Processors getting into CPG
3-min read
As the saying goes, you can’t really know where you’re going until you know where you’ve been. If you’re making a business decision that involves getting into consumer products: knowledge is power.
If you’re a processor or manufacturer thinking about entering consumer markets, do yourself a favor and research the vertical.
Start by mining the category. Create a competitive landscape by mapping how the category has evolved over time.
Projections for your brand in a given product category should be determined by the history of that category + anticipated future growth. You wouldn’t believe the number of folks seriously looking to get into consumer products that have no idea about the competition, where the category is headed, or who the disrupters are.
Take dairy for example. Dairy has seen huge upstream consolidation. But on the shelves, no aisle has seen more innovation than in dairy.
Here is a way to look at diary disruptors (list is not meant to be exhaustive):
There are 3 types of disrupters:
1. Corporates & Co-ops
2. Researchers (brands launched out of research funding)
3. Individual Founders
The latter two is where we find the most growth in this category.
Corporates & Co-ops
- Silk was founded as Whitewave Foods and launched in 1996. In 2010, the company introduced Silk Pure Almond, an almond milk, its first non-soy-based product
- Blue Diamond is the world's largest tree nut processing and marketing company under the Blue Diamond and Almond Breeze brands.
Researchers
- Oatly is based on Swedish research from Lund University.
- Fairlife developed the ultrafiltration process that removes the lactose and much of the sugar and leaves behind more of the protein and calcium.
- Pat Brown is a Stanford biochemist, and the founder of plant-based meat brand Impossible Foods, and a co-founder of Lyrical Foods, maker of Kite Hill, a non-dairy brand. The company has raised >$75 million.
- Ripple Foods, the brand that researched and developed a proprietary protein extraction technology to make milk out of peas, has outpaced Kite Hill on the fundraising front, raising >$260 million so far for its non-dairy milk products.
Individual Founders
- Chobani was founded by Hamdi Ulukaya who bought a plant that was being closed by Kraft Foods.
- Greg Steltenpohl co-founded Odwalla in 1980. He sold the company to Coca-Cola in 2001 and started Califia Farms in 2010. Sun Pacific, producer of Cuties clementines and Mighties kiwis, holds a majority stake in Califia.
- Miyoko’s founder, Miyoko Schinner, swiftly accrued $1 million in seed money and is now at >$58 million in funding.
Once you study the landscape you might conclude that:
1. It takes a while to build a brand
2. It takes a ton of investment
3. You can’t underestimate innovators
The exercise of mapping category disruptors is an important step in developing a business case for vertical expansion. If you didn’t do your research in dairy, for example, it may be surprising that alt milk has a 20% household penetration rate. That knowledge would surely impact how you approach entering the dairy category with a CPG brand. Gain the knowledge so you can better plan your road ahead.
All my best,
Jennifer