When Jeff Yurcisin arrived day one last August as CEO at Grove Collaborative, he accepted the challenge of a lifetime. Founded in 2012, Grove built a digitally-native business around environmentally-sound, sustainable products for household cleaning, personal care, health and wellness, laundry, clean beauty, baby, and pet care.
Yet despite consumers increasing environmental consciousness, Grove’s business was in trouble. Ironically, the company that sells only clean products had gotten into quite a mess.
After merging with Richard Branson-backed Virgin Group Acquisition Corp in 2021 and going public in July 2022 with a valuation of $1.5 billion, its market cap collapsed by the end of that year and now sits in the $50 million range.
“We were once a unicorn, and now we’re a micro-cap,” he shared with me. “But I’m not here and the board is not here to run a small $50 million micro-cap company.”
With revenues tanking – dropping 16% from $384 million in 2021 to $322 million in 2022 – and the company underwater with $80 million adjusted EBITDA losses, Yurcisin’s first day priority was to get the company’s financial house in order so it could tackle its founding mission: to transform the consumer products industry into a force for human and environmental good.
“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,” he said.
Turnaround Begins
Now Yurcisin can show results after his first year on the job. Through a sharp pullback in advertising expenses and other operating expense cuts, the company has delivered positive-adjusted EBITDA in the last four consecutive quarters and generated positive operating cash flow in three of the last five quarters.
And a new $15 million investment from Volition Capital, following a $10 million investment last year, will allow Grove to payoff the remaining $30 million of its outstanding term debt facility, after it paid down $42 million in July of this year.
Volition’s managing partner Larry Cheng said, “This investment is driven by my belief that the Grove management team has done an excellent job executing on the fundamentals of the business. And I believe the pieces are in place to enable a return to topline revenue growth in the coming quarters.”
Cheng, whose firm specializes in investing in disruptive e-commerce and consumer brand companies, sits on Grove’s board along with Grove’s cofounder Stuart Landesberg as Executive Chairman and John Replogle, former CEO of Seventh Generation and Burt‘s Bees, as lead independent director.
Confidence Growing
Yurcisin still has work to do to turn the company’s topline performance around. Revenues have continued their downward trajectory, dropping nearly 20% from 2022 to end 2024 at $259 million, and the first six months of 2024 are off 23% from previous year, from $138 million to $106 million.
But Yurcisin sees green shoots in its core customer base of green customers, now numbering just shy of one million active customers, but whose net revenue contribution per active customer has grown 35% from $225 in 2022 to $293 in the second quarter.
The company has identified some 57 million “conscientious consumers,” though its total addressable market could be much higher. For example, YouGov found 27% of U.S. adults – some 97 million strong – are what it calls “Planet Protectors,” who have a strong commitment to environmental issues and are willing to spend more on sustainable products.
“Somebody has got to be the leader to help customers who care about human and environmental health make the right decisions for their families,” Yurcisin explained. “So being the first one in, you are going to get a little bloodied, but our customer segment is large and growing every week.”
Yurcisin is projecting to show sequential quarterly growth by fourth quarter 2024 and has raised adjusted EBITDA guidance for a profitable full year, up 1%.
It All Starts With the People
Having spent some 14 years with Amazon, including CEO at its ShopBop platform, Yurcisin learned from the best – Jeff Bezos. He adopted Bezo’s Day One thinking.
“Day 1 is both a culture and an operating model that puts the customer at the center of everything Amazon does,” the company declared. “We strive to deeply understand customers and work backwards from their pain points to rapidly develop innovations that create meaningful solutions in their lives.”
Grove had already found the pain points in its target customers’ lives, but to create even more meaningful solutions for them, Yurcisin needed to understand the Grove culture first. He met personally with everyone on his Grove team to understand their career journey and learn what they think the company does right and may be doing wrong for its customers.
Next, he turned his attention to customer feedback by reading customers’ comments, including the good, bad and ugly. That led to two significant changes to enhance the customer experience.
First, Grove removed so called “gated access” to the site where customers had to give their email address before browsing and shopping. And second, it removed subscriptions as the default option. Rather, it incentivized customers to subscribe via a 5% discount offered on participating items, which encompass nearly two-thirds of available products.
“The change represented a significant shift in our business model, but more importantly, it is the beginning of how we’re rebuilding the front-end of our business,” he said at the time.
Replatforming To Enhance Customer Experience
To further the company’s transformation, it is transitioning its tech stack to industry-leading models, including Shopify for e-commerce, Ordergroove for subscriptions and Tapcast for its mobile app.
The migration from its inhouse-developed systems to these high-performance partners will cut costs, improve efficiency and allow the company to focus on its core retail mission, rather than have staff diverted to software development.
The replatforming began in July and will be completed by the first quarter of 2025. The shift promises to enhance the customers’ experience and provide Grove with more backend tools and analytics to scale its current and prospective customer connection.
Expanded Product Offerings And Distribution
While Grove’s over 300 house brands account for a significant share of company revenue, it has continued to expand its selections with like-minded eco-friendly and sustainable brands, now numbering over 240 partner brands.
These third-party brands have been instrumental in developing its beauty and personal care, pet, gardening, kitchen tools and baby offerings.
Vitamins, minerals and supplements (VMS) are next on the list for expansion as the category offers consistent repurchases. Plus customers who purchase VMS have over a 20% higher average ticket per order and nearly a three-times greater lifetime value than customers who don’t purchase VMS.
And to take advantage of the so-called “halo effect” where digitally-native brands can grow awareness and sales by being present in brick-and-mortar retail, Grove now distributes its branded products in over 10,000 retailers, including Target, Kohl’s, Amazon, CVS, Walmart and regional chains like H-E-B, Harris Teeter, Giant Eagle, Meijer and Hannaford.
Strengthening Its Defensible Moat
One thing that hasn’t changed under Yurcisin’s leadership is the defensible environmental moat Grove has built around its business.
Specifically, it is a Public Benefit Corporation and one of the few Certified B Corporations that have maintained certification for more than ten years.
Plus it is the world’s first plastic-neutral retailer, with plastic being the Achilles Heel of the consumer products goods (CPG) industry where nearly half of all plastics comes from single-use plastic packaging. That means the company collects and recovers ocean-bound plastic pollution from the environment, and recycles or processes it into building materials to support local community needs, through ongoing projects with rePurpose Global.
The statistics are compelling:
- Over 73 million metric tons of plastics are produced in the U.S. each year and 80% is headed to landfills, according to Statista. And only about 5% of all plastic is recycled, per GreenPeace.
- Ocean plastic pollution has reached crisis levels. The Center for Biological Divesity says at current rates, plastics are expected to outweigh fish in the sea by 2050.
- Nanoplastics are everywhere, polluting our air, soil and water and potentially impacting our health. On average, a liter of bottled water contains about 240k tiny pieces of plastic, according to the NIH. And being virtually impossible to avoid, nanoplastics may be linked to Parkinson’s disease, heart attacks and strokes.
- While American consumers are about equally aware of “plastics in the ocean” and “climate change” as environmental issues – 57% and 59%, respectively – they consider plastic pollution an overall bigger problem (65% concerned/very concerned) than climate change (58%), according to a survey among 1,000 Americans conducted by ERM Shelton.
The plastics issue is the one Grove is counting on to activate more consumers to engage with the brand. It is committed to avoiding plastic everywhere it can and giving customers the opportunity to shop “Beyond Plastic” through a digital badging system on its platform.
Some 63% of Grove branded products are 95+% plastic free and over 37% of partner products are reduced plastic. By using the “Beyond Plastic” search feature, shoppers can discover products that are 100% plastic free, 95%+ plastic free or contain no single-use plastic.
Refined Business Goals
Grove Collaborative was founded with an incredibly ambitious mission: to transform the CPG industry. Yurcisin has made its objective more tangible from a business perspective. His vision is for Grove to be “the trusted brand for conscientious customers by creating and curating wallet-friendly, efficacious and planet-first products.”
That won’t happen overnight, but it is a more achievable business goal than where the company started. “To be candid, we thought Grove was not managed well in the years prior to our original investment, “ Volition’s Cheng shared with Retail Dive.
But with his firm’s $25 million investment in Grove, Cheng is now fully onboard, having “recognized the underlying quality of the company” and his belief that Yurcisin will successfully manage its turnaround.