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

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?

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.

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?

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.

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.

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.

Yes.

Right.

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.

Right.

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.

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.

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.

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?

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.