By Leonard Grape
Many CPG start-ups fail within the first year.
In fact, it’s widely reported by various research studies that between 70 to 90% of new CPG companies don’t succeed.
It’s tough to be a founder of a better-for-you food & beverage CPG company. Your odds are stacked against you. The margin for success can be slim. But there are still a lot of brands that are thriving in the space.
In my podcast, I’ve talked to numerous better-for-you CPG founders.
I’ve exerted effort to learn about their beginning challenges, how they think, their struggles and milestones in the early days.
They also shared with me their mistakes, frustrations, and tipping points towards success.
To uncover what it took for them to succeed so other founders like you can emulate them.
My genuine curiosity to discover industry truths – both the good and the bad, has put me in a position of knowledge.
And I want to share these learnings with you by talking about six valuable lessons from other founders that can help you find better success in your own CPG journey.
Lesson 1: CPG is hard, really hard
A 90% failure rate is a staggering number. This reflects how consumer packaged goods have become such a difficult industry.
Let’s sum up a few key takeaways from this lesson:
Learning curve is long and winding, especially the first 2 to 3 years
Be ready to work hard for an extended timeline
Expect burn rate within 3 to 5 years
Profitability is a long horizon
While success is evasive in the CPG industry, it is not impossible to achieve.
Among the successful founders I’ve interviewed, patience and persistence stand out as their two vital keys to success.
But both traits must be complemented by sound business fundamentals, sales capabilities, and marketing efficacy to drive your brand to a winning stage.
Lesson 2: Every buck is a hard-earned money
If you’re just about to enter the industry, you need to think long and hard before diving in.
But if you’re already deep into your CPG journey, you probably know that every sale is hard-earned money.
There’s very tight competition across all categories.
You are breathing on a tight margin.
Given its capital-intensive nature, managing cash flow can become difficult.
But some success takeaways from other founders:
Be ready to be a salesperson and sell from day one
Start at a high margin rate, study price elasticity in your category
Anticipate the need to raise money, bootstrapping is possible but a long shot
Two of the major sales channels for most brands would be retail and direct-to-consumer.
But I don’t want you thinking with an “either, or” mindset. Instead, anticipate that you need to leverage all available selling platforms that make sense to your product.
Be creative to expand into other relevant channels such as local markets, specialized stores, brand partnerships, influencer tie-ups, among others.
Lesson 3: Consumers matter the most
Some founders take at least a year to do their feasibility study.
Others longer while there’s a few that jump the gun right away to sell their product.
But the key ethos would be to get your CPG brand out to customers as soon as possible.
You don’t want to overinvest in something that doesn’t even have a chance to win from the conceptual stage.
Main takeaways from this lesson:
Test at conceptual level, secure real consumer feedback during planning
Drive as many trials as possible even when the product is not fully ready
Iterate and improve based on consumer feedback
If you’re the kind of founder who falls in love with your concepts, be wary about that. One thing that I’ve taken from industry leaders is that ideas don’t matter unless they serve your target market. No matter how great you think your ideas are.
Your customers are the lifeline of your company.
Be obsessed with them, in every aspect of your operations and brand.
Lesson 4: Pivoting doesn’t mean failing
There’s a functional beverage that shifted their entire branding and messaging after being three years in the market.
I also know of a family baking company that turned into a CPG brand, which rebranded at least three times and regularly did product changes in 8 years.
Another multi-million alternative milk brand anchored their go-to-market strategy with rebranding and refocusing their primary target market segment. This happened when they expanded their market to other countries after more than 15 years.
So don’t be afraid to pivot when things aren’t going in the right direction.
This also applies to the way you operate, your business model, your marketing tactics. A few takeaways from this lesson:
Set the right metrics for your company
Be firm with your vision but be flexible with strategy and execution
Double down on what works, let go of what doesn’t
No business owner ever accurately forecasted the future of their company.
With CPG being a highly volatile sector, pivoting is a sign of succeeding, not failing.
Lesson 5: It’s a highly scalable business
While it’s a tough business to be in, there can be several upsides.
Everybody consumes food and drinks.
People are yearning for better-for-you options.
Retail stores are everywhere, and e-commerce just continues to grow.
This makes healthy F&B CPG to be a scalable business.
Some notes for you:
Leverage Direct-to-Consumer right at the beginning
Get into retail as soon as you can but don’t expand unprepared
Never stop building connections, networks, and partnerships
Money fuels growth so raising capital is a good strategy.
But be wary that fund-raising in the industry can be brutal.
You need to anticipate where your funds will be coming from right at the onset.
You must have a plan on how to utilize your capital. Most of the time, it’s with R&D and production but don’t sleep on your branding and marketing.
All founders that I’ve talked to understand that growth comes slow, so you need to be operating with a long-term mindset.
Lesson 6: Passion is not enough
Finally, CPG is not a passion project.
You may have started your product with something that you’re passionate about.
That’s well and good but know that passion alone is not enough.
It can take everything in you to succeed.
The number one trait that is common among successful founders who have come on to my podcast is being resilient.
But you also need drive, courage, support, and relentlessness.
Some takeaways from this lesson:
Be clear with your vision and understand your WHY
Leverage expertise whether having co-packers, working with retail brokers, or hiring creative firms and other consultants
Connect with other founders, join communities, and learn from fellow entrepreneurs
It’s a long entrepreneurial journey to be a better-for-you CPG founder. Learning never stops. Failure is part of the process. You will have to constantly learn more not just about your business and the market landscape but how you are as a founder. Take time to understand your strengths, weaknesses, and know that success comes to those who never stop trying. In summary:
CPG is really tough
Every buck is a hard-earned money
Consumers matter the most
Pivoting doesn’t mean failing
It’s a highly scalable business
Passion is not enough
While these six lessons are the ones that I think are the most relevant, there is still a lot more that you can take from other founders on how to succeed.
It’s taken me countless hours to continuously produce, run, and make the podcast available for free so better-for-you CPG founders like you can gain valuable insights.
Help yourself by taking advantage of this.
Spend time listening to my interviews, hear advice from other founders, and subscribe to the show if you’re keen on learning.
Treat it as your entrepreneurial companion.
Start here – www.thevineyardbc.com/podcast
Many more CPG lessons await you.
I wish you all the best and more success!