Why Volition Invested in Grove Collaborative (NYSE: GROV)

Let me step back – some of our best investments had 3 core pillars in place that anchored the investment thesis:

The first pillar is a very large existing market. There should be no speculation about whether the market will materialize. There should be no guessing about the scope of the spend in the market. In good times, the market is on the larger side of huge. In bad times, the market is on the smaller size of huge. It’s huge either way – it’s a very real and very large market.

The second pillar is just as important – there’s a strong secular long-term shift in the spend of that market. We look for shifts that can be expected to continue for many years to come which would result in a meaningful portion of the spend in the market changing hands. That means billions of dollars are flowing in a different direction than before – this shift in spend is what creates the opportunity for emerging companies in that market.  

And lastly, we look for a company that we believe is leading the way in that strong secular shift which is the one we ultimately invest in.

Therefore, the 3 pillars are simple: large existing market, secular shift in spend in that market, invest in who we believe is the leader. 

Some examples from our portfolio Hall-of-Fame:

• Chewy: Leading the shift from offline to e-commerce in the ~$75B pet products market
• Globaltranz: Leading the shift from telephone to Internet-based brokerage in the ~$50B freight brokerage market
• Connatix: Leading the shift from display to video in the ~$200B online advertising market

So, here’s what we see when it comes to Grove:  

Large Existing Market: The home personal care market is a large existing market with over $200 billion in spend in the US. This market includes all of your household consumer essential spending in:

• Cleaning (e.g. kitchen, bathroom, laundry, etc.)
• Home and Pantry (e.g. storage, trash, cooking, paper products)
• Personal Care (e.g. bath and body, haircare, skincare)
• Health and Wellness (e.g. vitamins, supplements, medicines, etc.).

In short, the spend in this market is established, durable and real and has supported several billion dollar brands over time.  

Secular Shift in Spend: The foundational shift happening in this market is from conventional to sustainable products including the specific shift from single-use plastics to zero plastic. This secular shift is being driven from all levels – from a regulatory perspective at state and local governments and bottoms-up as consumers change their spending patterns in search of more environmentally friendly options. We have also talked with several executives at CPG conglomerates who have made it clear that more sustainable products and packaging is a top initiative in the industry. We believe that this shift will continue for years to come – which means billions of dollars in this market have the potential to shift to more sustainable brands.

Invest in the Leader: Grove Collaborative has been leading the way in sustainable household essentials for over a decade. When I first met Grove’s co-founder Stu Landesberg in 2016 – Grove was the first-mover and early leader in sustainable home essentials, and now in 2023, they are the beneficiaries of having worked on this problem for over a decade. According to internal analysis of zero plastic companies, Grove has #1 market share in the zero-waste home segment in terms of sales, awareness, and impressively community size with over 1 million active customers in their DTC platform. Most importantly, they have a culture of innovation with their community that has allowed them to launch hundreds of SKUs to continue to lead going forward. 

Having the 3 pillars in place sets the stage for a great opportunity, but by no means does it guarantee any success. The key question then is how do you execute against that opportunity?