Lily’s Sweets CEO: ‘It feels like a mainstream trend [reducing sugar] is being boosted by a micro-trend [keto]’

By Elaine Watson

- Last updated on GMT

Lily's Sweets CEO: ' I’ve never seen a brand grow this fast based on pure velocity vs distribution.' (Picture: Lily's Sweets)
Lily's Sweets CEO: ' I’ve never seen a brand grow this fast based on pure velocity vs distribution.' (Picture: Lily's Sweets)
Consumers often say that if they’re going to indulge, they’d rather eat a small portion of something made with ‘real’ or familiar ingredients (butter, cane sugar, whole milk) than a more ‘processed’ low calorie/sugar/fat alternative.

However, surging sales of brands such as Halo Top (which gives consumers permission to eat an entire tub of ice cream without the guilt) and ‘no sugar added’ chocolate brand Lily’s (which replaces sugar with erythritol, inulin, dextrin, and stevia extract) suggest that many consumers are still willing to forgo ‘kitchen cupboard ingredients,’ provided products deliver on taste, Lily’s Sweets CEO Jane Miller told FoodNavigator-USA.

While no sugar added chocolate used to be the preserve of diabetics and dieters, the category is now attracting the more mainstream consumer, with Lily's performing strongly when it is merchandised next to regular chocolate, said Miller.

Whenwe did consumer research in November as to purchase intent for our new products, we had a top two box score (definitely/probably would buy) of 94% from Lily’s consumers and 77% of category buyers. The first number shows the loyalty of the Lily’s consumer and the second shows the mainstream appeal of no-sugar added products.”

You do get some polarizing reactions to erythritol  

Asked about the ingredients list, she said: “You do get some polarizing reactions to erythritol ​[a sugar alcohol] in the natural ​[segment], but with stevia the issue is more that people think it will have an aftertaste, so I always say ‘Just try it,’ and people are so surprised because they really can’t taste it at all in our products.

“When we were going through the rebrand, we considered taking the phrase ‘stevia sweetened’ off the front of the pack because stevia can be polarizing, but what we found in the research was that if you don’t tell consumers what you’re doing ​[how you are creating a no sugar added product] they have a real disconnect about what it actually is.”

VMG Partners​ invested an undisclosed sum in Lily’s in 2018, and has been an incredible partner, said Miller.

I’ve worked with a couple of private equity firms but I’d say that VMG is unique in that they have great industry knowledge and they get involved when they can add value, but they also really respect the roles of founders and operators, and know when to trust us and be hands off.”

Triple digit growth in the MULO channel

In 2018, Lily’s Sweets’ sales were up 165% in the MULO channel (multi-outlet), and 95% in the natural channel (SPINS, 52 weeks to 12.30.18), while it has continued to double its business in Whole Foods Market year over year.

Meanwhile, its chocolate bars turn on average six units per store per week in the natural channel, and its dark chocolate chips turn over 14 units per store per week, said Miller, a CPG veteran who joined Lily’s last April and has presided over a packaging revamp that seeks to take the brand into new categories.

Lily’s is the #1 contributor to natural chocolate bar category growth across channels, driving 72% of total category dollars vs a year ago. The big brands ​[Hershey’s, Russell Stover] have low sugar items that generally lead with ​[the far less expensive sugar alcohol] maltitol, but they just don’t taste as good.”

Old to New Packaging lily's sweets
Old packaging (left), new packaging- which rolls out in April 2019 (right)

84% of consumers say they have limited the amount of sugar in their diet in the last year

So what’s the secret to the success of Lily’s, which has increased its footprint from 3,000 stores in 2017 to c.10,000 stores today from Whole Foods to Kroger, but has also generated significant growth in “pure velocity​,” according to Miller?

The keto diet has definitely played a role, given Lily’s no sugar added credentials and low net carbs, said Miller. But Mintel data shows that more than 84% of consumers say they have limited the amount of sugar in their diet in the last year, with 70% buying items labeled as low/no/reduced sugar, she added.

“Keto fans are very communicative on social media, and it feels like a mainstream trend ​[reducing sugar] is being boosted by a micro-trend​ [keto]. What’s great about social media and search tools is that you can target certain segments such as keto or diabetics without being a ‘keto brand’ or a ‘diabetic brand.’

“More women buy our product, but what’s so amazing is that we’re seeing interest across all age groups. I’ve never seen a brand grow this fast based on pure velocity vs distribution. Most of the growth in distribution happened before I came on board and most of our growth over the last year has come from velocity and word of mouth, because we haven’t done a ton of marketing.

“E-commerce is also a really exciting area for us, and we’ve been growing on Thrive Market and other platforms such as Vitacost, but currently if you buy Lily’s on Amazon, you’re buying through a third party reseller. So we’re just now kicking off our Amazon business and we’re just hired someone to be in charge of e-commerce as we think it’s a huge opportunity.”

Beyond chocolate? 

Launched in 2012 by founder Cynthia Tice, the Lily’s brand is best known for its chocolate bars and baking chips, but has recently introduced three new snacks (chocolate covered peanuts, chocolate covered almonds, and chocolate peanut butter cups), and is looking to move into additional categories, said Miller.

“Over time we’re going to try to push the envelope to other sweet items. Can Lily’s own more than just chocolate? Our plan is by Expo East in September, we'll be unveiling some new products."

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