by Leonard Grape
Success can be evasive in the better-for-you food and beverage CPG industry. Here are a few reasons I say this:
It’s a highly competitive industry (at least 30 brands on a shelf)
It’s a capital-intensive business (average of $50k just to get started)
It’s a tooth-and-nail margin game (hard to stabilize at 50% margin)
It’s a long growth horizon (unprofitable for up to 5 years)
It’s a branding competition (in the context of commodities)
Still, there are many brands that are thriving and overcoming these challenges. For the past 12 months, I’ve studied what drives success for CPG brands. I’ve spent 360+ hours probing the journey of CPG founders:
What are the growth levers that can drive momentum?
How can a better-for-you F&B product get to a tipping point?
Why do others scale, and others don’t?
Obviously, there’s no blanket answer here.
If you’re looking for a silver bullet, you won’t find it in this article.
Or anywhere else for that matter.
But there are proven strategic approaches and tactical tips that can increase your odds for success coming from those who’ve been in the game for at least 5+ years.
Here are 4 things that you can consider:
1. Start with a High Margin
The number 1 metric for success for any CPG brand would be increasing revenue while increasing profit margins.
At this point, I want to emphasize that the earlier you focus on getting your margins healthy, the better it will be for your business.
It’s a dangerous proposition to think that your numbers would stabilize over time. Most likely, as you grow, your profitability will continue to dip.
Why? Because money fuels growth and growth sucks money, especially in this capital-intensive industry.
So be conscious about your financial health right at the onset. Strive to get the best margin possible at the beginning. Experiment with price elasticity.
Some tactical tips:
50% margin is ideal.
Do a production audit – check your ingredients and packaging costs
Anticipate economies of scale – from sourcing, manufacturing, and distribution
2. Develop a Brand from the Beginning
Brand Development should be a capital expense if you don’t want to compete as a commodity. It needs to be in alignment and in concurrence with your Product Development.
Typically, within 2 to 3 years, your brand will evolve as you get more customer validation and insights.
Start late and you’re effectively pushing your timeline by at least 24 months.
Begin early, you can have a head start advantage.
Remember, it’s no longer about who has a better-tasting product or healthier ingredients. It’s about who has a more powerful brand that can command recall and build affinity among consumers.
Some tactical tips for your brand development:
Identify 2 to 3 product benefits
Focus on 1 to 2 unique selling points
Craft 1 main marketing message
Refine your packaging as often as necessary
3. Build an Operation that Scales
As a start-up, you need to be scrappy in the first 6 to 12 months. Coming to the 2nd year, you must strike a balance of structure and systems.
If you want to grow and scale, you’ll inevitably build a team. You’d need operating guidelines. You’d have to focus on productivity and efficiency.
Having this in mind can help you be more intentional with the way you operate your CPG company. An operation that scales is one that promotes talent fit, multi-pronged efficiencies, utilizes technology, and constantly irons out friction points.
Some tools that you can use:
Trello – for project management
Hubspot or Streal – for CRM especially with wholesale accounts
Gorgias – for customer service
Loom – for video orientations or task instructions
4. Network with Other Founders
Building a better-for-you F&B CPG company can be a lonely journey. So, it’s important to expose yourself to other founders in the industry.
As a founder, it can take everything in you to constantly overcome challenges, battle self-doubts, and continue to be positive.
Fortunately, there are now several platforms and communities where you can interact with other entrepreneurs and learn firsthand insights.
Some of these are:
Start with high margins
Develop a brand from the beginning
Build an operation that scales
Connect with other CPG founders
Success can be evasive in this industry but it’s not unattainable.
If you hone your business acumen, operational capabilities, branding and marketing effectiveness, and continue to learn, you’ll definitely have a stronger chance to succeed.
I and the rest of our team at The Vineyard are rooting for you.
If you need support, we offer a free 30-minute consulting call for better-for-you Food and Beverage CPG founders.
All the best and cheers.