What should you include in your plan BEFORE you launch into retail.
The hurdles for launching new brands into a small shallow pond that is NZ FMCG require real work to understand upfront.
The costs of launching a brand are high, and the expectation that somehow if you 'make it into a supermarket' means that you'll be profitable is unfortunately not true. Doing this work before you literally bet your house on it means you'll be able to make more informed decisions around future cashflow and investment needs.
👉👉👉 Do your homework BEFORE you spend a fortune on developing your brand, creating formulations, designing packaging and doing initial production runs.
A recent LinkedIn post on this topic, resulted in a huge volume of builds and comments that deserve their own feature blogpost to keep for any aspiring CPG / FMCG entrepreneurs. If you’ve been operating for a while and find yourself stuck, you just might find a few reminders in here too…
UNDERSTAND THE CATEGORY DYNAMICS UPFRONT
Do the work to study what's happening with your category - is it in value growth? volume up/ down? price promo driven? dominated by large players? Over-run with new players? What would getting 1% share in the category translate into in revenue. Remember the sales numbers in these reports are the RETAIL sales - not what the supplier receives. If you take off GST, AND take off an additional 30-35% for retailer margin - you should get a feel for what the real sales just might look like.
Supermarket News Magazine publishes regular category insights and FMCG Business have category data so you can understand the numbers. dunnhumby also has paid reports for small brands to get a 'dipstick' on performance in Foodstuffs North and South Island.
We’ve got a full list of go-to free places here
UNDERSTAND YOUR SHOPPERS - AND CONSUMERS (they’re not always the same)
Are you part of their daily routine, or one off/ occasional purchase? Most buyers of most brands are ‘light’ buyers who may only purchase the same product 2-3x a year. The gap between purchases can be a LOT slower than you think as consumers have more alternatives than you might first think. The shopper could be looking for one thing instore (price, promo discount) and something different when it comes to using it (does it fit on their bathroom shelf, fit their decor, look good on the kitchen bench).
Do your own homework by observing shoppers instore and doing desk research. Google is your friend, and you can take as many photos as you need in your target store.
Who are your ideal potential customers and why they buy your products? What are the key usage occasions and how can you ensure you are speaking their language. Toby Hilliam (Skilton)
Avoid the dangers of going too narrow - or too wider.
Sometimes there’s either a super narrow narrow niche or ‘everyone’ as the target. To be distinctive and get traction you need to have solid insights (outside your own myopic view) and solid shopper perspective.
BE CLEAR ON WHAT YOUR OPERATING MODEL LOOKS LIKE
Are you going to rely on contract manufacture, inhouse production, narrow sales channels, outsource or inhouse resource? Scaling up means compliance hurdles especially around food safety and handling if you’re selling a food & beverage product. You need to have the technical support for logistics, supply chain and any potential health & safety issues to avoid future risks.
You can't make things from a small kitchen for large retail, and the more complex your product, the more you'll need technical experts like Beverage and Food Gurus Limited to formulate a product and identify manufacturing options.
Is your operating model based on high volume and scale to achieve profit? Or are you able to be more flexible and scale up slowly (which is less cashflow intensive).
DEVELOP A SOLID BRAND & PACKAGING that works for retail
Startups often face challenges in areas like branding, packaging design, and brand strategy. Key aspects like developing distinctive brand assets, packaging functionality, sustainability, messaging, unique selling points, understanding market categories, and ensuring regulatory compliance and trademark/IP checks are sometimes overlooked or underinvested. Barry Wylie
Have a clear plan on how you’re going to attract shoppers to your brand on shelf with packaging that WORKS for FMCG - and get OFF shelf? This is more than a pretty social media page, or a sharp price discount for a one off purchase. There’s a whole different level of expertise required for designing CPG brands. Understanding simple things like the impact of shelves and store lighting on different types of packaging, and what the category norms are to follow (and where to push the boat in innovation).
HAVE A LEARNING MINDSET - DON’T GET WEDDED TO YOUR IDEAS TOO EARLY
Getting feedback early and often on your NPD idea as well as marketing and packaging is critical. I’m a big believer in an agile approach - test and learn, regular consumer input and micro decisions vs big bang pressure moments after having your head in the sand for too long! Anna Henwood
BE CLEAR WHY THE RETAILER NEEDS YOUR BRAND
What is your story?? What makes you you? And why should we have you on the shelves? - Lot Hawkins
The bar to participate in NZ Grocery has been raised in recent years. Retailers are placing a higher value on their real estate and access to their model so you need to be better aligned and able to show WHY you make a difference. - Neill Arnold
HAVE REALISTIC GOALS & ASSUMPTIONS
It’s unfortunate that there really is not a lot of info on this biz out there, it’s all the glam gram! So people set unrealistic goals.
The key is to break it down, set a goal for your first run, then one for your second. Under promise to yourself and your expectations! - Laura Feavayear
AND be realistic with your numbers. Get others to stress test the assumptions and while it is FAST Moving Consumer Goods, things will take much much longer to happen than you expect. Especially in the current retail environment where retailer category reviews can take 3-5 months from start to end, and there can be up to 18 months between the major reviews. - Will Balldock
Understanding that rate of sale in some channels can be <1 unit/ store/ week - you’d be surprised how many sell this slow in retail. More distribution isn't always the right thing if your sales velocity drops. Large category buyers will look at overall performance and this goes against your goals... Its not rocket science but it does take some robust assumptions and a 'test, learn, evolve' approach.
Be clear with your assumptions.
What are your sales projections based on - target retailers, type of sales channels (direct, wholesale, retail, B2B/ OOH etc). Are you banking it all on getting an exclusive supply contract or are you planning a diverse base (and do you have the support structure to cover this).
LEAN ON OTHER PEOPLE TO CREATE A STRONG NETWORK
You are not superman, you can’t do everything. Creating a viable business means you need to utilise people's superpowers instead of trying to be all things to everybody. Talk to people in the industry already, look for experts both locally and in lead markets - and even if you can’t afford to buy their services initially, you can generally follow them on LinkedIn and sign up for their newsletters. - Sherrelle Smith
THINK ABOUT POTENTIAL FUNDING NEEDS UPFRONT (or at least a LONG time before you need it)
The path to funding is long, and the different models of business that you may find that bootstrapping doesn’t cut it. If you’re looking at a resource hungry model that does require 'funding', be clear on WHO might be potential investors and are there actually sources to get funding from. If you conclude that there are no funders who would, then stop and think through your assumptions again - do it differently. DON’T just go in with hope that “someone” will provide the funding. You’ll more likely find yourself with no cash runway left to keep your business going or in a debt position that means you’re unable to grow.
INSTEAD build your business brick by brick or step by step, rather than full tilt, then you might be able to fund your business yourself. As your scale increases, your margins improve, your ability to raise funding improves too - I say this not as an expert in FMCG, but an observer of many journeys and now realising that there are very few investors who will fund the tilt up in the early days. Again, one of the companies I have observed will arguably be able to secure debt funding now, more than they have now, because they started 2-3 years ago, build a relationship with a bank, paid their bills on time and now the bank has confidence to lend more - Andy Hamilton
When considering launching an FMCG business I would think carefully and take advice on whether external investment is achievable. It is very tough at present for these businesses to get external/sophiscated money. This is definitely not to say you don’t do it (launch the business!), but having a realistic expectation of how long it will need to be bootstrapped will mean you are pushing those levers between growth and revenue/being cash flow positive in the correct manner. - Chris Thomas
There’s a big difference in new manufacturing format brands like Sunfed, and those that can leverage existing contract manufacturers like Food Bowl. Non-food brands have an advantage for scaling in being able to avoid many of the regulatory & shelf life issues that are often cashflow intensive.
THINK GLOBAL FROM DAY 1
Most high growth categories (where a lot of new entrants are) are still 'niche' in terms of size so NZ + 1 more market(s) are required to get critical scale to become EBITDA positive (and to achieve this while still investing sufficiently in marketing to build your #1 asset). Anna Subritzky
NZ is a great testing ground before going further afield. AF Drinks and Fix & Fogg spring to mind as two examples. They’ve both taken on large categories and entered major markets with a clear go-to-market plan - and then executed against it over time.
If you’re feeling stuck with how to answer these questions for your brand, its not too late.
Working with prelaunch and early stage brands is what Pitchfork is all about. With practical guides and toolkits, there’s support to get you going with confidence and a solid plan.
Get in touch if you want to talk. Our mission is to help business do business better.
