholesale platforms like Faire have built strategies around catering to these shop buyers’ needs. One of these is offering specialty shops differentiated products from buzzy brands as these brands make their way onto the shelves of chain retailers. 

Emerging brands are rapidly expanding into more wholesale channels to reach mainstream audiences. And while many are seeking out big-box partnerships, they are still finding success targeting the smaller retailers that carried their products early on. Now, wholesale platforms that cater to these smaller players, like Faire, are building out new offerings to better serve specialty shops’ needs. Meanwhile, brands are increasingly seeing success by offering differentiated assortments to these boutique retailers, such as collaborations with similar brands. While sales volume from small retail accounts may not be big, they have an outsized impact in creating buzz for the brand among high-intent customers.

In recent months, collaborations by brands like Aura Bora and Graza, Fishwife and Fly By Jing and Momofuku and Raaka have become bestsellers on Faire. These collaborations, according to brands, are expanding beyond their direct-to-consumer reach thanks to growing interest from specialty shops. 

According to Faire, shoppers at independent specialty shops tend to be discovery-minded and more willing to try unique releases at higher prices. Faire CFO Lauren Cooks Levitan pointed to growing evidence as to why small business owners are interested in these types of products. For instance, within two months of its Graza Olive Oil Martini September launch, seltzer brand Aura Bora sold nearly 2,000 units on Faire.

“Independent retailers have long competed on their ability to curate unique products and a shopping experience that sets them apart from mainstream retail,” Cooks Levitan said. Stocking these unexpected product collaborations, she said, allows these shops to differentiate themselves through unique merchandising their customers can’t easily find online. On Faire, Cooks Levitan noted, searches for products “not available on Amazon” nearly quadrupled since 2020 — signaling an appetite to carry merchandise that can’t easily be found online or in major chains.

A testing ground for new products 

That’s the case for tinned seafood startup Fishwife, founded in 2020, which is trying to keep its relationship with these retailer’s shoppers strong as the brand expands nationally in Central Market and Whole Foods.

But the brand has found outsized success with a product line aimed squarely at more specialty retail players. The FishWife x Fly By Jing smoked salmon set, a collaboration with the also-buzzy chili crisp brand, while not created exclusively for specialty shops, has become one of Fishwife’s top-performing SKUs. Since launching in March, the trio has sold over 15,000 units on Faire to date. The product is now available at about 1,500 doors, and entered into Whole Foods in August. It’s currently in 217 Whole Foods doors, and is due to go nationwide in April.

Due to the excitement for the collab among specialty shops, Fishwife plans to incorporate the rollout strategy of testing niche products at specialty retailers before making their way to national retailers. 

According to Fishwife co-founder Becca Millstein, these smaller retailers tend to be thoughtfully curated by owners for customers who trust their taste. “These stores have been so instrumental to our growth, both in retail and DTC,” she said, particularly for attracting early adopters who typically help popularize a new brand via word-of-mouth.

By Fishwife’s second year in operation, retail accounted for 45% of revenue — and was mostly made up of specialty shops before the brand struck chain partnerships in the past year — “because it’s authentic and also has no customer acquisition costs,” Millstein said. Today, the combined revenue between DTC and specialty makes up over 50% of Fishwife’s business. 

When Fishwife added the Fly By Jing products to Whole Foods in August, it was due to necessity. “It was not our plan to go into Whole Foods with a $14.99 SKU,” Millstein said. Fishwife’s products typically retail around $7.99. After delays in developing its tuna products, Millstein said there was room to offer the retailer an alternative. “It was a risk for our buyer and us, but we had seen the demand making it one of our best-selling SKUs.” Thus far, Millstein said the trio is performing well at Whole Foods because while the velocity is lower than Fishwife’s standard SKUs, the higher price point has helped offset that.

Maintaining relationships with brand advocates 

Another collaboration performing well in specialty retail is Momofuku’s partnership with Brooklyn-based chocolate brand Raaka. Momofuku’s grocery brand, which was launched by the restaurant group in 2021, has been rapidly expanding its noodle line into chains like Whole Foods and Target. 

The Raaka collaboration debuted earlier this year with one chocolate bar SKU, the chili chocolate crunch, on the two brands’ respective DTC sites. It was brought back for holidays with an additional two flavors: a white chocolate crispy rice bar and miso potato chip. The second run was launched exclusively on Faire in October. 

Ryan Healey, vp of brand & marketing at Momofuku, said the Raaka collaboration comes at a time when the brand is still establishing its physical footprint. “We’re in an interesting place because we’re already in chain retailers,” Healey said. 

Originally, Healey said, the company did the collaboration to give its DTC customers something exciting that they wouldn’t be able to find in stores. But now the company is extending that strategy to smaller retailers. “The Faire merchants love when we give them exclusives,” he said. Currently around 1,600 independent retailers carry Momofuku’s products through Faire. 

“We come from the restaurant business, so we know what it’s like to have a presence in local communities,” Healey said. These retailers are willing to take a chance on risky products that major retailers may not want to test on a large scale. “Someone took their limited shelf space to stock us and actually advocate for the brand.”

For specialty retailers looking to carry unique products from buzzy brands, CPG startups want to continue giving them an edge with differentiated offerings. 

For Momofuku, the pipeline for these releases will depend on the trajectory of the brand’s growth. “We don’t have a massive collaboration strategy, so these types of partnerships will depend on having the right partners,” he said. 

Fishwife, meanwhile, is keeping buyers on platforms like Faire in mind for future product expansion. “What we plan on doing to keep the specialty channel vibrant and growing is to continue doing collaborations, like the Fly by Jing product,” she said, which won’t be available in big retailers. “We don’t want to sacrifice this channel as we continue to grow.”