The CPG Opportunity
The Business of Food
by Jennifer Barney
Today's post:
The CPG Opportunity
Upcoming posts:
Get the Fundamentals Right
Ag Growth Beyond the Core (3 Part Series)
Stop Thinking About Products
The CPG Opportunity 2-min read
“Our growers are really excited about having a brand.” I hear this all the time.
ag initiated brands tend to be born under these conditions:
easy money
belief that success breeds success
poor fundamentals
I believe ag has a huge opportunity in value-added food, particularly CPG…Consumer Packaged Food.
CPG is Hot
Institutional investors and Big Food have been throwing themselves at deals in this sector for a while and the biggest segment for M&A in food is CPG. Q3 funding this year to food and beverage companies hit an all- time high, raising more than $1.4B.
I believe the greatest opportunities for Food + Ag are innovations in plant proteins and closing the supply chain loop. This is exciting for vertically integrated ag producers (supplier-manufacturers) who position themselves as ingredient solutions with sustainability and transparency built-in. It also makes for a great platform to build a brand. But many that choose to start a brand fail to achieve sustained success. Let’s look at the typical conditions:
Easy Money
If you’re in verticals such as almonds and yellow peas, the recent past has been really good. Consumer demand has kept prices high and everyone starts out on the brand journey looking and feeling great.
The biggest mistake is approaching this business the same as other business: that sales is the greatest factor to success. It’s not.
Success Breeds Success
The second biggest mistake ag producers make is believing they can win simply because they have an unfair advantage over input costs. This is huge – and early on many experience big wins growing sales nationally and even internationally - as they’ve come to expect. But when the reorders don’t come through the cost advantage you have quickly dissipates as the expense of survival kicks in.
Poor Fundamentals
Underestimating the cost of excess inventory, new customer acquisition, and the resources beyond capital to support the brand are part of the problem.
In the next post I’ll reveal how to get the fundamentals right. Spoiler alert: it starts with seeing yourself as a startup. Even if you already ship to Kroger.
All my best,
Jennifer
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I'd love to hear from you - get it touch at jennifer@3rdandbroadway.com