DEUX has the lofty goal to offer a healthier alternative to iconic food brands like Nestle. I sat down with Sabeena Ladha, founder of DEUX, a better-for-you snack brand of edible cookie dough, donut holes and dessert spreads, to share her journey from extensive experience in big CPG, McKinsey, and venture capital to disrupting the consumer category. We discussed her strategic approach to product innovation, marketing, and navigating various retail channels that has shaken up the refrigerated baked goods section in grocery stores.
Dave Knox: Let’s begin with a description of what sets your business apart in the market. Could you provide an overview of DEUX?
Sabeena Ladha: Absolutely. While our initial launch differed, we’ve evolved into a better-for-you snacks platform. Our flagship product is a range of vegan and gluten-free cookie doughs, which forms the core of our current operations. Since our launch, we’ve also extended our offerings to include better-for-you donuts and a healthier version of Nutella.
Knox:. Let’s delve into the origins of your edible cookie dough business. What inspired you to venture into this niche?
Ladha: It’s kind of funny because if you had asked me if I have an insane passion for something like cookie dough, I wouldn’t exactly say that. However, I’ve had a sweet tooth practically from birth. I indulge in desserts after every meal, breakfast, lunch, and dinner. Concurrently, my interest in health and wellness has grown over the years. So, I was on the lookout for something to satisfy my sweet tooth while aligning with my lifestyle choices.
I used to make this particular version of cookie dough regularly—it allowed for flexible servings, from one scoop to three, and you could easily save the rest in the fridge. During the pandemic, as I conceptualized the idea of healthy indulgences and examined the overall market, I noticed that Pillsbury and Nestle dominated the category, with virtually no real healthier options. It struck me as not only ready for disruption but also an area I was interested in and had already developed a concept for.
Knox: You’ve expanded beyond being solely a dough company, moving into various aspects of the confection space. Can you share the motivation behind entering the donut holes and introducing DRIP?
Ladha: I appreciate the term “snack-fection,” the intersection of snacks and confections. Women, being 2 1/2 times more likely to crave something sweet, often associate sweet things with desserts. However, sweet snacks constitute a massive and growing category. Sitting next to the whiteboard where we brainstormed our next steps, I want to highlight our intention not to be pigeonholed as just a cookie dough company. Drawing from my experiences at Frito-Lay and in big CPG, diversifying early was crucial. We aimed to test and learn and inform product strategy through our direct-to-consumer channel.
The decision on which categories to explore early on stemmed from identifying significant and underserved markets. Sweet snacks, breakfast, and desserts were natural areas of interest. We assessed where the brand could authentically excel and we could create a permissible indulgence. Leveraging our product value propositions and messaging hierarchy, we arrived at the specific product lines of donut holes and DRIP. The critical factor was whether these categories had undergone disruption. In the case of donuts, with Hostess and Entenmann’s as the major players, and considering they hadn’t seen substantial disruption in better-for-you, we believed it was a category where we could establish our presence meaningfully.
Knox: Given your experience as a former brand manager for Frito, you’re familiar with the complexities that arise when launching a new product, especially one venturing outside the existing category. How did you approach this challenge as you expanded into different store sections beyond direct-to-consumer?
Ladha: To streamline operations, we initially placed our new products in the same section of the grocery store. Managing three buyers across distinct categories, particularly at that scale, is challenging. Our refrigerated donuts were strategically positioned alongside our core product, leveraging the benefits of refrigeration to enhance shelf life and utilize specific, superfood ingredients. The refrigeration not only eliminated the need for preservatives but also contributed to the craveability of the product.
As for Drip, its versatility is notable. It can be refrigerated as a spread or kept at room temperature for a drizzling consistency. While it leans more toward a food service product used as a topping on smoothie & yogurt bowls, in retail settings, we aim to merchandise it alongside our cookie dough and donuts, following the classic brand block strategy familiar from big CPG.
Knox: How did you navigate convincing the buyer to introduce a product like donut holes in a section of the store where they traditionally weren’t sold, all while avoiding conflicts with other buyers?
Ladha: Typically, we find ourselves in the dairy or refrigerated baked goods section, and I must say, the buyers in that space are eager for innovation. In contrast, center store cookies buyers face a flood of brands, requiring unique offerings to even initiate a conversation. In the dairy section, you’ll find yogurts, jello, and pudding. During Target’s accelerator program we participated in a couple of years ago, I included a snapshot of my local Target’s set in my presentation. At that time, it featured Pillsbury crescent rolls, Jello, Nestle Tollhouse, and regular Pillsbury cookie dough – not a lot of innovation, especially in the better-for-you category.
When presenting our better-for-you propositions in both cookie dough and donuts, appealing to the millennial and Gen Z consumer, the dairy buyers embraced the idea pretty rapidly. Thecategory required less convincing, given the need for innovation in that part of the store. It helps that they taste really delicious too…
Knox: You’ve touched on direct-to-consumer (D2C), food service, and retail, especially at places like Target. Could you share the current business distribution across these three channels?
Ladha: By the end of 2023, it was 20% food service, with D2C and retail contributing nearly equal shares. Looking ahead to this year, retail will take a more prominent role, particularly with significant national launches in Q1. While the core of the business will primarily be in retail five years from now, food service will continue to hold importance. In my vision, D2C will transition into more of a data collection and marketing tool, serving as a platform for collaborations with influencers and hosting engaging marketing campaigns. Our D2C presence has cultivated a dedicated social media following, contributing to our brand’s cult status. While D2C plays a crucial role in gauging what resonates for retail, the true scalability of the business occurs in the retail space.
Knox: Considering the potential scaling of your business across different channels, do you foresee any changes in your approach? For instance, are you considering bringing more limited edition products into retail, or will you stick to the current strategy you outlined?
Ladha: I love that question because our capability to innovate, especially in flavors, is robust and efficient. Drawing insights from D2C data, we’ve adjusted flavors based on consumer preferences. For instance, if a flavor like S’mores performs exceptionally well, we might propose a limited edition collaboration to our retail partners like Sprouts. This has created a cycle where larger partners approach us with ideas or opportunities for in-and-out products or flavor collaborations. They appreciate our agility in iterating quickly.
To address your question directly, the goal is to introduce more consistent limited edition drops in retail. We’ve observed that consumers, particularly Gen Z and millennials, value flavor innovation. They want brands to keep things exciting. While they still purchase their staple chocolate chip cookie dough or core brownie flavors, the addition of a s’mores flavor, for example, often leads to an increase in basket size. This behavior mirrors that of the potato chip market, where people regularly buy their preferred flavors but are also enticed by limited edition options like peperoncini, jalapeño, or sriracha. It’s a strategy to deepen our connection with consumers and, simultaneously, enhance the basket size for our retail partners.
Knox:. Exploring the concept of basket size further, it’s a crucial aspect for major CPGs, such as Frito-Lay or Procter & Gamble. However, not every beloved product in one category guarantees crossover success in another. How do you approach cross-selling, especially with three distinct products that might serve as a consumer’s first entry point to your brand?
Ladha: It’s interesting because we recently discussed with our agency the products that work well for customer acquisition versus repeat purchases. Our cookie dough excels in acquisition, acting almost as a gateway into the brand, often with a viral element. Surprisingly, the most repeated product for us is our donuts. This is something we are learning in the realm of direct-to-consumer.
Rather than viewing these as distinct categories of cookie dough, donuts, and Drip, we focus on integrating our products into different parts of a consumer’s day. Considering the concept of day parting and when someone might indulge in a sweet snack, each category fits into various day parts. For example, Drip could be added to granola in the morning, used as a snack on yogurt in the afternoon, or drizzled on fruit for dessert. Our innovation process revolves around infiltrating different parts of the day, allowing our products to serve as snacks throughout, as opposed to being limited to specific times like ice cream only being consumed at night after dinner.
The idea of day parting became significant for us. Instead of categorizing products, we strive to understand the role each food group plays throughout the day. It’s about fitting into various moments in a consumer’s daily routine.
Knox: You’ve expressed the ambitious goal of becoming a better-for-you alternative to brands like Nestle. Turning that vision into reality seems like a significant challenge. How do you approach bringing such a grand vision to life, and where do you start, and what’s the journey from there?
Ladha: It’s indeed a lofty goal, and each time I mention it, I’m reminded of its enormity. However, I’ve adopted a strategy of breaking it down into manageable increments, leveraging my experience in venture capital and at M13, a venture studio. I’m deeply committed to the testing and learning process, maintaining a non-committal stance towards product lines, flavors, and internal operations. This allows us to assess what works and what doesn’t in bite-sized portions.
The ability to be somewhat detached from my own ideas facilitates this startup journey. If something proves successful, we accelerate it; if not, we are comfortable parting ways. This approach aligns with the ethos of testing, learning, and adapting along the way. Whether it’s about flavors, pricing strategies, or the structure of our teams in direct-to-consumer and retail, we’ve discerned what contributes to our overarching vision and what doesn’t. We are willing to let go of elements that don’t align with the larger goal. This adaptability is, in a sense, our superpower. While traditional CPG may not be akin to tech companies, we bring the agility and rethinking processes from the tech world to the realm of consumer packaged goods.
Knox: Coming from a background with Frito-Lay, where marketing is truly an art form, how did you approach the launch of donut holes, particularly the habit change and perceptions about the healthiness of donuts?
Ladha: I’m obsessed with big CPG marketing and our stellar marketing team incorporates the principles I learned from them. While we’re recognized for our modern spin, especially with a focus on social media and influencers, the foundation is rooted in the excellence of big CPG marketing.
The key to convincing consumers, as I learned from big CPG, is delving into their insights to understand their desires and identifying the emotional territory. Beyond the functional value propositions of a product—its taste, health benefits, gluten-free nature, snack-sized or portion-controlled attributes—there’s a deeper emotional connection. We’ve coined ours as “cloud nine.” This concept stems from the idea that when our consumer indulges in our product, she not only experiences the pleasure of consuming something sweet and delicious, triggering the release of endorphins, but also sheds the guilt ingrained by societal norms about enjoying treats like sweets, cookies, donuts, and Nutella.
It may sound a bit existential, but we aim to tap into this emotional territory, creating a feeling of cloud nine. The goal is to shift the narrative from being diet-focused to embracing a more wellness-oriented perspective, allowing individuals to feel and be their best selves. We strive to make this transition less overwhelming compared to many wellness brands, aiming to blend comfort food and indulgence with health.
Knox: Considering your diverse background in big CPG, McKinsey, and venture capital, what advice would you give to future founders who aspire to revolutionize their consumer category?
Ladha: My perspective is influenced by my varied experiences. Unlike the glamourized notion of being a young founder and breaking things, I believe there’s immense value in gaining experience. My journey involved learning the rules before breaking them, and that’s a perspective I appreciate. While we do break the rules, knowing how they function is crucial.
For future founders, I encourage them to seek experiences, not necessarily confined to their specific category but geared towards building essential skill sets. My time at McKinsey, even though it wasn’t directly in CPG, taught me critical thinking, problem-solving, and the art of crafting a strategy. It might not sound glamorous, but I advocate for accumulating the experiences and skills needed. This not only makes the entrepreneurial journey more manageable but also accelerates personal growth by providing a solid foundation and understanding of the rules.