No one comes to the Natural Food Industry in a half-hearted way. Folks are excited and passionate about their idea and confident consumers will embrace their brand.
But many founders focus on the wrong thing. They tend to look a mile wide and an inch deep. What works is thorough, strategic planning, and building trusted partnerships geared toward the long game.
This is an industry that has shown to be recession-proof in the eyes of the consumer, so succeeding here will result in long term success!
You’ve done the hard work of getting your natural food brand ready for market. All the R&D, sourcing, and packaging is complete. You’re confident that there is a need for your brand within its category and that the public will scoop it up. How, then, does the preliminary work and inspiration translate to actual sales? And how can you scale those sales into a sustainable, long-term profitable business?
In our longstanding experience in the natural products industry, Dirty Hands has been a key player in launches and has seen tons of examples of successful and not so successful brands at retail. Here are six key themes we’ve observed while supporting launches of smaller emerging brands and larger launches of innovation in established brands:
Master these 6 things and you will be well on your way to driving a successful brand.
Do Your Research
Surprisingly, some brands don’t realize the importance of serious market research. Do your research! Both basic consumer-oriented questions and data-driven retail analytics like those derived from syndicated data are important.
What are average prices for your product(s) versus existing products in your category?
If you are higher- why? Will a consumer understand and support that higher price?
Who is your customer? This is key- this will drive who your target retailers are!
How is your category trending? Don’t find yourself in a category that is trending out.
Are you developing a product that can be commercialized at scale (think about manufacturing and ingredient requirements)
Have you considered how your packaging will look and fit on the shelf in your category?
Envision your competitors, and keep things in mind like packaging shape- For example… that cool box may cause a retailer to pass if it causes air space in a planogram based on other competitor’s packaging height!
Spend the time required to learn as much as possible about your target market, in both micro and macro scenarios. Without research and development, you’re flying blind in terms of what might work in the marketplace. Creating a great tasting product means nothing if it can’t compete on price, scale up in commercialization, or are in a category that’s on its way out.
Attacking retail is expensive. And unexpected costs pop up often. Do you have the cash on hand to undertake the launch? Think through the following when it comes to cash considerations;
Fees associated with getting on shelves: slotting in either cash or free fill. Early planning is key. For example, If you can do a 6 pack rather than 12, you will save thousands on free fill fees. Knowing the costs up front can help you plan and anticipate.
Promotional Spends: Most will require quarterly (the going rate is 20%.) Keep in mind you will need a minimum 15% Off Invoice to distributors out of the gate for 90 days.
Production Runs: Forecast it! Do not overproduce. Keep in mind, in distributors, you need to move through 60 days of the initial purchase orders before you get paid. Understand the potential length of time it will take for cash to get back in your bank account.
Tools to drive velocity once on shelf: Getting on the shelf is easier than staying on. Do not rely only on promotions. How are you going to differentiate at the shelf to get into baskets?
Distributor set up costs: Know your set up costs and potential future fees. Get your paperwork right. Incorrect paperwork can break a launch!
For the most part, gone are the days of brands finding success without an influx of capital. Fundraising for early-stage brands is critical.
Patience, diligence, and savvy financial management are crucial for new brands. If you need the help, this is a place to invest in experienced advice. Running out of cash is not an option.
And win small first. It will allow you to understand cash planning without much risk. Then scale up once you feel comfortable.
Finding the right partner for your size and situation is key. Ultimately, you’re looking for a manufacturer that is transparent on costs, can flex up and down as you scale, and has a proven track record of reliability.
Some key areas to consider when choosing a manufacturing partner are:
Reliability: Do they have a proven track record? There is nothing more damaging than being unable to fill orders from valuable accounts. Get references.
Right Sized: Based on where you are in your lifecycle, is the manufacturer the right size for you? Understand minimum order requirements and if it makes economic sense based on what you need to produce.
Flexibility: Can they scale up or down as you land new accounts. You don’t want your growth stunted because you can’t produce enough product.
Cost Transparency: Are you aware of all of the costs up front? Will you be on the hook for new equipment or issues in early production runs?
Ingredients: It’s critical that your manufacturer can handle your ingredients. It’s all about taste and quality in natural food. Make sure your taste, texture, and quality are right.
Geography: How quickly can you move product around and for what cost? And does it make sense?
Don’t skimp out there. Manufacturers ultimately determine the quality of your brand.
It’s all about finding the right partners who can consistently get you to the shelf. Once in a retailer, you need to worry about building and maintaining trust with retailers and shoppers. One surefire way to kill trust and relationships is to go out of stock for extended periods of time. So getting distribution right (alongside manufacturing) is fundamental to any strong retailer and customer relationship.
While supply chains experienced unusual disruptions in recent times, the Natural Products Industry is fortunate to have large, reliable distributors such as UNFI and Kehe. And over the past year, we’ve seen smaller, regional distributors step up and provide more opportunities to brands and retailers to get to the shelf.
When establishing distribution, new brands may find difficulty navigating each distributor’s unique requirements. Even the language used by distributors can be confusing. Don’t go it alone.
Mistakes in this process can be costly and set you back months. Try to leverage someone with experience, either a vendor or consultant, to help you get set up and navigate the process. Distribution can make or break a new brand, this is an area it pays back ten fold to hire the knowledge!
Having a trusted brokerage partner is crucial in carving a path into distribution and retail that’s sustainable. It can be tempting to try to say yes to every retailer and distributor that comes along the path. But every yes has a cost, as discussed throughout this article. What will it cost to produce, distribute, promote, support the shelf, etc. And when will you get cash back into your account?
Brokerages bring experience to the equation. They’ve worked with thousands of brands and understand the costs and complexities of each distributor and retailer. And so finding the right brokerage will help you develop a sustainable sales plan that is right for you and your cash position.
For example, a recent Dirty Hands client was excited to land a prestigious natural food grocery chain on the east coast. They secured manufacturing and distribution as this was an important growth opportunity.
Then, a smaller but premier grocery chain on the west coast wanted to bring in the brand. It was also such an incredible opportunity. Of course, the brand wanted to say yes to both accounts.
When we mapped out the logistics and costs, it became clear that the brand was not ready to handle brokerage and merchandising in such distant regions, which could’ve ultimately jeopardized both accounts and cost them considerable cash. The stakes were too high.
Though it was a tough decision, the brand decided to focus on the east coast chain, knowing they could double down, focus, and generate healthy sales data that would facilitate future growth.
Knowing the cost of business of key retailers, alongside the length of time to achieve a return on investment, is key in the process of choosing which retailers to pitch to.
While it is so tempting to go everywhere, you need to be sure that you can support the retailer, its effect on your business, and that there is enough volume to sustain the warehouse distributing product. You want to also recognize the cash investment requirements alongside the managerial capacity needed with each yes. Brokerages will help you sort through all of that.
Keeping Established Accounts
Getting approved in a retailer is the starting line of the race. If you don't drive velocity, retailers will kick you off the shelf as they have to justify the shelf space each brand takes up.
Ultimately, getting off the shelf and through the register is the finish line. And with over 35,000 products in stores, on average, you need a strategy and execution plan to differentiate.
A few ways to do that are:
Pricing Tools: Like promotions, instant redeemable programs, or retailer specific programs to drive trial with shoppers.
A brokerage and/or merchandising partner: have someone very present and active in the market to drive off shelf placements, reorders, promotional execution, educate in store employees and cross merchandising. We highly recommend this. It’s a huge differentiator.
Point of Purchase Collateral: Shippers, clip strips, coolers, etc… Getting off shelf drives double digit sales lifts.
Demos/Sampling: Get shoppers to taste your product and get real time feedback needed to make adjustments.
Driving velocities gives you a more compelling sales story to take to your next retail pitch. It’s better to have strong velocities in a few accounts than poor velocities in a lot of accounts. The former makes category reviews, retailer pitches, and funding rounds difficult.
Becoming a category leader does not happen overnight. You need to have a good product. But more importantly, you need to be better positioned, more in stock, and more visible to customers over long periods of time as compared to your competition.
At Dirty Hands we offer Natural and Organic brands with best in class brokerage and merchandising services nationally.
Our mission is to make sure our brands are growing rapidly, but sustainably, with the right retailers and distributors and are crushing their competition at the shelf. And we do this by keeping our brands in stock, off shelf, with promotions executed, and better shelf real estate over time. Reach out if we can assist in any way!