CPG brand builders must have a comprehensive strategic plan that moves them in the right direction. In order to develop a strategic plan, you must start with your long-term goal in mind and work backward. In other words, “Why am I doing it?” where the “it” is building your CPG brand. Sounds simple and logical enough, but too many new CPG brand builders don’t give it the thought it deserves. It’s probably the most important question (and answer) in your brand building journey because it determines not just the “what” you should do first, second, and third, but the “why” you are doing it.
Why Are You Doing It?
We built our brand for the express purpose of selling it and monetizing on its brand equity. Some brand builders are more interested in trying to “get rich” on cash flow and like to say, “I’ll never sell my brand.” Others think they are creating a dynasty where their kids will take over and take care of them in their old age (Good luck with that!).
But if you are like us, your strategy in the early days has to be laser focused on being known as a “Hot Seller.” Why? Because it is the essential building block that everything is built upon. Your reputation as a “Hot Seller”, or not, precedes you in the marketplace. It can either open doors or close them …tight! Don’t you think your competitor’s salespersons are going to warn their buyers about a slow mover, also-ran, or even a mediocre player? Of course they will! There’s a limited amount of retail space out there and they want to protect theirs from you!
The fact is, no matter whether it takes you three years or ten to attract a buyer, you will have to demonstrate steady growth in the marketplace. Acquirers don’t buy brands; they buy the business the brand has developed. They buy the rate of growth the brand has demonstrated. They buy, in essence, your reputation. So if that’s your goal, how do you start out to carefully build your reputation as a hot seller without making the most common missteps?
5 Common Missteps and Remedies for CPG Brand Building from Ground Zero:
Misstep #1: Private Label
You need capital so you provide your product to a retailer as their house, control, or own brand. Now you are a commodity supplier. Now you are no longer building your brand. Now they have you over the barrel since you can (and will!) be replaced for a few pennies less. But yes, it helps your cash flow …for a while.
Instead, build a brand. The reason retailers don’t like brands is because they have power outside their stores. If the brand is hot enough, the retailers have to keep them in stock because their customers are demanding them. And that’s what your acquirer wants!
Misstep #2: More Choices
You hear from your salespeople, “If you only had (this or that) offering, I could sell it,” and so you expand your line to satisfy them. Some particular buyers may buy the new offering, but since you are not yet well established in the marketplace, other retail buyers, knowing they have limited shelf space, will ask your salespeople, “Which one would you like me to cannibalize in order to add your new offering?”
Instead, enter the market with one or two offerings. It’s better to be thought of by salespeople, distributers and clerks as the brand that specializes in one thing. Don’t try to get to many choices too soon or you will exceed their mindshare and your own brand-width. Too many choices confuse most people.
Misstep #3: Expanding Too Fast
You get some interest in another state or region. So you start selling there. Then you realize that it’s too far away to service and sales die off. Now you are blackballed from that territory. Your distributers and retailers want you to cut the price so they can clear out your slow selling product. And now your price is forever compromised in that territory.
Instead, stay close to home. For the first year or so, don’t sell further away than you can drive and apologize (for the various and inevitable mistakes you will certainly make as a newbie) and return home in one day. Focus on being a hot seller in a small, manageable area first! So you get the reputation of being a hot seller – even if its only in a few stores in a small market! Don’t go into a new retailer unless you can be a hot seller – and that take a lot of hands-on energy!
Misstep #4: Priced Too Low
You sell directly to the retailers but you forget to add enough in for a middleman (the distributor, the broker, your salespeople) because you think you don’t need one right now. You try to get a price advantage over your competition because you are selling direct and cutting out the middleman. But later, when you try to expand and have to go through middlemen, you have already established your retail price, and it is too low!
Instead, establish a high enough retail price from the beginning that will allow you to have the room to add a distributer, etc., later. Remember, you can take your price down, but you can’t take it up!
Misstep #5: Getting Milked
You go through a distributer too soon and find that you can’t afford all the support they require. You discover you still have to do most of the heavy lifting yourself. You are making less and it’s costing you more. Now you are trapped because you didn’t have the volume first to negotiate a better deal with the distributer.
Instead, build your reputation as a hot seller in a territory you can manage. Don’t worry – the distributers’ salespeople will notice because you are taking precious retail space away from them. They will come knocking soon enough but you must have the sales, the displays, and the rate of growth that give you the upper hand in the negotiation! Remember everybody wants to milk the cow. Nobody wants to raise the calf!
These may seem like baby steps, but you are building a firm foundation to take the next step. While you are a “toddler,” you will learn how to sell, how to get and keep displays, what your marketing materials must look like, how much merchandising is required, and all the problems that can occur in distribution that have nothing to do with your product, price, or quality. Learn how to walk before you run. (And learn how to run before your fly! But that’s for another post.)
First, become the Hot Seller your acquirer is looking for! They want to know how fast you sell where you are and not just how many places you are in! Good Luck in the new year to all our Brand Builders out there!