Grocery 3.0

Carlos Ponce (00:09):

Good morning everyone. Welcome to another episode of Tech Leaders Unplugged, and I am joined today by, by my fellow teammate and co-host Wade Erickson. Hi, Wade.

Wade Ericsson (00:22):

Hey, thanks for being here today, and nice to meet everybody out there for watching the show.

Carlos Ponce (00:28):

Absolutely. Thank you, Wade. And joining us today is Spencer Price, who is the CEO of Halla.io. And of course, joining him as well is, we have Henry Michaelson, who is the CTO of the same company, Halla.io, so I want to welcome and thank our guests for joining us today because we're going to be talking about …what is it that we're going to be talking about today, guys?  We're going to be talking about Grocery 3.0. Look forward to this interesting topic. You know, we all, we're all into grocery shopping and of course the AI thing, so how do these two combines and see what comes out of it? So, thank you for joining us today, and let's start with Spencer, Henry. You guys, it's your show, so please introduce yourself, for the, to the audience, and of course, introduce the company as well. Thank you.

Spencer Price (01:32):

Well, thanks so much for having us, Carlos, and Wade. And thanks to everyone tuning in. Both of us are co-founders here at Halla. My name's Spencer Price, I am a co-founder and CEO I spend most of my time wrangling investors and working on marketing and partnerships. Henry is our co-founder and CTO, and he could tell you a bit more about what he's up to.

Henry Michaelson (01:59):

Yeah, I mean, typically from my role, I manage the product, understand where the industry's going, try to adapt the product to meet those needs, and then make sure it drives value with clients. So kind of that, that whole piece of the product and the business in that sense.

Spencer Price (02:17):

And I'm happy to share a bit of an overview of the company if that makes sense.

Wade Ericsson (02:23):

Yeah, great. Always been interested in founders and how they found each other, and where they came up with the idea. What kind of drove the, you know, what was the problem you guys were trying to solve by launching the company? I think we have a lot of viewers that are, you know, also interested in startups and, you know, what got you guys started. I mean, we all have frustrations in the grocery store, finding things and, and, you know, selecting things, especially those that don't shop as much anymore with all the other tools that have been post-pandemic. But yeah, please share all of that. That'd be great.

Spencer Price (03:00):

Yeah, absolutely. So first and foremost, Halla is an AI company that designs and develops solutions exclusively for the grocery industry. And specifically, we work in online grocery or grocery e-commerce to power, highly personalized shopping experiences that are unique to every single end user's taste preference, household habits, and dietary restrictions leading to a much smoother and easier, more enjoyable, and discovery-oriented shopping journey for every single customer of one of our retail partners. And for the retailer, we drive incremental or impulse sales stickiness or customer retention. And just a general increase in add-to-cart rates and conversions throughout the e-commerce environment. We do that through three core solutions, each of which rests on our proprietary AI tech stack and, and knowledge base. One is recommended, one is a substitute, and one is a search. And those three solutions comprise the suite that we've been calling Taste Intelligence. We, I wish I could tell you about our, super relevant backgrounds that that brought us into this solution space. But actually, we got started when we were 19. Henry and I and our third co-founder, Gabriel Nepote got started after we met in high school. And then two years of college later we spent a summer building an initial prototype trying to answer this question, how do people decide what they want to eat? And at that point of decision-making or at the point of purchase, can you influence those decisions? And the answer is yes. And seven years later, we're still answering those questions in real time for a wide array of grocers and thousands of e-commerce storefronts across the continent.

Wade Ericsson (04:58):

So, tell me a little bit about the original experiences that you I mean, you said you bring it into recommendations, substitutes, and taste. Tell me a little bit about the platforms that you integrate with, and how they bring your AI into their shopping and e-commerce experience. because I'm, because it doesn't sound like you're building the shopping experience, you're actually feeding information into their existing shopping experience. Tell me a little bit about how that works and how you approach the larger retail market and grocery market in general.

Henry Michaelson (05:33):

That's a great question, Wade. So, as it currently stands today, we are effective, we take this superpowered AI brain and we use it to turbocharge your e-commerce offering. So, and the reason, you know, why we chose e-commerce is because you know, number one, it's quickly growing and it, there's so many new avenues that you get with e-comm that you just don't get, you know, in the in-store experience, like for example, you know, in e-commerce you have the ability to really, really quickly build a basket. You have the ability to, you know, browse many, many more products. You have the ability to compare products based on price, but then there are also all these issues in e-commerce right now where grocers find it unprofitable on the whole, there's new competition from the likes of Amazon purchasing Whole Foods, which was kind of the starter's gun in this space. And you also have issues where like, customers are not satisfied when they buy a banana, and it gets substituted for something like a banana ice pop or something completely different. And so, it's kind of like this perfect storm for us, which is that it's a new fast-growing space, but there's, and there's a lot of possibilities, like for the first time, you don't actually have to walk a store to get all the things that you would want. And because it's a website, you can fully personalize it to the shopper such that, you know, in theory, when I go on the landing page, it can know me, you know, know my health goals, know my, you know, everything that I want to do with the shopping trip, my budget needs, my family needs, all of that allergens, sensitivities, and it can take all that into account and create a personalized store. So again, when you think about opportunity, both in terms of growth, in terms of potential UX in the future, but then also the real challenges that online grocers are facing today, it's really a perfect storm for disruption. Now I will say that you know, online is still just a fraction of what in-store is doing. So again, the goal is to start with online because, you know, online you get the best data feedback, which then trains the AI and makes it stronger and better over time. And then to bring that into the in-store shopping experience as well to better incorporate, you know, actually using tech to help you complete your meal in a sense.

Wade Ericsson (08:15):

And so, I'd imagine there's some, there's a profile of sorts that you build in, in the interface. Now. Does that profile, that avatar-ish kind of entity that you become, flow between the different platforms that you support? So are you guys centralizing some of that or do you look for each of the different shopping platforms to carry that profile and then apply that to your AI engine?

Henry Michaelson (08:44):

That's a great question. So, I, I will say that we take privacy very seriously at Halla. So, for starters, like we're not in the business of storing personally identifiable information and becoming like, you know, some sort of shady group in the background that's selling you consumers' information. Now the retailer does own all of their data, which is an important piece of the whole platform. So that means that you know, the models that we build for one retailer that, you know, we don't share that data with other retailers, however, we are the ones actually building the model. So, the effective way that it works is retailers send us lots and lots and lots of information and each little bit of information is effectively just like a data point on some part of the buying experience. So, it could be this shopper I’d just added bananas to their cart and then added flour. It could be this shopper saw this recommendation and didn't add this product to their cart. It could be, you know, this person searched for this type of product and saw, you know, and did not like the first thing that came up. And each of these data points is usually a tiny little bit of information that on its own, you know, is not very useful. But however, when you combine it together with, you know, the hundreds of millions of data points that are coming in from each retailer, they tell a pretty compelling story about what shoppers like, what they don't, and that incremental experience of building a cart. So, I would say, you know, that's kind of in a gist how many pieces of the Hala engine work. However, I will say that one of the biggest issues with grocery is that, you know, grocery retailers have, you know, they've been making these investments for a long time in tracking products, tracking stores, being able to, you know, serve personalized recommendations to grow to consumers. But the challenge is that a lot of the systems that they're using are very, very old. And you know, like some people are still running, you know, transactions on, on mainframes of like ancient pieces of tech. And so, as a result, the data, especially on products that retailers have, is very, very, very dirty. And what that means is that like, when your data is dirty, it means that it's really hard to pull out patterns. Because You don't actually know what you're looking at. You don't really know what this product is. And if you don't know what the product is, how can you find out a pattern about it? And so that's why one of the big pieces that we've invested in and really what our defining secret sauces and why we are only working with grocers, not in other domains, is we built this really large in-house taxonomy of every single product inside of a grocery store. And we built a very sophisticated AI engine based on gen AI and LLMs to be able to tag products with really clean information. And what that allows us to do is it allows us to make better recommendations, searches, and substitutions than our competitors can do. And yeah, that's like a little breakdown of how we do what we do.

Wade Ericsson (12:24):

And so, I'd imagine the inventory from, tell me a little bit about the inventory is obviously different between the different stores, and then you all have probably a combination of generalized product types, as you said, a banana, a banana versus a specific brand of Banana. Right? And then how does that play into the AI of doing specific brand interactions versus commodity names and all of that kind of stuff? because You know, a banana's not a banana and chili's not a chili, right? So, tell me a little bit about how you kind of bring that brand recognition into that to help the grocers and, and a

Henry Michaelson (13:07):

That's a fantastic point. So, I, I would just say, you know, a banana's, a banana until it's a dull banana, and then it's something different. There you go. And so, I will say, you know, one thing about grocery that's really rich and exciting and full of potential when we're talking about what this evolution is, right? There's lots of information and content out there on how you can actually use the products inside of a grocery store. So, for example, you know, you have recipes, how can you combine things in your cart, take them together, and then use that, you know, to actually tell people, to give them instructions on how to turn, you know, a banana into a banana cream pie, for example. So, I would start to seem like a lot of, you know, food knowledge is commoditized and plays with things like half a pound of chicken doesn't necessarily play with branded things. But however, for us, we have to walk a tight line between that way of thinking about it, just the concepts. And then also the fact that like, grocery is a very thin margin business. It's a high-volume business, but it runs on a very, very thin margin. And the actual, you know, one of the main profit streams that grocers have been the brand deals are choosing when and how to promote products to create a seamless UX but also drive Nestle and Coca-Cola their quota of how many products they expect to sell. So for us, you know, the idea here is like, currently on e-commerce, a lot of what people are doing is they're saying, okay, well when you search for Coke, I'm going to make that first slot on the grocery on like the, the search page be sponsored, and I'm going to run a little option in real-time so that Pepsi and Seven-Up and you know, that everyone can bid to see what comes up when I search for Coke. And that works pretty well. But what we do is, because we're using models to drive everything inside of our whole business, we're saying, you know, like, hey, maybe the retailer wants to push Pepsi or Seven up, but they might want to do it in a more nuanced way. Let's not restrict ourselves to just one slot where you can show certain products. But why don't we add a bias in the Holla model so that retailers can say, you know what, I  want to show Pepsi a little bit more than you would just without a bias, but I want it to be, you know, something where while I'll still see more clicks on Pepsi overall, I'll still get a high click-through rate because what I'm showing users is relevant for them. So for example, if you turn a bias up towards Pepsi, you might not see it when you search Coke because people don't actually do that, but you might see it in your recommendations at your checkout because you added hot dogs and hamburgers to your cart. Oh, maybe you want to add the six-pack of Pepsi. So it's all about, you know, not forcing people into a certain way of shopping, but letting the AI actually guide where you surface the sponsored branded recommendations such that, you know, you can actually work a new habit in, in the easiest way possible.

Wade Ericsson (16:32):

That's awesome. Awesome. So we have about there's we lost Carlos by the way, so I guess I'm solo on this. I'll finish it out. I know there he is. He came back because he had some technical issues and had to refresh. So the beauty of having two crosses here and it worked out

Carlos Ponce (16:51):

Yeah. And sorry for the glitches, but yes.

Wade Ericsson (16:56):

[INAUDIBLE]

Carlos Ponce (16:57):

Yeah, exactly. That's the beauty of we're keeping it real. So, go ahead, very little

Spencer Price (17:02):

Take on the name of the, the program you were unplugged.

Carlos Ponce (17:06):

Unplugged completely.

Wade Ericsson (17:09):

We had to unplug the replug.

Carlos Ponce (17:11):

Exactly. Thank you.

Wade Ericsson (17:13):

Obviously, this is grocery shopping and food is, is, is, is a hundred percent applicable to everybody. Without sharing your kind of your IP and your secret sauce, where do you kind of see the trends? I'm always kind of, you guys are deep in this area and, you know, since it's an experience we all share and the movement, obviously Covid had a huge push towards this online, which in a sense kind of helped you guys a little bit because now the dependency on the algorithms was even more in, in, you know, because I, I know for me, I went from small shopping almost every day to almost no shopping. Everything comes through our e e-commerce tools. And but where do you guys’ kind of see more, I mean, you brought up the recipes and I have a family member that's a chef and you know, has a, you know, an online following and, and publishes recipes. And do you guys see some of that even becoming more of a roll-up where it's like, hey, I want to do this kind of a dish, click it, and now it's, that's that bundles that to make that, and then the recipe comes with it and everything? Do you guys see kind of a trend that way? Or are there any other kinds of trends that are kind of like grocery 4.0 that kind of you feel are next?

Henry Michaelson (18:41):

That, that, that's a great question. I'll do a quick stab and then I'll turn it over to Spencer because I know he's very passionate about this as well. But I'd say Grocery 1.0 as far as we see it is what the store is currently, right? They've put a lot of work into optimizing that and making it work as well as it can. 2.0 is the first version of e-commerce of what, of what we're seeing right now. What we see as 3.0 is, you know, right now grocery shopping in many ways feels like Amazon, right? Like your kind of just are looking at commodities, you search exactly what you want, and maybe you go on and get your reorders, but it's a pretty boring experience. And, you know, there are other problems that people also have and with, with, with food in terms of, you know, like food discovery is a real issue that people face because what you put into your body is what you end up, you know, it has massive health consequences, planetary consequences, you know, just like convenience, consequences, budget consequences. It's one of the only things that people reorder and interact with every single week from an e-commerce standpoint, it's very rare. So, I'd say that means that there's a ton of opportunity into how we bring other types of content and applications into the grocery shopping experience to actually give people the tools to effectively own their diet. And I really think that's where the future of this industry is heading. And I'll turn it to Spencer to kind of unpack that a little bit more. And I know Carlos, you have a question as well.

Spencer Price (20:15):

Yeah. So much to Henry's point, and I'll take a little bit more of a macro view for a second. Everything about the evolution of the grocery industry has been more and more oriented towards tuning into the shopping experience from your customer's perspective, looking through your typical customer's eyes, and trying to figure out how you can make it not just the easiest and most enjoyable journey, but also maximize the dollar value of a given shopping trip. And if we go way back, the introduction of the shopping cart was the first way to do that, right? It was a way to have more products that you can leave the store with than what you can hold in your hands. And so, then we got e-commerce, which is a way to just click. You don't have to hold a single thing or put anything into a cart. And 3.0 is this personalized layer where everyone is now living in a pretty digitally native world. And we're used to and expect personalized recommendations throughout our content experiences when we watch streamable videos, when we browse our feeds on various social platforms, and then some e-commerce realms, if you will have done a really good job at the same thing from a product standpoint versus content. And grocery is, is a little bit of a lag relative to the rest of the retail sectors that have seen this surge in e-commerce growth that have taken advantage of personalization technologies. And so that's where, where Grocery 3.0 comes in, every single shopper can have their own unique store tailored to them and their tastes. Every aisle is the products that you'd like, and then items that complement those products or might be interesting based on the season or the occasion. This, this question of 4.0 and to Henry's point diets not just diets from a dietary restriction standpoint, but over 40% of Americans in their similar stats in lots of countries have at least one dietary restriction, a chronic condition or a disease that impacts what they can or should eat. And to address that is incredibly important, right? You are what you eat is a very true saying. And so actually tailoring those things to those suggestions throughout your shopping experience, to your unique set of not just restrictions, but your goals and ambitions of how you might improve, your health, wellbeing, and vitality through suggested substitutes, even if the item's not out of stock, there might be something that can play into, for example, if you are if you've got, if you suffer from hypertension or high blood pressure there are lots of swaps that can be made around products that have less sodium or less sugar in the content of the product for something that's just like what you've added to your cart but is, you know, it's an alternative that's just likelier to, to treat you and your body a bit better. And we see that that intersection of precision nutrition and grocery shopping is really taking off in the next few years. And so we're trying to stay a couple of steps ahead of that, and that's where a lot of our development efforts have been focused for future roadmap and releases.

Henry Michaelson (23:59):

Yeah, and just one thing to kind of jump in because I think it's, it's interesting here is like, you know, everyone knows they should eat carrots. Everyone knows they should eat more fruits and vegetables. Everyone knows these basic rules, but the idea is how do we use advanced technology such as, you know, advanced algorithms to look at what you like, what you are interested in getting, and how do we blend personalized meal plans for you that help you achieve your goals while not sacrificing on flavor, taste, convenience, your habits, etcetera. Do you know? And I really think that is the next frontier of where this space is going. Your grocer's going to become your nutritionist and you know, and it's going to make the world better in many ways. It's going to connect problems that, you know, it, it's exciting when you start to see multiple industries come together. That's when you know you're at the cusp of something really big and something really new. And we're seeing that in many places between the grocer and the healthcare provider. And sorry Spence to just jump in on, on that point, but, you know, yeah.

Wade Ericsson (25:07):

I mean that that is a great point because that's, we see that in, in any evolution. We talked about the evolution of this, and the evolution is really solving the problem in ways that you did not have these tools prior. So, the reason we can have this kind of combined interaction between like you said, nutrition and, and grocery experience and meal planning and all of that is because you have an API model that can feed all of that, right? And so that was not available 15, 10 years ago. And so, as technology evolves, you can bring different areas together, in a manner that is enhancing, you know, the lives. And that's what we do in technology, right? We solve problems, right? For people and engineer problems. So, I know, Carlos, you had a question. I'll shut up.

Carlos Ponce (26:00):

Yes, yes. Thank you, Wade. Yeah, actually I mean, I cannot be less than extremely fascinated by the technology component because, but my question is from the layman's perspective. because That's my vantage point would be I'm just curious, you know, I'm hearing all these how can I say this complex to say the least technology arguments and components and all that. But what about, the human experience? My question would be along the lines of wondering how retailers, for example, are going to maybe strike a balance between AI-driven efficiency, which is unquestionable, and in comparison and in balancing it out with that personalized touch with our customers. What is the, what is the challenge here in the, in the near future?

Henry Michaelson (26:57):

Yeah, I mean, that's a great question. So, I think that's why we said evolution, not revolution, right? It's going to happen bit by bit over time. We don't see this as something where it's like, oh my gosh, gen AI comes out and everything changes today. So, what, what does that mean? Like, where is it going bit by bit and how does that play with the customer experience? So probably what you'll start to find is that currently when you search on a lot of grocers and you search green onion, right? It doesn't actually know what a green onion is. It searches the words green and the word onion. So, you might see like, actually, this is a real search from a top three retailer in the United States. When you search green onion, you see green Christmas tree ornaments, which come up during the summer. So, step one is you're probably just going to see the website getting a little bit smarter. So, start to incorporate some of the features that you love about Google, where it's like, oh, it knows that a green onion is a type of thing that it's a type of shallot type product. Okay, well let me show other types of products that are related to it and let me maybe toss out some things you can do to green onions, how you can prepare them, you know, how you can store them, what their shelf life is. Certain things like that that just make the shopping experience easier, a little bit more intuitive, and a little bit more connected. So that's the next step. And I think in the next three years or so, we're going to start seeing that, you know, the really, really, big tech companies have this technology. The biggest grocers are starting to get it, and the mid-size grocers are lagging a lot in terms of this market, but we're going to see acceleration there. Now the big gap is going to come at how we take the customer experience of, you know, the fact that, you know, the grocer really plays a fairly small role as it currently stands. It's just the place where you go to pick up the goods that you know you want. How do you actually get the grocer to really go upstream and impact the products that customers buy in terms of teaching them new recipes, having them explore new products, and having them understand their nutrition and those types of impacts? So, when we're looking five to 10 years out, I think we're going to see a big evolution in terms of the actual CX of the grocery shopping experience and the apps that these grocers have. So again, it will be incremental. It's going to start with your search and your recs getting a little bit smarter. Your reorder recs might not be the thing you bought last week, but it might be the thing you bought five weeks ago, the toothpaste that now is out, you know, the system just knows. But yeah, it's going to be something gradual, but we're really optimistic about where it's going to go because there are a lot of problems that this is solving. There's a huge new opportunity in the market across industries and we're really excited to be at the forefront of it and to continue to plug away.

Carlos Ponce (29:59):

Great. Thank you so much, Henry. And well unfortunately we're wrap. We're kind of coming up on time. So do you have any final words for our audience as it pertains to today's topic, grocery 3.0? Anything you want to leave our guests our viewers with.

Spencer Price (30:17):

Just feel free to reach out and connect with us. If you're interested in learning more, you can find us on LinkedIn or our website, Holla. It's right there.

Carlos Ponce (30:30):

Okay. I am showing it for our viewers right there on the ticker, so, you can make a note of it whoever's watching. So please reach out to Henry and Spencer right down below. There's the address right there. And then of course we have the company, URL. You can always check out their website and you can get ahold of them, right there too as well. This being said, the only thing left for me to do Spencer and Henry, is thank you big time. And of course, thanks Wade for being part of this show today, and I appreciate it. And just a quick announcement before we go is next week, we're going to have we're going to be featuring, oh, I'm sorry, that was the wrong ticker. Sorry about that. So, it's kind of hard to, you know, focus when you are doing two things at the same time, right? Okay. So next week we're going to be talking with Lindsay Simon, the Vice President of Engineering at, we're going to be talking about front-end cloud, open-source solutions for the next generation of developers right here. That's going to be on Thursday of next week. That is the rock-solid confirmed interview that we have. And keep an eye on techleadersunplugged.com for upcoming ones that are yet to be confirmed, but I'm almost sure that they're, they're all going to be there on the calendar. This being said. Thank you Henry Spencer and Wade and see you next time. Stay tuned. Techleadersunplugged.com.

Henry Michaelson (32:06):

Thank you.

Spencer Price(32:07):

Thank you.