Daily Table Offers a Hand, Not a Hand-Out with Doug Rauch, Founder and President of Daily Table

For the many Trader Joe’s dedicated shoppers, Doug Rauch is a name you might not know as well as “Joe.” As President, he helped grow the business from a small chain in Southern California to a nationally acclaimed retail success story. After 31 years with the company, Doug hung up this trademark Trader Joe’s Hawaiin shirt to start a non-profit, community grocery store that provides fresh, tasty, convenient, and nutritious food to communities most in need at prices everyone can afford. 

Doug Rauch, Founder and President of Daily Table

The “Distinguished” podcast is produced by Boston University School of Hospitality Administration.

Host: Arun Upneja, Dean
Producer: Mara Littman, Director of Corporate and Public Relations
Sound Engineer and Editor: Andrew Hallock
Graphic Design: Rachel Hamlin, Marketing Manager

Music: “Airport Lounge" Kevin MacLeod (incompetech.com)
Licensed under Creative Commons: By Attribution 4.0 License
http://creativecommons.org/licenses/by/4.0

Transcript

Arun: Welcome to the Distinguished Podcast, produced by Boston University School of Hospitality Administration. I'm Arun Upneja, Dean of the school, and I'm pleased to welcome our guest, Doug Rauch, who is the founder and president of Daily Table. Previously, he spent 31 years with the Trader Joe's company, the last 13 years as the president, helping grow the business from a small chain in Southern California to a nationally claimed retail success story. He was instrumental in developing their prized buying philosophy, their unique private label food program, and wrote and executed the business plan for expanding Trader Joe's nationally. Doug was a fellow at Harvard University's Advanced Leadership Initiative, where he researched hunger, food insecurity, as well as where the idea for Daily Table was hatched. Doug has many honors in his career. Daily Table was established in 2012. It's a nonprofit community grocer dedicated to providing fresh, tasty, convenient and nutritious food to communities most in need at prices everyone can afford. Welcome, Doug, to the Distinguished podcast.

Doug: It's great to be here, thank you.

Arun: So when senior executives leave one position, they go for another position and then another executive position. What inspired you to start Daily Table as the next chapter in your post-Trader Joe's life?

Doug: Yeah, it's a great question. Even when I retired from Trader Joe's, I internally called it a graduation because I'd been to a lot of retirements at Trader Joe's and here's a company that wears a Hawaiian shirt, famously as their uniform, and we'd all dress up in suits and it felt like a funeral. And they'd start talking about what a good fellow he was and he's sitting right there and he's dead. So I said, okay, look, you guys wear whatever you want. I'm wearing a Hawaiian shirt. And second, this is a graduation. This is something we should be celebrating, not like mourning. But the reality is also I flunked retirement. I didn't really believe in retirement as a concept of more of a transition.

So what I wasn't clear about in my mind when I retired from Trader Joe's was what's next. I thought I'd sit on boards and I'd do philanthropic work and maybe get engaged, but I really didn't have any other commercial business interest at the time. I happened right after I left Trader Joe's, ran across this opportunity you mentioned at Harvard, which is just in its first year at that time for this Advanced Leadership Fellowship. And what I liked about it was that it was gathering a cohort of 15 or 20 that were senior executives and or people in public service that wanted to give back in some way, that they were still feeling they had gas in their tank and they wanted to help tackle a social challenge. What particularly about the program attracted me was it was an attitude at the time that said, come, utilize the university and then stand and deliver in front of the faculty and your cohort. What are you gonna do about a problem?

And I said, I like that. I'm ready to reengage in something that's operational instead of just sitting on boards, which are fine. And I said on a number, but there's something that for someone who's been an operator most of their life, it's attractive about getting involved with that. So I had not actually sought going out into a nonprofit solution. I didn't really care if the solution was a for-profit or a nonprofit. It just so happened that for reasons that made sense in this marketplace, that tackling hunger is best done in the way we're doing it through a nonprofit structure.

Arun: So first, just a very quick comment on your graduation from Trader Joe's. We are in a university setting, so you just didn't graduate from one program. You are now getting a PhD. So I wanted to turn back to the hunger and obesity problem. So how did you hone on these two issues that would be of interest to you? And how did you educate yourself on those issues?

Doug: Yeah, it's a good question. It's a foundational question to what I'm doing now. So when I joined this program, I had no idea what I wanted to do. I mean, there's so many social challenges in America, right? There's environment and there's poverty and education and just, I mean, everywhere you look, there's a challenge that we could lean into. And as I was driving from my home in Newton into the campus in Cambridge at that time, and this is 2009, 2010, there was a billboard on the Mass Pike that said one in six are hungry in America. And I drove by that once or twice when it really hit me. It's like, that's 52 million Americans. Like, how's that possible?

We're the richest nation in the history of the world in food production. My entire lifetime, we've been net exporters of millions of tons of food. So that we'd have 52 million Americans that are hungry, need something to eat, you know, I don't understand that. So I said, why don't I lean in to try and figure this out? Maybe it's a distribution problem. Hey, maybe there's some thoughts I have on that. Maybe I can help. So that's where it really started. It started with this, what is at the heart of this one in six? Because it just felt, one, a staggering number, and two, it felt like it flew in the face of all I knew about the food industry.

Arun: So let's just jump in to this a little bit more when you saw that billboard and you say 50 million Americans go hungry, is it, and I think this is going to speak to what you're trying to do also, are they hungry in terms of just lacking food or are they hungry in a sense that they are eating food which is full of calories and not nutritionally dense?

Doug: Yeah, and that was the heart of my first real awakening to the problem which was that I had thought that hungry meant a lack of calories and I had as a kid growing up in the 50s and 60s had seen all the care package commercials for helping feed the starving in India and Africa and save the children and so when you tell me that we got 50 million hungry people, I'm thinking of images of people that are starving and as it turned out of course that frankly, obesity's the face of hunger in America We're in America, and it's because hunger isn't a shortage of calories, as you mentioned. It's really a shortage of nutrients. And so the solution then flips to a much more difficult one to solve, which is no longer is it about a full stomach, it's about a healthy meal.

And the fact that we have, through various policies, whether it be subsidizing corn and the farm bill so that we can end up with high fructose corn syrup, which is ubiquitous now, and adding calories and sweetener everywhere, that we end up with people that can get all the calories and more that they need, but it's in foods that are leading to tremendous health morbidity issues of diabetes and obesity and heart disease and hypertension. And so that was a first real awakening was that, oh my gosh, hunger isn't what I thought it was. It's actually far more complex and more difficult. And then it's, well, how could we provide a solution to nutritious food? And that was the next one. So I reached out when I was at Harvard program to the head of Feeding America, a woman by the name of Vicki Esquera, was the CEO at the time. And in a couple of conversations I had with her, asked her, what's the number one problem you face? What's the biggest problem Feeding America faces? And she said, oh, it's simple.

Right now, this is the heart of the Great Recession, 38% of the population that qualifies for SNAP and our services don't use them. And when I asked, well, why is that? You know, I mean, is it because, and I started then immediately going into my type A personality of solving it, is it because you don't have enough locations, you don't have the money to market it, they're not aware of it, language barriers, ICE? I mean, she goes, whoa, whoa, whoa, whoa, slow down, Doug. Much simpler than that, they're ashamed, they're embarrassed, they don't want to hand out. And that was a major aha moment for me because it had been one of the things we're actually in the rings that I was already doing at the Kennedy School was this issue of the Maslow's hierarchy of needs around how profound human dignity and respect is and that need for us to have a dignified sense of ourself is, we're hungrier to keep our dignity many times than even our own health. And so that was the next big aha that led to the type of response that Daily Table was.

Arun: So before we dig deeper into this issue, just in case there are people who are listening who don't understand what is SNAP, can you just give a very brief synopsis of what that program is?

Doug: Yeah, SNAP, which is the Supplemental Nutritional Assistance Program, used to be, most people would think of it as food stamps. And it's now electronic on an EBT. But it is support from the government to supplement a person's economics to be able to be spent on food. And it's somewhat limited and complicated. It's on a formula, how much you get depends upon, you know, your household size, your income and all that. But it also then is, shall we say, controversial in what it covers and what it doesn't cover. And a lot of this came out of, not surprisingly, the people who are listening, wrangling around Congress and lobbying and special interest. So, the thing about SNAP that drives me nuts is that soft drinks and chips are covered on it, but a hot rotisserie chicken or a hot soup off a soup tray in a supermarket isn't. And that's kind of like, huh? And so, anyway, part of what we do at Daily Table was to craft a response to that, what I'll say, internal inconsistency and craziness by having all of our food be SNAP-eligible. And so, even the foods we create in our kitchen, we then sell them refrigerated. So, our rotisserie chicken, fully cooked, we put in our refrigerated case because we put it out on a hot tray where all the other supermarkets do. SNAP doesn't cover it. It's that crazy. It is.

Arun: That's just unbelievable. Okay. So, I then want to go back to the challenge that you mentioned, which is people are ashamed to buy used SNAP because I've seen a lot of grocery stores will accept SNAP as well. And then, you know, they were also except for sodas and all the other beverages. And I believe there was a very big UN cry anytime any government tried to stop it from being used for these calorie-rich food. But so how did you solve, think about solving the issue of this shame or loss of face in people?

Doug: Yeah. And so, you know, I think it was Abraham Maslow again, the same Maslow target that said that if you're a hammer, all the world's a nail. So I came out of retail. So of course, the solution was retail. I make fun of myself that way, but I do think there's something in the retail model. The beauty of retail is that you've got to earn the patronage of the customer. So in retail, it's voluntary exchange. None of us shop at a Trader Joe's, a Whole Foods, a Stop and Shop, a Shaw's, wherever it is we are, because we're forced to, we choose to go there. So if we could craft a business that people would choose to come to, and then sell them healthy nutritional food at a deep discount that was affordable to them, then we provide an opportunity for them to have a dignified shop because they have the power of the purse.

Because then no longer are they feeling beholden to us. We've got to earn their patronage every day because they're choosing us. And that's what I liked about that. One is we've got to set our standard such that we have what they want in the way that they want it at a price that they think is worth their hard earned money. And then it also at the same time creates for us a secondary gain which is one of the big problems of every hunger relief effort to date is it's not scalable. There's not a food pantry that's scalable. And much of it is because they have no revenue generating. It's all a philanthropic black hole. I'm not saying that it doesn't do good, it just means they generate no revenue. All of their costs has to be borne by the philanthropic community. So our model would be what if we crafted a business that could get the majority of its funding by the delivery of its mission instead of simply for the delivery of its mission. And if we put the stores in the right spots in the inner city, our customers that come shop with us, every time they buy something, we're delivering on our mission.

And every time they buy something, they're actually funding the mission which becomes in a virtuous cycle that then allows us – right now, for instance, we cover about two-thirds of our expenses which means that for every funder that gives us a dollar, they get a two-for-one automatic match every single time. So we hope to get that, by the way, into the 80s over time as we both get our efficiencies and our scale up. So retail is something that does a couple of other things. One is that we know from studies by Cornell and others that if you give a kid an apple in a school lunch line, it almost certainly got to move the trash can to the end of the line because that's where the apple goes. If you nudge them toward a decision to choose the apple, they'll eat it. To choose regular milk instead of chocolate milk, to choose a healthier meal, if you nudge them toward they have a psychological engagement, they'll use it. So one of the things about retail is when they come in, if they see something that maybe they don't know if they like it, but it looks like the price is right or it's good, or there's some produce item that's priced so that it's attractive, if they buy it, they're psychologically engaged. They'll almost certainly at least use that up. They may or may not come back to buy it again, but at least you've got the engagement of knowing if they buy it, they're probably going to use it.

Arun: So that's a very, very elegant solution, Doug, that if, like you said, the child, if the child chooses the apple, then he or she is likely to eat it. But if you just give the apple, then they'll just throw it in the trash. But this retail solution, then, you know, there are many different aspects to it. And I want to start off by asking, you know, there is part of the reason why high fat and high calorie rich foods are sold much more in greater quantities because they are tastier. So you would rather eat fried food than, you know, something that is baked. So, how does your store, how does it try to move people away from those calorie rich foods?

Doug: Yeah, and that, by the way, is a problem for all of America. That's not a problem of, quote, the poor or economically challenged. That's not a food insecurity problem. We all as Americans, because our brains are wired for calorically dense foods, we still have the genetics that say, we don't know when the next woolly mammoth kill will come along, so you gorge on caloric intake. The challenge is we can get a woolly mammoth three times a day now, hence we got the challenges we have. Here's what I can say. We were one of the first, the first rollout here in the city of Boston going back five years ago to the Double Up Food Buck program. Double Up Food Bucks is a program that now is sponsored and funded by the USDA and the city of Boston. It allows for someone on SNAP to come in and get fresh fruits and vegetables and frozen for half price, so it basically removes the economic barrier.

This originally started in farmers markets and now has expanded to a number of retail sites of which Daily Table is one of those. And, when this happened for the first year, because we are a store where we are a membership store, membership is free, it's open to anyone and we don't take any personal information other than you put in some identifier. It's often a cell phone number that you punch in at the register and a keypad. We had data on every single customer from the time we opened. What they bought, how they paid for it, how often they shopped with us, etc. We didn't know who that customer was. We didn't know your name, didn't know your address, so it was completely randomized, but we had that information specific to that number. One of the researchers at the Friedman School at Tufts doing a doctoral program said, I'd love to go in and see what the effect of Double Up Food Bucks. was Let's go and look at the year before, follow all the data through to the year after.

Sarah John's her name, Sarah John found that by introducing Double Up Food Bucks, the average SNAP customer of ours shopped with us 15% more often and bought either 24 or 27% more fresh fruits and vegetables on every visit, which as you know in the world of nutrition and dietitians is a significant increase. That's not just a rounding here, to be able to say that he's shopping 15% more often now and every one of those visits, you're buying 24 or 27% more fresh fruits and vegetables, goes to the heart to me of answering, can you move people away from a diet that's unhealthy towards a healthier diet if you remove the economic barrier? And the answer I think we can show with impact and metrics is yes.

That doesn't mean they aren't still having soda, doesn't mean that they aren't... And by the way, Daily Table's goal here would be to democratize access to nutrition so that regardless of your economic status, you have the same opportunities to make the same healthy choices as any other American, regardless of economic status. Whether you choose to do that or not, that's your decision and we're not the food police. We simply are there providing opportunity.

Arun: Right. And I think a lot of people don't really understand the concept that healthy food is a preserve of the rich. I think it's healthier food is more expensive, fresh food is more expensive to buy and so there is this big economic divide between who can buy healthy food and who cannot buy. So this is great. Now I want to just ask a little bit more about the Double Up Bucks program. So this is a government program and can they use this program anywhere and what all can they buy with doubling up?

Doug: Yeah, so Double Up Food Bucks is a program that's authorized and run with the USDA and it is limited in its application. I think that they're looking to expand it in the current farm bill that will be up this year, but right now it's only offered, I believe, at Daily Table and maybe six or seven other retailers, no major supermarket chains. And what you can buy on is any fresh produce item or fruit or vegetable and frozen fruit or vegetable. So frozen blueberries, for instance, if you do a smoothie or something, you can come get that at half price. It is something where what happens is at the time when they buy it, when they use their SNAP, they're like a debit card, that they then are only charged half of the fresh fruits and vegetables. So that takes some internal programming we had to do with USDA.

So they're charged half of which then that half we make up initially until the USDA reimburses us. So we threw a program called GusNIP named for Gus Schumacher who was very well known in the food and security circles and here in Massachusetts, a wonderful man passed away a couple of years ago and the NIP I believe is the Nutritional Incentive Program. So, it's a combination of an award honoring his efforts to get nutrition out there.

Arun: So, that's great. Now, if you are subsidizing one third of the cost, so it's two-thirds of the cost being paid and for fresh produce and fresh fruits and vegetables, they're only paying half, so they're paying one-third of what the price would be.

Doug: Well, it's an interesting way to look at it. So, for instance, our bananas are 39 cents a pound every day to anyone that walks in. If you're on SNAP, you're getting them for 19 cents a pound. So, we have Little Leaf Farms, the wonderful packaged salad that's hydroponically grown just 20 miles from here. It's honestly the freshest tasting lettuce you're ever going to get. So, we sell that for $1.99 every day to every customer who comes in the store, and it's only 99 cents for those on SNAP. So, we have reduced that. And yes, there's a subsidy that's there, but I think that at the end of the day, what the challenge in front of America and in Daily Table is that we've got one in six Americans because although COVID has ended as a pandemic and is even ending as an epidemic, like a large boat that's gone by, the wake behind that boat is now hitting the shore. And we still have one in six households that are food insecure in Massachusetts.

We have the reduction, as you know, of SNAP benefits. We have all these other things that are being withdrawn at a time when we haven't had the economic support in face of largest food inflation in 50 years. So this part of the population that we're serving is getting a double whammy on all fronts. And so to be able to come to a Daily Table and get, quote, subsidized product, I think is really, really critical. And so one other thing I'd say is that I would say probably, I guess nine out of ten, maybe eight to ten of our customers have no idea we're a non-profit. We're just the corner market that is there, that has friendly people, bright and colorful and easy to shop at, and has good product at great prices.

Arun: That's very, very impressive. There was a hurricane in Louisiana many years ago, I believe it was Katrina. Even though the United States has a federal agency which is in charge of delivering aid to those areas, I think water is one which is a low-price, bulky item, and Walmart was able to get water to those areas much quicker than this dedicated federal agency. My question is, are you partnering with any of these big like Costco, Walmart, Sam's Club or even Trader Joe's, for example, are any of those chains interested in partnering to sort of help drive down the cost of products that you're selling in the stores?

Doug: We partnered with a number of companies in the food business, not so much at the retail level, because mostly for retail, people, when you look at donating product, it's usually because it's short or at its code date. We made the determination some time ago that due to that same dignity reason we just mentioned, we don't want to sell product past its code date, even though it's legal within the state of Massachusetts to do so, as long as it's still healthy and fresh. By the way, it's a whole another conversation, could take a whole another podcast around the confusion on code dates we won't go into.

Because of that, we didn't want... We actually had, for instance, Wegmans came and said, we really want to support this, and we looked at it. Because of our nutritional guidelines, we don't take anything that is high sodium, high sugar, we want to be a force for good, we want to make sure that the product we're getting out into the community is actually going to benefit their health. When Wegmans looked at that, they said, like 20% of the product we're going to give you actually meets your guidelines here, we can't help. We go upstream to the manufacturers. We have crafted some great relationships with food, both the fishing companies, manufacturers, farmers, wholesalers, growers, both around the state and around the country.

Arun: So the next question I want to ask is, and this is something that I actually was an observer to, a conversation between my son who a college student and my wife was, and they were discussing laundry pods. My son went to the local drug store, and he tried to buy detergent pods. And it turns out that my wife was horrified at the cost. And she said, well, I can buy three times that number and half the cost at Costco. And so the instant reaction from my son was, but that is so terrible. The poor people who are around this store are coming and buying these detergent pods at such a high price. And here we have the money, we can get the Costco membership, drive there, and we buy it one third. So I think one of the issues with if you are economically disadvantaged is you cannot go and stock up on some things for three months because you need to be able to buy everything that you need for that week. And so how, is there any system in place that you're trying to get people to be able to buy a bag of 25 pounds of flour versus just five pounds at a higher price? Or do you see that happening?

Doug: So it's a great question, and it's one that we can spend a lot more time than we have, which has to do with just the inequities and inequalities in pricing, distribution, inner city models of return, all that stuff. What Daily Table tries to do is most importantly is provide affordable nutrition. And whether we sell, and right now for instance, you can get 20-pound bags of rice, great price at Daily Table. But, whether it's a two-pound bag of lentils, we want to price it in a way that it's a great deal. So it's not like, oh, you got to go to Costco and get their 25 pound bag, because as you said rightly, many of our customers don't even have a car, let alone the economics. How are they going to get there? And then what are they going to do with their 25 pound bag, carrying it on the bus, et cetera? So I think that the challenge is to meet our customers' needs where they are and providing them the true access to a varied and healthy diet so that they don't need to go to a Costco, a Trader Joe's, et cetera, in order to get those economic advantages. And certainly one of the challenges with Costco is, I'll just say personally, now that I'm empty nesters, the size of packages alone can, if you're not careful, lead to a lot more food waste and or just the economic outlay is much greater. So what we try to do is have it so that we're a neighborhood store. They can shop with us once or twice a week or more. They can get what they need and they can get it in the size that's appropriate to them. But they also get it at pricing that is 25, 30% less than they'd find out in the regular grocery industry.

Arun: I have a few more just a quick fun questions. So what's your favorite healthy go-to food?

Doug: My favorite healthy go-to food, honestly, it'd be a fresh smoothie, something made like blueberries and kale and banana and I throw walnuts in and some things like that. But it's fresh. It's what I usually have each morning and I find that without the grains and carbs, it just feels better and I last longer. So that'd be my answer now.

Arun: Fantastic. If you could have dinner with any four people, who would they be and why?

Doug: Oh, geez. I have no idea. There's so many people come to mind. I mean, there's everything from the spiritual and religious traditions, which you'd want to draw from, which I think would be fun, by the way, to get a Jesus and a Buddha together in a room and have them have a conversation. But then second would be the things like the people that truly have been inventors and amazing. I mean, the obvious stereotype is an Einstein, but there's so many other inventors that are around that are... George Washington Carver, by the way, invented more products and did more with peanut butter. He did magic. It'd be fun to get him and see how he thought and what he did. I don't even know how to honestly in a short time answer that question other than there is no shortage of fascinating people when you look back, both in Today Alive and Going Back Through Time.

Arun: If you could get one person to visit Daily Table so that they could see firsthand how this business could make an even larger impact, who would that be?

Doug: From the shameless plug, Mackenzie Scott, I'd love for her to come see what we're doing and see if it's of interest to her. 

Arun: We should send this podcast to her. Thank you, Doug, for joining us. It was really an interesting conversation and I hope we do that more often since there are so many other topics we need to discuss in more depth.

Doug: Thank you for this opportunity. Thank you. That was great.