Schnucks Bets Big on Local Brands — But Will It Work?

Summary

Omni Talk Retail Podcast Summary

Episode Title: Schnucks Bets Big on Local Brands — But Will It Work?
Release Date: May 2, 2025
Hosts: Jeff Walton, Anne Mezzenga, Chris Walton, and Luis [Last Name]

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Introduction

In this episode of Omni Talk Retail, the hosts delve into Schnucks' ambitious initiative to integrate local brands into their product offerings through an incubator program. Launched a year prior, Schnucks' Snooks Springboard aims to support local, diverse-owned businesses by providing education, resources, and access to Schnucks' extensive customer base. As the program introduces its first cohort of local products in 15 St. Louis area stores, the hosts explore the potential benefits and challenges of such initiatives within the retail landscape.

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Schnucks' Local Brands Initiative

Schnucks Markets has taken a significant step towards fostering local entrepreneurship by launching Snooks Springboard, an incubator program designed to test and promote local products. Starting May 3rd, select Schnucks locations in Missouri and Illinois will feature products from the program’s first cohort, accompanied by sampling events to engage shoppers and introduce them to these new offerings. This strategic move aligns with Schnucks' family-owned heritage, emphasizing community support and the promotion of lesser-known, family-operated brands.

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Perspectives on Local Incubators

Jeff Walton's Insights

Jeff Walton, one of the hosts, expresses strong support for local incubator programs within grocery stores. He emphasizes the community-building aspect of such initiatives:

“I think you're a terrible person if you're not pro that. It’s a great concept that I think does a lot for a local community” (00:00).

However, Jeff also raises concerns about the profitability and strategic alignment for larger companies. He suggests that Schnucks’ genuine commitment to local brands, rather than seeking mere headlines, increases the likelihood of success.

“When you do it for that manner in that capacity, it works. When you do it for a headline or a consumer talking piece, I think it's lost.” (02:12).

Impact of Tariffs on Small Brands

The discussion shifts to the vulnerability of small local brands in the face of external economic pressures, such as tariffs. Jeff highlights the precarious situation for businesses reliant on importing goods:

“Unless you can think about your pricing and promotional strategy in a very quick manner... it'll be very challenging for some of these smaller bespoke brands...” (02:42).

He cites Huckberry as an example of a company successfully navigating these challenges by sourcing a mix of US-based and international brands without relying solely on promotional tactics.

Luis’s Strategic Advice

Luis, another key voice in the conversation, addresses the strategic considerations for retailers contemplating the integration of incubator programs. He poses critical questions about the allocation of capital and resources:

“Is it the right use of capital and resources for a grocer to be investing and helping develop those companies?” (04:07).

Luis underscores the importance of aligning such initiatives with the company's core DNA and capabilities. He points out that while many large corporations attempt to incubate small businesses, sustainable success often requires acquisition of already scaled companies, rather than fostering startups from the ground up.

“How stretched can you be? Do you want the grocer just focused on their core business... or do you want to integrate and scale new products quickly?” (04:07).

Chris Walton's Position on Local Products

Chris Walton offers a nuanced perspective, balancing his agreement with Luis against skepticism about the long-term viability of local incubator programs for most retailers. He acknowledges the community value but questions the financial sustainability:

“I’m pro the idea as long as you are 100% committed to it being an idea to give back to the community for the long term...” (06:07).

Chris highlights the inherent risk of consistently losing money on small local brands, noting that while occasional successes may occur, they rarely offset the ongoing costs. He warns that without steadfast commitment, such programs may be short-lived, citing examples of initiatives being discontinued in search of other growth opportunities.

“We've seen other examples... where they say they're going to do this and then they pull the plug on it because they need to find some other growth opportunities.” (07:44).

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Strategic Considerations for Grocers

The conversation delves deeper into whether grocery retailers should view local incubator programs as a marketing strategy or a core merchandising effort. Chris emphasizes the importance of evaluating these initiatives not just as promotional tools but as integral parts of the store's product strategy:

“If you're using these local brands as marketing to draw you into your local store... that's not a merchandising play.” (07:44).

He argues that successful integration requires more than just spotlighting local products; it demands a strategic commitment to their placement and growth within the store's overall operations. This involves strong leadership and a clear understanding of how these products can drive comparable store performance year over year.

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Conclusion

The episode concludes with a consensus that while Schnucks' Snooks Springboard program holds significant promise for supporting local businesses and enriching the community, its success hinges on sustained commitment and strategic alignment with the retailer's core operations. The hosts acknowledge the delicate balance between fostering local entrepreneurship and ensuring financial viability, emphasizing that only through thoughtful implementation can such initiatives thrive in the competitive retail environment.

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Notable Quotes:

• Jeff Walton:
  “I think you're a terrible person if you're not pro that." (00:00)
  “When you do it for that manner in that capacity, it works." (02:12)

• Luis:
  “Is it the right use of capital and resources for a grocer to be investing and helping develop those companies?” (04:07)
  “When they acquire a company that's already scaled... they can integrate in their view.” (05:40)

• Chris Walton:
  “I’m pro the idea as long as you are 100% committed to it being an idea to give back to the community for the long term.” (06:07)
  “You've got to have a really strong leadership that's going to stick to this idea.” (08:03)

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This comprehensive discussion on Omni Talk Retail provides valuable insights into the complexities and potential of integrating local brand incubators within grocery stores. It serves as a crucial resource for retailers considering similar initiatives and stakeholders invested in the future of local entrepreneurship in the retail sector.

Transcript

[Host]

We're going to talk about Schnooks once more. Schnooks plans to test local products via an incubator, according to Grocery Dive. A year after launching its business accelerator program, Chinook Markets announced Tuesday it will introduce products from the program's first cohort of local businesses in 15 of its St. Louis area stores. The program, called Snooks Springboard, provides local, diverse owned businesses with education, resources and access to the grocery company's existing customer base. Starting Wednesday, 11 Miss. 11 Missouri and four Illinois stores will offer the company's products in a four week trial to help introduce the new goods to to their shoppers. The grocery has also reportedly scheduled sampling events for the first weekend in May. That's this weekend, people. Head out to all your Schnooks select locations in Missouri and Illinois. I'm going to go to you first, Jeff. Generally speaking, are you pro or con the idea of local incubators within grocery stores?

[Jeff]

The concepts, it's, I mean I think you're a terrible person if you're not pro that. I, I, it's a, oh boy, it's a, it's a great concept that I think does a lot for a local community. Now whether it is a profitable or the right strategic direction for a larger company to employ, I think is if it's looking for a click, you know, banner headlines it to be the unlock for them. I'm not a big proponent of it, but I actually am not surprised at Schnooks given their family owned and operated history, seeing what they're doing in particular in the markets that they're going to employ it. I actually don't think they were looking for a headline here. I actually believe they were doing this because they, they want to get some unknown local family owned and operated brands more exposure. And I think when you do it for that manner in that capacity, it works. When you do it for a headline or a consumer talking piece, I think it's lost.

[Host]

Jeff, I have to bring back something you said earlier in the podcast, cause this is something that I'm wondering about with some of these incubators. What happens when tariffs hit these small companies? Like you've, you've invested all this money in a local incubator and you were talking about major retailers potentially going out of business this summer. I mean what is, what impact could tariffs have on these programs for the small brand that suddenly is paying three times the amount of money for organic flax seed coming from overseas?

[Jeff]

Yeah, it's, it's, it's, it's Lights out. I mean, unless you can, can, can, can think about your pricing and promotional strategy in a very quick manner. It'll be very challenging for some of these smaller bespoke brands that are heavily reliant on the sourcing of their goods outside of the US to weather the type of pressure that we're going to face and we are facing right now. Look, I think there's still some brands that do it well. I think of Huckberry as an example. Huckberry, I love everything that they do and they source a lot of bespoke, unique brands, obviously US based, but they do some international, a lot of international actually brands. And it'll be. And they don't do it for the promo, they don't do it for the advertisement. But I do believe that you have an opportunity with some of these smaller brands to lean into. But it'll be interesting to see how many are actually left at the, at the end of this if this isn't resolved.

[Host]

Yeah. Luis, how would you be advising your partners at A and M or your clients at A and M if they're, you know, if this is the strategy that they have to bring in new customers and really help bolster some of the local businesses.

[Luis]

I think one question, and that's, you know, Jeff, with the CFO services, hat kind of alluded to it, is, is it the right use of capital and resources for a grocer to be investing and helping develop those companies? And that's a real question on, you know, how stretched can you, can you be? Do you want to have the grocer just focused on their core business and other VCs or other players are supporting and bringing the new players to the groceries who will then distribute it, or do you want to integrate and do you think that because you're a grocer, you have actually a specific set of knowledge, you know, the customers, you can very quickly scale the new products in your stores and help accelerate. So, so that's a strategic question that you have to, to answer. And it depends on the DNA of the company. And some companies have turned into good incubators on the side, but not many. So.

[Host]

Yes. Right.

[Luis]

And you actually see a lot of the, from consumer standpoint, a lot of the big players, you know, if you think the pepsi, Coca Cola, Dr. Peppers and others, typically they try incubating, they try developing small companies, but not that many or even L'Oreal in the beauty space or not many emerge very smart.

[Jeff]

Right.

[Luis]

How it typically works well is when they acquire a company that's already scaled, that's no longer a startup and that they can integrate in their view.

[Host]

So right. That's the biggest thing is can, can you scale if, if you do take off in the local four or five stores are you ready to go chain wide and how quickly. So it's more complex you're saying than pro or con Chris, I'll give you the last word. Pro or con? Local income.

[Chris]

I feel like the last two times we've had a M on the show and like, you know, like I, I get very vociferous in my. I don't think I disagree with you guys actually I think I agree with Luis but I'm going to come at Jeff a little bit say I guess I'm the bad person that is con for the local, the local products and grocery stores because I think Luis hit it on the head. Like I don't think most retailers have the stomach to do these for the long term. So like with that I like with that said, I'm pro the idea as long as you are 100% committed to it being an idea to give back to the community for the long term. Like I'm talking forever or as or as R and D and like you're just comfortable losing that money every year and again you're going to do it every year for the R D because chances are when, when you're, when these items are stacked up against every item in the store. I've said this a thousand times on this show. These brands are small for a reason. They wouldn't get in the shelf, they wouldn't get on the shelves otherwise. So you're going to lose money on them more often than not. Sure. Are you going to get a winner? Yeah, maybe every once in a while. But it's not going to offset the cost of trying to do this day in and day out. And the chances are to Luis's point, the winners will get onto your shelves naturally. Anyway, that's just how this works. So net net. I don't think it's a good, good investment of capital for the average retailer to think about. Like I just, I just have not bought in on it. But again schnooks very important in the local community. If they're beholden to the idea of supporting local entrepreneurs then fine. But we've seen other examples, particularly in our local market where they say they're going to do this and then they pull the plug on it because they need to find some other growth opportunities and that's just a waste of time in my opinion.

[Host]

Yeah, so well said. I think that's. That's also like, where's the budget coming from? Is this a marketing thing where you're trying to get like, are you using these local brands as marketing to draw you into your local store? That's a marketing budget. Then that's not a merchandising play at that point in time too. So it's really changing how you're thinking about it, right, Chris?

[Chris]

Yeah, and I'd say too, like, as a former merchant, looking at my adjacencies or my space plan on, you know, in a store, in the average store, as soon as I start to see the average dollars per square foot of these items being incredibly low, I'm going after that and I'm making a play for it because I want to bring in something and I want to be the hero in my organization that helps drive comp growth year over year. So that's what end up, most of the time ends up happening here. You've got to have a really strong leadership that's going to stick to this idea.