Erewhon's Chief Growth Officer reveals membership drives over half of revenue and tech stack is fully in-house with 10 engineers

Speaker 3: When you spend as much money as Airwon... As at Erawan as Jordy does, they send down the chief growth officer to check-in... Is that what's going on?

Speaker 5: Brought you guys some personal gifts too. There we go. Yeah.

Speaker 2: There we go. Nice hat. This is a nice nice material.

Speaker 3: But yes, introduce yourself and...

Speaker 5: Good to meet you guys.

Speaker 2: I'm pulling up my app right now.

Speaker 5: I already looked you up before coming in here. Don't worry. You're up there.

Speaker 3: Yeah. Yeah. Yeah.

Speaker 2: I've never met anyone that can pull up the app. Yeah.

Speaker 5: You're up there.

Speaker 3: I there's a whole slide on him in the board meeting.

Speaker 5: There is. There is. It's like,

Speaker 3: let's project out Jordy. What does that do for...

Speaker 5: I also thought of the whole conversation where everyone thinks they're the top spender at Air One and no one's ever even remotely close to being the top spender

Speaker 3: Okay. At Air

Speaker 5: Yeah. That's part of it.

Speaker 2: Yeah. Okay. That's funny. I'm just saying I've never met any... I've never gone app for app with anyone.

Speaker 3: That's hilarious. But yeah, introduce yourself. Yeah. Talk about the day to day.

Speaker 5: Talk about

Speaker 3: the challenges and the...

Speaker 5: Chief Growth Officer of Air One. Yeah. If you don't know... If you're not from LA, you may not know what it is. Some people probably do. We're a chain of grocery stores at its core. We've got 14 stores across the Los Angeles market today. Yeah. We are premium in everything we do. We're top of the market in terms of the brand, the food, the store build outs, the retail experience and we just try to push the bounds in everything retail and food and beverage. Been there eight years. It's been a ride. I worked in the back of a grocery store when I started.

Speaker 2: No way. Yeah.

Speaker 5: I went from the Beverly Hills private equity world to going in the back of the dairy cooler at The Grove to my office.

Speaker 3: That's cool.

Speaker 5: And we've grown up. Did

Speaker 2: you like get a bunch... Like, how did how did that series of events happen? Because you were just going in for lunch I was every day playing a

Speaker 11: great job.

Speaker 2: Seeing the guys seeing

Speaker 5: the guys... No. And the truth of it is I was I was in the private equity world for a long time Yeah. And wanted to transition and learn how to run a business. Wanted to be a GM one day and I met everyone...

Speaker 3: So you wanted like true operations?

Speaker 5: Yeah. Met I met people in UNLA and I got very lucky to meet our owner and CEO, Tony

Speaker 3: Yeah.

Speaker 5: Who was looking to bring someone on to help him grow. Yeah. And we're still a family owned business but we were a much more mom and pop business back then. We only had four stores, no corporate offices. Yeah. And we've just grown since then.

Speaker 3: Yeah. What's... What is the overarching thesis on 15 stores in one Fourteen. Region? 14 stores in one region? I guess the fifteenth store opened in Thousand Oaks?

Speaker 5: That might have been 14.

Speaker 3: I guess.

Speaker 5: Palisades closed its reopening, So

Speaker 3: anyway, All the stores write in one Yeah. Mentality. What's the benefit? What what what's the thesis around expansion?

Speaker 5: We run out of a commissary model. Okay. That's the reason. Yeah. So we have a commissary kitchen in Downtown LA.

Speaker 3: Oh, okay.

Speaker 2: We call

Speaker 5: it Air One Disneyland. Sure. It supports all of our stores. Okay. So any normal cafe Yeah.

Speaker 3: Yeah. Yeah.

Speaker 5: Can't do what Air One can do without the support of a central kitchen.

Speaker 3: That makes sense.

Speaker 5: That allows us to do sort of this hub and smoke bottle and grow. Got it. Okay. And it lets us do what we do.

Speaker 3: Yeah. We've got to be really really big until you can do the second Yeah. Hub. Exactly. Because you can't jump one

Speaker 5: store in every key mode.

Speaker 3: Because there's world where it's like, yeah, there's one in San Francisco, one in Manhattan, but that wouldn't work.

Speaker 5: It doesn't work. It works for grocery stores. Yeah. It doesn't work for food.

Speaker 3: Sure. Sure.

Speaker 5: And the prepared foods will make everyone one, at least we think.

Speaker 3: Yeah. A 100%.

Speaker 5: We think about growth in terms of everywhere we can drive from our Comms or Kitchen. Yeah. So further south's in play, the Bay Area is in play. Yeah. As soon as everyone talks about Air One New York City, which would be a smashing hit, we know that. Yep. You got to have the supply chain to support it.

Speaker 3: Got it. Okay. Yeah. What is the what is the model for platforming or accelerating new and upstart brands? Like there was a there was a while ago where I believe maybe a decade ago or two decades ago before the Amazon acquisition, Whole Foods had like regional buying. So like, you could get in one Whole Foods, you could use that as a toehold as like a CPG company. Mhmm. And I'm interested in like, what role do you see Era One playing in being a curator, a taste maker, an important pillar in the growth story of modern CPG companies?

Speaker 5: Yeah. I mean, it's it's been organic. But we are the top of funnel for every CPG brand or we try to Whole be. Foods was it at some point. I have a background in CPG before this and every brand wants to be in Erawan. Yep. We like to remind people you can't make a business on 15 stores. Yeah. You have to grow from there. Yep. But you can get the volume, the velocities that you can take in Erawan and prove that to other retailers, other investors,

Speaker 3: Yep.

Speaker 5: Yeah. And it's happened organically. We just have a cache of bringing in the best and the newest and Yep. And knock on wood everyone wants to be in Air One without us having to go out and forge all those brands today.

Speaker 3: Yep.

Speaker 5: And it seems to work.

Speaker 3: What's the...

Speaker 2: Yeah. And the other thing that's notable is like I I know and I'm I'm sure there's multiple, but I know of one one SKU at Airwon, that's the number one SKU at Airwon and the number one SKU in its category on at at Amazon as Oh, interesting.

Speaker 9: Which one?

Speaker 2: So like think Salt and Stone.

Speaker 5: Okay.

Speaker 3: Do have

Speaker 2: a company? Yeah.

Speaker 5: Yeah. Just got bought.

Speaker 2: Yeah. Friends company.

Speaker 3: Oh, interesting. Yeah. What what what is the life cycle for a brand from first meeting to actually being on the shelf? Like, how quick is that? Is that years of of building a relationship?

Speaker 5: Could be

Speaker 9: two weeks.

Speaker 3: Two weeks.

Speaker 5: Could be two weeks.

Speaker 9: Woah. Yeah.

Speaker 5: So we That's crazy. We try to operate very differently from the traditional grocery store and

Speaker 3: that Yeah.

Speaker 5: Allows us to be fast.

Speaker 3: Yeah.

Speaker 5: So Whole Foods, you know, Sprouts, six month category reviews, they cut in new products.

Speaker 3: Yeah.

Speaker 5: We're reviewing products every Thursday

Speaker 3: Yeah.

Speaker 7: The office.

Speaker 5: And we're reviewing categories on the Wow. And we can self distribute and bring them into our distribution center. We can go through distributors we already have. Yeah. And allows the brand to get on shelf really quickly.

Speaker 2: Yeah. And how how quickly do you know if something's gonna work?

Speaker 5: Couple months.

Speaker 2: Really? Couple months.

Speaker 5: And it's hard. I mean, getting into Air One is not the hard part. Selling at Air One is the hard part. Yeah. You guys have been there. Look at the beverage wall.

Speaker 3: Yeah. There's tons Yeah.

Speaker 5: It's a ton of stuff.

Speaker 2: No. Every every time I... Somebody every time somebody pitches me a beverage brand, say like, go to Air One and be honest with yourself when you are on this wall. Are you gonna do And and this mark... And Air Ones are I think a place where people are probably more inclined than ever to try something new because of that curation element and because like people are novelty seeking when they're when they're in in a narrow one. Yeah. Right? They're like... They might go in and get their favorites but they also wanna try, I'm gonna get five things I've never had before.

Speaker 5: For sure.

Speaker 2: And... But be honest with yourself. Are you actually gonna win on that wall? Because it's like the most competitive market I

Speaker 5: take that beyond beverage. I mean, I'll take my air one hat off. If someone wants to start a CPG brand, say, don't do it. Like, it's incredibly competitive. It's really hard. Can see it from the inside angle.

Speaker 2: Know it's really hard.

Speaker 3: Yeah. What what have you learned about retention curves in like where we see with like software, you know, you you get somebody in, they might churn for a little bit, but then they become a weekly active user, then a daily active user, and this curve kind of smiles. What does success look like for a launch? Is it like really high conversion as soon as they're in and then some reasonable churn? Or how do you even think about Yeah.

Speaker 5: From a

Speaker 3: brand perspective. Like you're putting a new brand on the shelf. You know, it's been a couple weeks. You're moving quickly.

Speaker 5: Yeah.

Speaker 3: But then you need over three months or six months to see good turn data. But what is the shape of that turn data? What other metrics are you looking at?

Speaker 5: Yeah. The reality is the brands control the brand's performance at One.

Speaker 3: Okay.

Speaker 5: We we can't... They're on the shelf and it is what it

Speaker 3: is. Yeah.

Speaker 5: And brands will invest or not invest. They might be local, they might not be. Mhmm. Retention groups, we think about from the member perspective. Mhmm. There is a... Air One's a fascinating business for a lot of reasons. There is everything the customer sees and there's everything the customer doesn't doesn't see.

Speaker 9: Sure.

Speaker 5: And where me and my team focus on are all the things the customer doesn't see. Yeah. And talk about retention, like membership drives Air One. Yeah. Sales from members are well over half of our business. Okay. And that drives our entire business. We might try to be Costco one day where we're not a 100%, but we're close to a 100% membership The evolution of a customer at Airwon is they will come with a friend.

Speaker 2: And part of that, it's like, if you live near an Airwon and you're going even a couple times a month, it's hard to justify not getting a membership. Yes. Because it's actually really good. I mean, it's...

Speaker 11: But it

Speaker 5: starts way it starts way before You you will have never heard of it and someone will say, let's go get breakfast at a grocery store. And you'll say, why are we doing that? And you'll come get a breakfast burrito and it tastes good and you might come back and get a smoothie and it tastes good and you might come back the next time by yourself and get a couple things and on your third or fourth or fifth visit, you've bought the membership. Once you're a member, unless you leave LA, you are not leaving the membership program. Because like you said, you come once every week or two and it pays itself off. Yeah. So that's our evolution and we just launched the tiers program. You got it on your app where we're just getting people further and further into the cycle to keep them as long as we can.

Speaker 3: What's the thesis on celebrity collabs? Very unique, very interesting.

Speaker 5: Yeah.

Speaker 3: Are you ramping that up? How do they work?

Speaker 5: Yeah. So they... I would say the thesis is that's top of funnel. Yeah. They don't make or break the business from like a dollar's perspective at all. But you get a lot of eyeballs and you can leverage audiences that we may not have already.

Speaker 3: Yeah. It feels like it's you know, Hailey Bieber's smoothie was like globally relevant. It was like global news or at least national news.

Speaker 5: I mean that skew that in particular was Broke the Internet. Anomaly. Yeah. Like, they'll do h b s case studies on that Yep. Individual item. It... You could run businesses off of that item alone. Yep. But we run them every month. They're successful. They usually last thirty days. Yep. We leverage another audience. Then we've kind of built system and a process, we can just keep kind of going with them.

Speaker 3: Yeah. That's great.

Speaker 2: Yeah. How do you how do you think about balancing the in store experience for people that live in the area and are like DAUs or weekly active users versus the the most frustrating times I've had in store are like a summer weekend and it walks in and it feels like it's a tourist attraction.

Speaker 5: Beverly Hills?

Speaker 2: Yeah. Yeah. Yeah. Beverly Hills is crazy. Venice can get Yeah. And it ends up, you know, I might rage quit, you know. I might just walk out. And and I feel like that's a champagne problem. Right? Yeah. Like there's people traveling from around the world. They're like

Speaker 5: Or local.

Speaker 2: Yeah. Yeah. Yeah. Local, but also like, I'm in LA, I gotta go. This is like part of my stop. Yeah.

Speaker 5: Champagne problems for sure. Cannibalization is good for our stores. I will not go to Beverly Hills on the weekend. I won't go to Venice on the weekend and I work there. It's a terrible customer experience from my personal perspective. And so we... Our stores have theoretical limits of capacity and a good customer experience, we believe. And so we have lately infilled West the Hollywood store opened. It pulled away from Beverly Hills.

Speaker 3: Oh, sure.

Speaker 5: Believe it or not, Calabasas was our best store. We opened Thousand Oaks to pull away from there a little bit. Interesting. And it helps the overall experience to offset that whether you're a member or you're not or you're local or you're not Yeah. If you go into Beverly Hills and it's slammed in Canyon, it's just another spoke. Absolutely. Interesting. Yeah. And it helps fill that capacity.

Speaker 2: Yeah. Yeah. How how how have you guys thought about technology and like the consumer app experience over the years? I I felt like it actually took me a while to like even be... Use the app just because like my association with like a grocery store made an app. Yeah. It was is so bad. Right? It's like, sorry, I'm not gonna download I'm not gonna download the Vons app. I'm just never gonna do it. Right? So eventually downloaded it and you guys ship a lot of updates. It's, you know, it feels like a startup is shipping it

Speaker 5: Yeah.

Speaker 2: In a In a good way? Interesting way. In a good way. Yeah. Yeah. In the sense that like some stuff will break but it'll get fixed quickly. Yeah. And it's constantly improving and Yeah. Things like that.

Speaker 5: I appreciate that. We... I mean, feels like a fraud coming on a tech show working at a grocery store. But it's all built in house. So we operate a team of 10 folks and every piece of software you see, we built ourselves from the ground up.

Speaker 12: Yeah.

Speaker 5: We didn't have it before. We had a third party app and you... If you had it at the time, you'd probably agree.

Speaker 2: Dude, the app the app when I moved to LA It disgusting. It was so bad.

Speaker 5: Because this... Shut it down because the retail experience Oh, was

Speaker 2: yeah. It like... Was irs.gov level. Yeah. Yeah. It was And so like we put... In hindsight, it was like I actually had... You... When the the new app came around, I had pretty low trust level with it because I used to like with with Connor and and Sean, we'd all order breakfast burritos on that and the app was just like so horrific. It was it was so bad. But it got good. So you guys fixed

Speaker 5: it. Thank you.

Speaker 3: 10 people seems like the right amount of... The the right size. Like it's it's a big enough team, but it's not overstaffed.

Speaker 5: Yeah. It's a

Speaker 3: team, basically.

Speaker 5: It is. It's it's an internal tech software team with developers data engineers and and all of that. Mean, we're sitting on treasure troves of member transaction data Sure. Starting to layer into the app. And so we made a conscious decision that that app was terrible

Speaker 3: Yeah.

Speaker 5: And we needed one that reflected our brand in our stores and we put in the time and the money and the effort to build it. And that's where we got. And and the numbers speak for themselves because Yeah. People that go on the app and shop omnichannel are Yeah. Not novel to air once. It's a

Speaker 3: lot of So

Speaker 4: you...

Speaker 3: 10 people on technology or on the app, Who else is on your team? Who else sits in growth? Like what other disciplines Yeah. Fit under growth?

Speaker 5: Yeah. So our team, we define it as what are all the ways Air One can grow outside of opening new stores.

Speaker 3: Yeah. We will

Speaker 5: continue to open new stores and we are

Speaker 3: that's like an obvious way to grow.

Speaker 5: That's not because we have that. We're focused on everything else.

Speaker 3: So the function of growing.

Speaker 5: Yeah. And so what do we do? We do all things e commerce and digital. Yeah. And so that's the app, that's the website. We run a separate DTC Shopify site standalone that we're merging in nowcom. Oh, interesting. Okay. We built a data warehouse. We have data analytics. We just hired a data scientist to help our team to start churning through all the transaction data. We've got applied applied AI engineer who's internal tools using AI.

Speaker 3: What's the history?

Speaker 2: I should imagine your job is to apply AI to Airwon. It's fun.

Speaker 3: You're super intelligent with supermarkets. What what has the the the evolution of the journey of like third party delivery services just delivery been? Like I I saw this report that there's a secret network of In N Out delivery. Have you heard about this? That that there's like a... It's basically just like a WhatsApp group. Bootleg. Like like... So In N Out has turned down Right. DoorDash. Yeah. Like you can't DoorDash In N

Speaker 5: Out. Correct.

Speaker 3: And that's a brand standard. They've decided to do that. But there's people that are like

Speaker 2: Life finds

Speaker 3: a I got another idea. Life finds a way. And so I'm wondering about the evolution of delivery, what's worked, what what you know, what have you learned along Yeah. The journey.

Speaker 5: Yeah. Every restaurant has to deal with it separately. In N Out might have done it from a capacity perspective

Speaker 3: Yeah. Potentially... Always a lineup.

Speaker 5: Always lineup. There's only so much throughput they can put to the kitchens. Yep. We we keep both. We have three p and one p. Okay. One p is what we're talking about.

Speaker 3: Yep.

Speaker 5: Three p is Uber and Postmates, we're exclusive to them. Okay. And we like to balance both. Uber is a marketing machine.

Speaker 4: Okay.

Speaker 5: We could turn it off, but they are bringing in net new customers to us

Speaker 3: Yep.

Speaker 5: All day long. Yep. Maintain margin neutral on them because we mark up to offset the fees.

Speaker 3: And are they getting... I know most of those Uber customers getting like food and smoothies or are they doing like their full grocery

Speaker 2: shopping?

Speaker 5: Oh, super prepared foods.

Speaker 2: Okay.

Speaker 5: Most super foods. That makes sense. And then our app is our one p. Yep. We're margin neutral, but if you're a member, you're not getting points on this side. You're getting points on the app only. Yep. And so every member that shops digitally, I'm guessing you...

Speaker 3: Flows over.

Speaker 5: Oh, okay. And the... Can bring over here. Yeah. That's... And we keep this on for eyeballs and people coming into our system Yep. And then we use our marketing effort to transfer them over here. And as long as this experience is good, if not we think better than Uber Eats

Speaker 2: Yeah.

Speaker 5: Yeah. We've got them. That's how we think about it.

Speaker 2: What is... Do you guys spend a lot of money on on traditional advertising? Zero. Yeah. Figured. Zero. Because the products really like... Air One has managed to like stay like in the conversation at least at a low level like perpetually Yeah. And it's... And it almost feels like it does.

Speaker 3: But I mean the obvious that marketing thing would be like buy an f one team. Right? Like if they got an F

Speaker 2: one team. It's on

Speaker 5: the road map.

Speaker 3: Yeah. I'm not saying you should run like D to C ads that's, you know, potentially low...

Speaker 5: But in all fairness, we've been in Southern California. Yeah. So when we go to market number two

Speaker 3: Yeah.

Speaker 5: There will have to be more

Speaker 3: Yeah. Outward marketing. Yeah.

Speaker 2: Yeah. It feels like you guys have exercised like insane self control around expansion.

Speaker 3: It's a family business. Like, this is always the story. Right?

Speaker 2: Yeah. Yeah. But but but still, it's like the amount of people that are like, when are you opening in New York? Yeah.

Speaker 3: When are opening

Speaker 2: New York. Like for like years and years and years and Yeah. And then letting people like front run you the market. Right? Yeah. And in some ways I feel like they'll do a service to you because they're just introducing people Yeah. To the model. Then because they don't have the the scale and the playbook, like the the experience is ultimately like inferior.

Speaker 9: Yeah.

Speaker 2: But they're getting people sort of like bought into that idea of like going and getting. You can get breakfast, lunch and dinner at the grocery store.

Speaker 3: I I

Speaker 5: think there's two elements to it. We can't miss on a store. It's too costly. And so we don't want to open New York or Vegas until we're ready. And if you miss on a store from a brand perspective, it can it can hurt.

Speaker 3: Why is it costly? Is it just the build out cost?

Speaker 5: The No. Sorry. Ten year lease No. Like the brand impact on a miss. The brand? Okay. Yeah. Would be Yeah. Oh,

Speaker 3: that's the empty one.

Speaker 5: Yeah. Exactly. Yeah. No one... They messed up. They should went to New York too early Sure. Not gonna work in a second market, Yeah. But discipline, we are a family owned business, that's true. But our owners, Tony Justine, have maintained a lot discipline on opening stores. They bought the first Air One, which was at The Grove in 2011. Mhmm. And then they waited three years to open a store. They waited two years to open a store. We open a store every year, then every six months, and now we're opening three a year.

Speaker 2: Mhmm.

Speaker 5: Three year for Air One is very

Speaker 7: fast.

Speaker 5: Yeah. These things are titanics. They're like operational behemoths. But the economics suggest take out as much capital as you can and open as many stores as fast as you can because they pay back like that. Yep. But if you do that, the model breaks.

Speaker 3: Yep. So we've

Speaker 5: taken the route of going slow. But three this year was good for us. We've got three openings next year in the Palisades reopening, Downtown LA and Newport Beach, which will be a slam dunk for us, and then we'll kind go from there.

Speaker 3: Yeah. Makes a lot of sense. It's exciting. Yeah. I love it. Thanks for coming by.

Speaker 2: Yeah. Super cool.

Speaker 3: Any other questions?

Speaker 2: Had I've had like my adult life perfectly tracks with like my Erawan experiences. Like moving to LA, I drove into LA with like a with a with a gold colored Prius that had 200,000 miles on it. And I would drive it to Erawan, I knew that I couldn't afford anything in the store. And so I would just bring these big glass jugs of water and at at the Venice location, I'd be filling up these jugs and I'd always be looking inside.

Speaker 3: Never understood that. You've told this story before, but like, Erawan gives like free filtered water? No. No.

Speaker 2: No. This was like... You maybe have removed it by now, but you could pay like $2 and fill up a jug like with like water. So I would just drive in there and I would never... I just like knew that I couldn't afford anything in there. I just wouldn't go in at all. And then and then over time I just like I just

Speaker 5: it just sucked me in. Yeah.

Speaker 2: It sucked me into a vortex. And then and then other... Like all these memories tied to like whatever car I was driving at the Okay. Yeah. I distinctly remember I was on like a pretty long drive, pulled into Erwan, the spot right in front of the opening And in went in, had dinner or whatever, bought bought some groceries, come out. Car doesn't start. Luckily, I knew all the valet guys like super well. Like, they were my buddies. Like, I would talk to them all the time. So I'm like, oh, guys, like, this thing looks pretty cooked. I'm gonna be working on this for the next couple hours. But they're the best. So many so many great memories. Stuff. Yeah, really really cool how how sophisticated the operation is. And yeah, excited to hear how you guys effectively apply AI to get me to spend more money.

Speaker 3: Yeah. But it's it's joyful. Thanks so much for coming on the show. Yeah. Have a good one.

Speaker 2: Of course, dude.

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