With distribution deals in national chains like Costco and Target, Back to the Roots has come a long way from their first experiment five years ago, when, as business school students, they tried growing mushrooms out of used coffee grounds and then selling them at farmer’s markets. After that initial, successful trial, Nikhil Arora and Alejandro (Alex) Velez founded and have grown the company in a culture of experimentation.
Today, Back to the Roots sells their original ready-to-grow mushroom kits, but also aquaponics and gardeninacan kits, and now a line of ready-to-eat items, and they’ve tested everything along the way — from distribution channels to community engagement, from product to the details of selling in retail stores: positioning, packaging, pricing and more.
What follows is an edited interview with Arora on how the Oakland-based startup has incorporated experimentation into all parts of its operations.
Mercedes Kraus: Most people think about experimentation as testing a feature on a product, but you and Alex have run the gamut with experimentation, from product to distribution, from packaging and marketing to the way you operate internally.
Nikhil Arora: Experimentation, we’ve learned, demystifies entrepreneurship, which now has this sort of grandiose ethos to it, like it’s something special and magical and rare. But when you build experimentation into the culture, that all breaks down. It lets two college kids who have no background in food, growing mushrooms or starting a food business do just that — because it breaks big problems down into small little tests.
MK: Were any of these small tests actually really momentous?
NA: When we launched our Water Garden, a home aquaponics unit, it was our first real big brand move. We had been known as the mushroom guys, and all of a sudden, here we were trying to sell a fish tank. In our minds, it connected perfectly — since it was still about growing food — but we quickly realized through conversations with buyers that they weren’t ready to make that leap.
All of that forced us to test and experiment, which we did in a couple different ways. We used a prototype for in-person demos in stores and at farmer’s markets to validate two questions: Does the story resonate? And, are we getting high-level interest or uninterested observations like, “That’s kind of disgusting to be growing food off of fish waste”? Those mini tests gave us a confidence boost to do a larger test, which for us was a Kickstarter campaign.
We had two big goals to test out of that campaign. First was to see if we could actually get people to support at the price of the aquaponics unit — at the $50 level. In the end, about 80 percent of the $250,000 we raised were $50 pledges for the unit. It was hugely validating that people weren’t just supporting us as entrepreneurs, but they actually want to buy the product.
MK: How did you prepare for the experiments you did during the Kickstarter campaign?
NA: Part of it was the influence of lean philosophy in that we began with wanting to make sure we had all of our questions written down beforehand. We knew that, if not, it would be too easy to get caught up in the emotions of the thing, to forget what we actually wanted to learn.
MK: What other kinds of brand and product experiments are you doing right now?
NA: In April, the launch of the breakfast cereal, our first ready-to-eat product, expanded the brand from just ready-to-grow kits: It’s also a very big leap for the brand, and a very new development. We’ve taken the lessons from the Water Garden and asked: How can we test this concept with our key stakeholders before we invest all of our brand’s energy? We’re a small company, so we can’t afford to go out and fail on a product.
In this case, before even talking to customers, we went to retailers to see if there was actually a need for innovation in the cereal category. So we took our mock-ups and prototypes and sat down with Costco and Whole Foods and Amazon — almost, in a way, co-developing the product with them — because we wanted to test out the taste, the packaging, how it fits in the shelves, all of those things before we actually pulled the trigger on production. We wanted to work with retailers initially because just a few buys with a major retailer can mean hundreds of millions of dollars spent on cereal. So we needed to make sure that the gatekeepers, the stakeholders who have such influence, that they were excited about what we were doing.
When they were, we dove headfirst into working with customers, doing taste tests and all these different things. But we wanted to gut-check it first at the highest level.
MK: And, did you test your way into finding cereal as the next product?
NA: Well, how we got to cereal was actually more through passion. As we explored different foods, we got a chance to visit farms and dive into how food is grown. When we visited a wheat farm, it was a moment where we were just blown away and inspired, which is how we fell in love with stone milling. So we went back to buyers with the thought that there was an opportunity for us to really reinvent the cereal category, and do it in a fun way.
MK: You distribute both to national retailers and directly to consumers. How have you figured out the best way to reach your customers?
NA: It’s funny, because we’ve done a lot of testing — especially selling to retail so often. You spend all this time creating this product and this package, and then you put it in a retail store, and you have no idea who the customer is that’s seeing it. It’s kind of a crazy challenge to sell in stores, as opposed to selling online where you can get a lot of customer information: For 80 percent of our customers, we have almost no information.
It sounds simple, but it’s a pretty tough challenge to figure it out, so a lot of our time has gone to how to make our packaging most engaging so that people actually want to pick it up and buy it off the shelf. And then we asked, “How do we get them to engage with us beyond that?”
For that, the learning has not been quick; it’s step-by-step. Each customer engagement test would go for three, six months at a time. Here we are a few years later, and I think we finally kind of figured it out. But early on, we first tried something very transactional, telling people if they had questions to come to the website — so that hopefully they’d come and sign up for the newsletter. We didn’t get much traffic at all, and we could barely track the specific link, which was just a URL on our boxes. Then we thought maybe we could give customers something, get them to visit the website for recipes (for example), and there still wasn’t a high velocity of engagement.
That all led us to what is now a central part of our ready-to-grow products, which is our “Grow One. Give One.” campaign: For anyone who posts a photo of their fully-grown Mushroom Kit on our Facebook page, we donate a kit to a classroom of their choice. We’ve now got thousands and thousands of photos of people, and it’s such an incredible way for us to connect with the customer. So now we at least have some way of communicating with them and knowing who they are in a way. But it was a huge challenge to figure out.
For us to engage our customers, we now realize that we’ve got to focus on the why, which is the purpose of the vision, and not like, “Come for recipes,” or, “Come for help.” The moment we focus on the passion and the vision of the company and the product, we have all these people engaging in the brand. That was an interesting lesson for us, for testing out different ways of reaching out.
MK: How did you test retailers, and retail environments, especially when they are so different?
NA: We’re launching this line of Breakfast Toppers that let people customize their own cereals, oatmeals, and yogurts. As an entirely new product, our retailers are asking, “Where do I put this? What do I do? How many should I order?” To figure that out, it’s about doing really, really quick iteration and testing.
We’ll make our best guess on velocity — like, “We think we’re going to sell 36 of these Toppers a week” — and then design case packs around that. But for us to learn fast enough, we have to be in stores. So right when we launch, we’re there demoing constantly to see if what we had projected was actually what’s happening in stores. If the answer is no, we have to adjust really quickly so we can then adjust the expectations of buyers. If it’s yes, we have to adjust because we’ll go out of stock, and that’s equally bad, because when you fight for all this shelf space and you’re out of stock, you can lose it in seconds. The speed of learning is honestly what can make or break a product launch, so we invest a lot into store demos to learn.
MK: So do you — both you and Alex — go into the stores, or your whole team?
NA: When we launched the cereal at Costco here in NorCal— a whole new product, whole different retailer — Alex and I and a whole bunch of our team members were out on the floor, just talking to customers, learning, watching. I love to watch customers walk up to this display, to see how they interact with it, what they’re looking at. It’s funny how moving it is to actually see something launch, because you quickly realize no matter how much time you spend on it, there’s no way to nail it. There’s so much to learn, and you constantly think, “I can’t believe I didn’t think about that.”
MK: It seems like you really understand how to test and iterate quickly. Were you always such pros at experimentation?
NA: Our Water Garden, actually, is an example of a retail launch that didn’t go well initially: We messed up our packaging because we tested to the wrong audience. We launched our Water Garden, the aquaponics kit, on Kickstarter. So there we were, with $250,000, more than 4,000 followers, tons of excitement and engagement, and we were getting ready to launch the physical product.
For our packaging, we engaged some of our core fans and people who were the most responsive in our Kickstarter community to help us design it. Sounds like an incredible idea, but it was a blind spot in terms of on our product development. We were talking to customers, who — I now realize it sounds obvious looking back — already knew about our product. They loved it, we printed it, and when it finally hit stores, we realized that the average customer had no clue what it was.
So, yes, we tested, and we talked to our customers before we launched, but we tested it the wrong way. We should have taken it to a store and had people who’d never seen it before tell us if it communicated what we wanted it to. We had to do a big packaging recall from our major retailers, and it was a big headache and a lesson learned.
The challenge of testing is in getting feedback but taking everything with a grain of salt: Each type of customer statement is going to give you different feedback, and at the end of the day, success relies on being able to listen to all these different things and hopefully choose the right things and then let some things go.
This week, the Lean Startup is taking over the blog on Intuit Labs with original stories and a fresh perspective. Centered around experimentation and investigating all parts of a business or product idea, this week’s posts include case studies, tips, Q&As, startup stories and more. If you want to learn more about Lean Startup and how it’s applied at Intuit, visit the Intuit Innovation Institute. This piece was written by Mercedes Kraus.