Online grocery retailer merges discount member model with natural, organic products

WASHINGTON — If Costco and Whole Foods got together and produced an offspring, the baby’s name would be Thrive. At least that’s how Jeramiah McElwee explains the model behind the new online grocery concept.

Thrive Market is an online store that sells natural and organic nonperishable foods, personal care products and household items. However, unlike other online grocery retailers, such as Peapod, Thrive operates on a paid membership program.

Shoppers fork over $60 a year to buy everything from baking mixes to cereals, snack foods and cleaners that are discounted 30 to 50 percent off retail.

McElwee, Thrive’s vice president of purchasing and merchandising, says the goal behind the company is a social one.

“Basically, it came together with the mission of democratizing access to healthy, organic and non-GMO food, as well as sustainable products,” he says.

Because of the membership fees, the Los Angeles-based company, which launched in November 2014, is able to keep its prices lower than competitors. The low overhead associated with running an online business helps prevent product markup too.

On Thrive’s website, a box of Seventh Generation automatic dish detergent sells for $4.65; on Peapod, the same box of detergent is $5.99. Similarly, a box of Barbara’s Bakery Peanut Butter Puffins cereal is $3.95 on Thrive and $4.19 on Peapod.

For every membership purchased, Thrive donates a free one to a low-income family, a teacher or a veteran — “Basically communities and audiences that are traditionally underserved and don’t have access to healthier products or can’t afford to carve out a part of their budget to buy organic or non-GMO,” McElwee says.

Thrive Market emerged at a time of peak consumer demand for both online food shopping and for natural and organic food products.

Over the last five years, online grocery sales grew at an annual rate of 14.1 percent, The Washington Post reports. And sales are expected to continue growing at an annual rate of 9.6 percent until 2018.

At the same time, public pressure has encouraged food giants such as General Mills and Nestlé USA to remove artificial flavors and colors from their products. Even the kid-favorite Kraft Mac & Cheese is saying “goodbye” to the dye that gives the cheesy pasta its iconic orange color. Come January, paprika, annatto and turmeric will be used to add color to the boxed pasta.

All of the products sold on Thrive Market are non-GMO and there is a “heavy focus” on organic, McElwee says. What customers won’t find, however, is a dizzying array of options.

“Right now we have around 4,000 products and that’s intentional. We really try to provide the best in class, highest quality product options in each category and then not a lot of other noise,” McElwee says.

The startup, which has received financial backing from celebrities such as Justin Timberlake and John Legend, recently raised $30 million in investment funds. McElwee says the company plans to use to the capital to open a second distribution center in Batesville, Indiana, and to execute an educational component to help customers eat healthier.

“We’re putting a lot of money and time into building out our content, building out the education and building out platforms so that we’re not just giving cheap quinoa to everybody and saying, ‘Here, go figure it out.’ We’re also saying why you would want to buy quinoa: It’s higher in protein and has B vitamins, it’s gluten-free,” McElwee says.

In addition, Thrive Market plans to launch a line of private label products and expand its offerings in natural pet products, home goods and home gardening.

The company is currently offering a 30-day trial for new members.

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