The online grocery startup betting big on the pandemic shift in grocery shopping

January 3, 2021, 12:00 PM UTC

This is an installment of Startup Year One, a special series of interviews with founders about the major lessons they have learned in the immediate aftermath of their businesses’ first year of operation.

Grocery shopping changed radically, and possibly forever, in 2020. While consumers still headed to line up at their local markets nationwide, many shoppers went online for their groceries. But it’s not just the Amazon–Whole Foods powerhouse reaping the benefits. Plenty of smaller, niche grocery startups are making the most out of the opportunity.

Launched during the second half of 2020, Hive is a digital marketplace for premium sustainable goods. The company follows a strict set of criteria before allowing any brand or product on the platform, a process known internally as the “Hive Five.” 

The cofounders (all retail alums from Freshpet, Casper, and were frustrated by the heavy lifting consumers had to endure to actually find, evaluate, and decide whether one brand or product was better than another. The cofounders were learning as well how difficult it was to discover smaller, more independent brands with great products and values, making the barrier to entry, both online and in-store, an enormous one. 

Fortune recently spoke with Katie Tyson, cofounder and chief commercial officer of Hive, to learn more about the business, the lessons learned, the hurdles overcome, as well as Hive’s plans for the new year.

The following interview has been condensed and lightly edited for clarity.

Katie Tyson, cofounder and chief commercial officer of Hive.
Courtesy of Hive

Fortune: Could you share a bit about your background? What were you doing professionally prior to launching Hive?

Tyson: I graduated from the University of Virginia in 2008, where I studied business with a focus on marketing and management. My first five years of work were all in the world of advertising. I got to start my career at some of the bigger agencies, first McCann Erickson and Saatchi & Saatchi. Over the years, I saw the world move into digital. Many of the bigger agencies were struggling to do that effectively at the time, so I went to VaynerMedia, which is Gary Vaynerchuk’s digital agency. That’s a place where I learned a lot about social and digital marketing, and also got my first taste of the startup world.

From there, I was lucky enough to move over to Freshpet, where I established myself as a consumer packaged goods (CPG) marketer. I learned about Freshpet while working in advertising and was drawn to their mission and commitment. I stayed at Freshpet for four and a half years and built their digital marketing from the ground up. Working there gave me the opportunity to learn more about traditional brand management and marketing. We took the company public while I was there, which was an incredible experience. I also had some big professional wins in terms of building really compelling content and viral hits.

Once Freshpet went public, I wanted to learn more about e-commerce and direct-to-consumer, so I joined Casper, which at the time, was the darling of the direct-to-consumer (DTC) marketing space. During my two years at the company, I worked on building out their marketing and consumer insights function.

I always had a bit of an entrepreneurial bug, but it took some confidence for me to pursue that. When I started at Casper, I was mentoring early stage startups and expanding a life-coaching business that I had launched on the side. I continued to coach within startups and to pursue that full-time when Scott Morris, cofounder, president, and chief operating officer of Freshpet approached me about Hive. I fell in love with the concept of creating an online marketplace rooted in sustainability where consumers could easily shop their values. Hive was the perfect convergence of all my passions both personally and professionally. I saw Hive as a huge opportunity, and the rest is history.

Hive is an online marketplace for premium sustainable goods, including snacks, seasonings, cleaning supplies, baby products, and more.
Courtesy of Hive

What inspired the launch of Hive? What makes the cut for the kinds of products you sell, and who is your target audience?

Scott came to me with the idea of Hive. We believe people are becoming more and more compelled to shop in a way that is sustainable. People are tired of relying on the government to achieve the big-step changes we need to make, and they want to be involved. They want companies to be more involved too. We chose to focus on the world of grocery as these items are the most frequently consumed and thus have a huge opportunity to make an impact over time. We spent several months trying to validate the concept to see if people really wanted to shop this way.

First, we did a quantitative study. We wanted to understand if people would be motivated to shop more sustainably, and the results were very surprising to us in the positive sense of the word. The data to support Hive was there, and it kept growing, especially as we started doing focus groups and talking to friend groups with this kind of mindset.

During this process, we kept hearing people say that they were very motivated to shop their values, and it really mattered to them in principle, but it was also really challenging. They often spent lots of time trying to figure out what matters, what products were doing good, and then had to cobble together an ideal shopping basket across multiple sites and stores. They were getting lots of individual shipments, which also wasn’t ideal from a carbon footprint perspective. At that moment it became clear that there was a big need for something like Hive.

Our target consumer is more of a mindset than anything else. The Hive shopper is a person who cares about what they are consuming. They care if something is natural, organic, and tastes great, but they also care about the impact of their purchases in terms of sustainability and social mission. They care about brands that support causes in a meaningful way.

We realized we needed to put together our own proprietary criteria to determine what products would be on the Hive platform. We have an amazing team that vets all of the brands we work with based on a set of criteria we call the Hive Five. We taste and try products across all members of the team to make sure everyone is on board. On the social impact front, we want to partner with companies that are committed to a strong social cause. On the sustainability front, we look for brands that use low-impact ingredients and practice fair or direct trade. Low carbon footprint is very important too, and we seek out companies that carbon offset or invest in renewable energy. Recyclable packing is something we want a brand to have whenever possible. And in some categories, this is super achievable. For others like chip bags or bar wrappers, we look for brands that are best in class, and then we bridge the gap with our TerraCycle program, which allows consumers to opt in and send back any packaging that isn’t curbside recyclable to Hive.

Grocery shopping has become complicated, to say the least, during the pandemic. Many retailers are metering customers, with lines around the block to reduce crowding and maintain social distancing, but not all customers have the time (or patience) to accommodate that. How do you see online grocery orders and delivery evolving in the next few months and in the long term?

I believe online grocery is here to stay. As more and more people experience the benefits and convenience of grocery shopping online, it will become a bigger part of our everyday lives. I think that’s a big driver in terms of how the pandemic is shaping the grocery space overall.

Regardless, there are a lot of challenges facing online grocery right now. For instance, it is very hard to fulfill across all categories, including fresh and frozen. From my perspective, the fresh and frozen side of the equation will be a bigger focus of the industry at large, but new fulfillment mechanisms need to be put in place to make it more mainstream among all players. At Hive, we are thinking a lot about how to expand our assortment and get into those “more difficult to handle” categories.

I really believe that grocery is going to continue to become a bigger topic of conversation. People are thinking more about where we are getting our food, who is growing it, and what ingredients go into a given product. And in a way, that is counter to how big online grocery functions. Ultimately, I think online grocery players that support smaller, localized brands will be the ones to make a bigger splash moving forward.

The company uses a strict set of criteria, known internally as the “Hive Five,” to evaluate brands and products before allowing them on the platform.
Courtesy of Hive

Economic downturns often prove to be a fruitful time for startups that can fill a void. What has it been like launching a grocery startup during this pandemic and economic crisis? That said, what has it been like to secure funding for Hive? Is it privately funded or backed by venture capital?

On the business side, we have been very fortunate. We would never wish this pandemic on the world. What has been interesting for us during this time is to see how the pandemic has shaped the way people have embraced online grocery. People are also taking the time to pause and really rethink their personal priorities, which has led to a growing consciousness around our behavior and impact on the environment. The reception to Hive as a business has been really tremendous, but the pandemic has also created the right environment for this.

The economic downturn is a real challenge, and puts the onus on us as a business to make sure we are as accessible to people as possible. We have been really thoughtful about the brands we bring to our community, and we offer tiered pricing across every product category. We have embraced a good, better, best approach. For example, we offer some incredible, premium nut butters on Hive that are best in class in every way, but we also have some nut butters on the platform that check a lot of the boxes, making them accessible at a lower price. The pandemic has made us think more about consumption in general, and how we can help play a bigger role in fighting the U.S. food crisis. We are also partnering with organizations to help address this ongoing problem.

Hive is aligned with how people are thinking right now, and we have data that shows conscious shopping resonates. Simultaneously, because we have a seasoned team and Scott’s terrific track record around Freshpet, a company that has done exceedingly well, a lot of doors opened for us that I think wouldn’t have otherwise. From a fundraising perspective, the people that believe in Hive are very mission aligned. We are privately funded, and we don’t take funding from people who want to simply round out their environmental, social, and corporate governance (ESG) portfolio or who invest in potentially detrimental companies counter to our values. We are conscious that anyone we take funding from has to be philosophically aligned with Hive’s greater mission.

Post-pandemic and five years down the road, where do you hope Hive will fit within its industry?

What Whole Foods did for natural and organic grocery, Hive wants to do for sustainability and social impact shopping. In five years, we hope that we have grown tremendously and that Hive occupies a person’s consideration set in terms of where they choose to buy groceries every month.

In an ideal world, we want to influence the grocery space meaningfully. We want to push independent grocery stores to create sections that are focused on products rooted in sustainability and social impact. That would be a huge win. At the end of the day, if Hive can help shape and influence the industry at large for the better, then that’s amazing.

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