Ag cos launching brands
The Business of Food
by Jennifer Barney
Ag companies launching brands
2-min read
Selling value-added branded food to customers at high margins is totally different than selling a commodity with your label on it. If you are an agricultural company and you're competing in Consumer Product Goods (CPG) there is one way to succeed: act like a startup.
I wrote a version of this in an earlier . To my ag friends out there, I can't stress this enough!
It doesn’t matter that you already ship a commodity product to Kroger. To enjoy higher margins in competitive hot categories like snacks or alternative proteins you must compete for consumer loyalty. That's what startups are good at.
But I’m not a startup you might be thinking. This is true only in the sense that startups typically aim for a big exit, and you are not looking to sell. Still, you won't survive if your product is not addressing a real need.
CPG is crowded and it’s not hard to start a brand. Startups begin scrappy, cash-poor, but with manically passionate founders. They are only able to scale if they get investors, and they can only get investors if they first prove out a market need. This is the first fundamental.
What is valid proof?
Consistent repeat sales to a small but significant target audience.
This is gospel. It is the essential, and fundamental step. It is what separates the startup, which has now become an emerging brand with a network of industry veteran advisors, from everyone else - including Big Food.
Ag tends to miss this step because it does not need investors to launch food brands, and I’ll argue, tends to seek the wrong advisors who push for wide distribution too early. To get this fundamental right you have to give up on looking at sales as anything that leaves the warehouse - this is not the proper metric to be concerned with – and start looking at velocity in same store sales.
The difference is a business model that is consumer (end user) focused not buyer (customer) focused.
A true story:
A great group of farmers launched a brand. They succeeded in getting nationwide distribution right out of the gate. 18 months post launch the brand slowed on growing new doors, velocities did not meet retailer expectations, and the brand began to get discontinued. Last ditch discounting efforts to push old product through and get the new-and-improved versions on shelf proved feeble, and by this time the grower base was no longer enthusiastic. Additionally, someone’s wife saw it at TJMaxx and lost respect.
Don’t let this be you.
All my best,
Jennifer
Now more than ever - secure your suppliers. If you are a supplier now is the time to show up for your customers.
I'd love to hear from you - get in touch at jennifer@3rdandbroadway.com