CPG Playbook   //   November 20, 2023

Grove Collaborative CEO: ‘Next year, we will be profitable’

Jeff Yurcisin took the helm at Grove Collaborative this August, a moment when the eco-friendly cleaning brand had yet to turn things around from its stock drop in late 2022. Not only has it lost customers over time, but third-quarter revenue dropped by 20% year-over-year to $61.8 million and and Grove lowered its annual revenue projections by several million to $257.5 to $262.5 million.

But the new CEO, formerly of Zulily and Amazon, sees an ability to turn the company around by winning back former customers with an online revamp, new products categories and personalized recommendations that help customers make more sustainable choices.

“What we’re really openly talking about is next year, we will be profitable. We will deliver on that vision,” Yurcisin told Modern Retail. “When you think about us being this company that aspires to transform the consumer products industry from a sustainability perspective, we’ve got to be sustainable ourselves.”

Founded in 2012, Grove Collaborative operates an online marketplace of natural products in addition to its own line of branded refillable and plastic-free products. The company went public in June 2022 in the heat of the SPAC movement. But its value quickly plummeted from $1.5 billion at that point to a market cap of $73.4 million by December 2022, where it currently hovers. This year, and Grove continues to see year-over-year declines in sales.

To turn Grove profitable, the company tapped Yurcisin, who brings more than 20 years of experience in direct to consumer sales and marketplaces. He most recently was the CEO at Zulily, the budget-friendly marketplace aimed at moms, and Shopbop, an apparel acquisition of Amazon.

At Grove, Yurcisin sees seeds of potential in its most recent quarter and its prior customers. The third quarter saw the company’s first ever positive adjusted EBITDA, at $200,000. It’s expanded its reach to more than 7,500 stores nationwide that carry its name-brand products, a strategy that helps boost sales and drive awareness for its DTC business. Though Grove has sold to one million customers in the past 12 months, it has four million more former customers that Yurcisin plans to win back by being “customer-obsessed.”

The company’s strategies include revamping Grove’s online marketplace to have better search functions and more personalized recommendations. The brand will also pull back on marketing spending compared to prior years and trim operation costs as a means to turn profitable. And Grove plans expansion to new household categories, both in its owned brands and marketplace offers. 

“What I am really energized by is how we can transform that customer experience appeal to those four million customers, bring them back and become officially active customers,” Yurcisin said. “But you do that not necessarily through a marketing channel, or a marketing gimmick, or anything like that. You do that through a superior customer experience that’s delivering tremendous value, that’s educating customers on how to make the right type of sustainable choice.”

This conversation has been edited for length and clarity. 

What are the biggest challenges the company faces right now when looking to become profitable? 
When you’re looking at the business, what you’ll notice is that our revenue has been down. But this is a natural consequence of what had once been unsustainable marketing and advertising spend. So we’re now demanding even greater efficiency, we’re finding pockets of efficiency. We’re really happy with our free channels from an advertising and marketing perspective. So where we’re going is, I think, pretty clear.

What are some of the strategies that you will implement to make the company profitable? 
The five to six different things that we’re doing kind of fall into three big buckets. The first is you have to first start with the customer. And then we’re going to win on sustainability, we’re kind of doubling down on that mission and that vision. And then the last bucket is to prioritize profitability. It is all within this vision of supporting this trusted platform for customers who are depending on us to find safe and sustainable products. That is core to us.

What are the key elements to prioritizing profitability?
There are certain things we can do from a customer perspective while delivering value to customers that can improve our profitability. So the things that jumped out to me are, I think we can improve the core customer experience and that will drive improved retention. A great example of this is this new search and browse experience that we just rolled out. It truly has transformed shopping either on an app, phone or on your PC — to being able to find the right items at the right time in a way that we just didn’t have the functionality. So what that will do is make customers more sticky will improve profitability. 

The second thing that jumps out is we’re really pushing on expanding assortment. When we listen to customers, they trust us to tell them what is safe and sustainable. And so we’ve had some good success as we’ve expanded into health and wellness areas like multivitamins. Every week, more and more customers are putting that into their cart. 

As we expand assortment and coverage and categories and become that true, trusted platform, what’s happening is we’re seeing the lifetime value of customers improving. So all of those will help on the top line. But candidly, though, the team has done a lot of work from a percent margin profitability perspective. I think there’s still opportunity. So I see opportunity on the gross margin line. I see opportunity in how we think about our entire fulfillment ecosystem. These are areas that they’re either contracts or negotiations and are just opportunity to find more efficiency.

Does Grove’s future growth rely on its own products, or the assortment of third-party brands in the online marketplace? 
Customers tell us probably more than any other comment, “I love your products.” So there is this connection to some of our own developed products. If we want to transform this industry, we need to reach customers in a way with a broad assortment that we are explaining why these are good products from a sustainability lens. And so we don’t work backwards from a financial model, saying “This is the percentage of Grove, and this is the percentage of third party brands.” We just think “Let’s put the best products in front of customers, and let them decide.” 

What customers are telling us is they also love some of the great third-party brands that we offer, but they truly do love our own products. And I think that one-two punch is going to be a part of our vision and platform indefinitely. It’s core to how we think about the business and, candidly, core to the type of value that we can offer customers. 

Do you see different paths for growth for DTC sales and wholesale channels?
We are this omnichannel player, and what I love about our business right now is you see a real path to growth in both of those channels. On the DTC side, I joined because of the mission. But I also joined partly because I believe we can fundamentally improve the customer experience. And I believe sustainably profitable growing companies do it through extraordinary customer experiences. I always saw this great opportunity on the DTC side to improve the core customer experience. And we’re going to do that, period. 

On the omnichannel side… there are a lot of learning we’ve had when you get into retail for the first time, and you’re thinking about the type of packaging and presentation on a shelf, versus a website and showing up at your doorstep. One of the things that we’re doing is we’re launching some new products, including a ready-to-use item that is really designed specifically for retail. We’ve been investing in [research and development], and thinking about packaging in a way that isn’t just sustainable, but shows up really well on a retail shelf.

And we’re aspiring to transform this industry. And in transforming the industry, we’ve got to meet the customer where they are. And that’s on Amazon, that’s a Target aisle and many others. So you’re going to see us continuing to add more points of distribution.

And on the e-commerce side, serving customers who love the convenience of a box showing up to their house every month or every other month.

What are the biggest pain points in the customer experience that you want to address? 
Search, browse, sort. All of those were kind of number one. The next big bucket I would say is tied to personalization and recommendations. Our job is to get the right product in front of the right customer at the right price, and what you’re going to see is innovations on each one of those.

I’m not ready to announce which spaces we’re building into. But there’s all of these different categories that customers are telling us and feedback of, “Hey, I’m interested in this type of product.” I was talking to a customer yesterday who was telling me they started off with sustainable home care and love some of our innovations. And now what brings them back monthly are actually our dog treats. Truly, we’ve got some great jerky for their dog. And so there’s a world of, as we’re expanding across categories, tremendous value that we’re offering to customers.