If you live in a low-income neighborhood, chances are you don’t live close to a grocery store. The fruits and veggies many consumers take for granted are much harder to come by in other parts of the country. For some, that often means relying on packaged snacks and soda when the fresh food runs out.
How to address so-called “food deserts”–neighborhoods and regions with limited access to healthy food–has been a matter of public debate for years. Now one digital startup thinks it’s found a solution.
A Digital Costco With A Social Mission
An estimated 55% of all ZIP codes with a median income below $25,000 fit the official USDA definition of a food desert. And while the government has a handful of ways to measure food access, the key characteristic of a food desert is the absence of grocers or farmer’s markets stocked with fresh produce and whole foods, leaving residents to fill their bellies with cheap, high-calorie options that aren’t particularly nutritious.
This is something that Gunnar Lovelace has thought a lot about. After emigrating with his parents, who are from Argentina and the Dominican Republic, to California at age two, Lovelace lived in the U.S. for the next seven and a half years as an undocumented immigrant. “I grew up poor with a single mom,” he says. “I really saw how hard my mother struggled to make healthy choices, and it always seemed crazy to me that food with lots of chemicals and processing cost less than food with chemicals and no processing.”
After graduating from college, Lovelace started working in the software industry. But his dream was to create a way to bring healthy food to people with little access to it, and he believed technology could help. He noticed many people in wealthy communities don’t go grocery shopping; they bought fresh produce through delivery platforms like Instacart or Peapod, the same way they’d order boxes of staples on Amazon or Jet.
So in late 2014, Lovelace launched Thrive Market, an e-commerce site that sells food items, from pasta to chicken to peanut butter, that are carefully selected for their nutritional value. The vast majority of products are priced below market value, typically 10%–15% cheaper than Amazon. The catch is that customers must pay an annual fee of $59.99 to get access to those bargains.
This membership fee lets Thrive Market skirt brands’ “minimum advertised pricing agreements” (or MAPS, in industry lingo), Lovelace explains. “We’re able to have these low prices because we buy directly from the brands and the farmers, we cut out all the middlemen in the supply chain, [and] we have our own distribution centers.” This means Thrive Market’s margins come not from product sales but from membership fees, making the business “kind of like a socially conscious version of Costco online,” says Lovelace.
Not everyone pays the membership dues, though, and that’s where Lovelace sees Thrive Market’s social mission kicking in. For every customer who pays their membership fee, another membership is given away to someone in need. The company partners with nonprofits like Feeding America and United Way to identify low-income families with unstable food access. Thrive Market also allows people to apply for free memberships on its site, prioritizing low earners, teachers, veterans, and students who might not be identified by other NGOs.
Paying members can also directly donate a portion of their savings at checkout to a family in need; Thrive Market claims it distributes grocery stipends based on these contributions to over 1,000 families each month. “The business is really focused on making healthy living easy and affordable to everybody,” Lovelace says. “That’s something that’s very personal to me. It doesn’t matter who you are or where you live or what color your skin is–people want to feel good in their bodies, and they want the same for their children.”
When Less Is More
Thrive Market deliberately sells a narrow range of products. Rather than offering the same hundreds of laundry detergents as Amazon, Thrive Market carries four or five brands that are all non-toxic and as natural as possible. In fact, a product sold by Thrive Market needs to meet 150 quality standards. “Consumers are overloaded and don’t know who to trust,” Lovelace believes. “Discovery [of new products] is really important, but they also want to know that there is some editorial curation in the process.”
Many Thrive Market brands are small organic or artisanal food companies that don’t sell products on Amazon because they’re worried about unfair pricing. They also don’t want to have to mark up their prices in order to stay in the black after Amazon takes its cut.
Smaller brands like Primal Kitchen, Kettle & Fire, Square Organics, and Epic have launched products with Thrive Market to get early feedback from the company’s customers. “What we hear from these brands is that they feel like they are taken advantage of by the traditional retail system, so they don’t want their products to be as expensive as they are,” Lovelace says.
It’s taken Thrive Market several years to scale, but if it’s successful, the model could prove to be an alternative solution to the food-desert problem. In fact, a new study by scholars at New York University, Stanford, and the University of Chicago makes the case that food deserts aren’t the only reason why lower-income Americans have been found to eat less healthily than higher earners: Access isn’t just about geography, it’s also about price, and healthy food is often too expensive for many.
Food For Thought
The same study concluded that poorer communities tend to lack the education and nutritional knowledge to make healthier choices, frequently compounding their families’ poor eating habits. That’s why Thrive Market is also working to educate shoppers about making healthier choices. The company shot a 20-part video series that it shares with families who get free membership. “The movies cover things that are very obvious to people in some communities but not so obvious to others, like how carbs turn into sugar, and why you should care about toxins in your cleaning supplies,” says Lovelace.
It wasn’t easy to sell this idea to investors, he adds. When they started fundraising, Lovelace and cofounder Nicholas Green were rejected by many top VC firms on the West Coast. So they devised an alternative approach. Rather than seek out seed funding from professional investors, the two pitched influencers on their vision, hitting up blogs like Wellness Mama and The Kentucky Momma, both of which cover feeding families on a budget. Loveland and Green also got the attention of wellness gurus like Dr. Mark Hyman, Deepak Chopra, Jillian Michaels, and Tony Robbins.
Through these efforts Thrive Market assembled its first $10 million from checks of $10,000–$20,000. These influencers also helped drive 10 million new visitors to Thrive Market’s website early on, says Lovelace. “For us, it didn’t matter how much they invested. We were more interested in the fact that they were emotionally invested and supported our project.”
Thrive Market has since received more than $160 million in funding, most recently from a Series B round of $110 million in 2016. But in a roundabout way, the company’s unconventional start has helped the brand in profound ways, Lovelace believes. At a time when consumers may be losing trust in big brands like Facebook and Amazon (and by extension, Whole Foods), Lovelace sees growing space in the market for his smaller brand that’s managed to gain consumers’ trust.
He now counts some 450 influencers in that informal community Thrive Market has built, a small army that’s gone on to fight for social issues involving food insecurity. Together they campaigned for the USDA to approve food stamps for use online, generating 180,000 petition signatures and a meeting with the officers of 100 Republican and Democratic members of Congress. The federal agency has yet to change its policy, but in late 2017, Amazon and several other stores were approved to be part of a pilot program to accept food stamps online. There have been several technical delays in getting off the ground, but people familiar with the program believe it could launch this summer. The process is moving slowly, but will hopefully lead to more online grocers moving in this direction.
Shortly after launching Thrive Market, Lovelace heard from a single mom who told him she used to dumpster-dive outside Whole Foods to feed her family before receiving her free Thrive Market membership. She knew perfectly well how to choose healthy foods, but just couldn’t pay for them. Lovelace remembers dumpster diving himself as a college student on a full scholarship with no disposable income. “Yes, I’m motivated to create a successful business,” Lovelace says. “But I’m first and foremost motivated by the idea of business as a vehicle for social change. It’s been the most gratifying adventure of a lifetime to see the positive response we’ve received.”