In the News
You can’t build a consumer brand in 2018 and ignore the 800-pound-gorilla that is Amazon. Not only does Amazon control nearly 50% of e-commerce sales, the company has clearly set its sights on physical retail as well, having acquired Whole Foods and opened multiple retail stores last year.
This past year was full of surprises for consumer goods companies. If 2015 and 2016 saw new consumer models hit the mainstream – most notably the DNVB (digitally-native, vertical brands) and meal delivery models – then 2017 was the year those models were truly tested.
The DTC business model first emerged in product areas dominated by slow-moving incumbents with hefty profit margins, such as spectacles and razor blades.
There’s an ongoing debate that doing good in the world means you have to sacrifice money. Collaborative Fund disagrees. They specifically fund entrepreneurs with mission-based businesses or as they say, “who are moving the world forward.” They believe that doing good is a driving force in building successful, impactful businesses. Yes, businesses that make money.
Chipotle Mexican Grill customers fled in droves after an e-coli breakout in late 2015, devastating the company’s sales. On a conference call shortly after, Chipotle’s chief marketing officer was asked what he learned from the ordeal. CMO Mark Crumpacker talked about the aggressive marketing campaigns the company had targeted around the restaurants that experienced outbreaks. The strategy wasn’t to make excuses. It was to fess up, apologize, fix the problem, and move on.
Even the very best idea isn’t a guaranteed success without the right implementation. As Michael Dell once said, “Ideas are commodity. Execution of them is not.”
This is especially true for the labor-intensive and operationally-complex consumer packaged goods (CPG) industry, where production and supply chains can make or break a startup.
Venture Capital funding plays a Darwinian role in the food industry. On the entrepreneur’s end, the process of pitching and negotiating with potential investors will put your vision and product through the most arduous of survival tests. On the VC side, deep knowledge of the market, the talent/skill/experience it takes for a business to succeed, and the community within which that business exists — lets call it the ecosystem — are just some of the highly specialized insights required of an enduring VC firm.
The global food system is enormous, complex, and highly concentrated. Investments into the space can have an outsized impact on the hunger, health, the environment, and rural poverty. As the food system and consumer preferences change, market share is shifting from big to small CPG companies and M&A is increasing.
What innovations are you most excited about right now? My guess is that when you’re scrolling through tech blogs or Product Hunt, you’re probably clicking on the most buzzworthy technology or trendiest social media app before a new consumer product.
There are a lot of reasons to be excited about CPG and retail startups right now. Legacy brands are poorly positioned to keep up with shifting consumer trends, so smaller startups are gaining market share by creating simple, natural, and socially conscious products with an authentic brand story. Consequently, as growth accelerates and M&A activity heats up, an influx of new capital is facilitating big innovations like lab-grown leather and vertical farming.
Consumer goods startups are having a moment. A number of articles highlighted the growing opportunity following Dollar Shave Club’s $1B exit in July, but if a picture is worth a thousand words, then these six charts effectively articulate why it’s never been a better time for consumer goods startups.
At first blush, building a startup that produces consumer goods like food or clothing may seem a lot more manageable than building a highly technical SaaS or biotech company. After all, entrepreneurs use consumer products every day, so they have at least some familiarity with, say, sneakers, snack food, and mattresses, if only as consumers themselves. But CPG and retail startups come with their own unique challenges...
When you hear “startup,” you probably think of Facebook, Airbnb or Uber before Casper or Blue Bottle Coffee. But while companies that produce tangible goods like food and clothing receive less media attention, they’re proving just as innovative as their more high-profile tech counterparts. In fact, Warby Parker and Everlane, two retail startups, ranked higher than Airbnb and Snapchat on Fast Company’s The Most Innovative Companies of 2016.
By nearly any metric, it’s never been a better time to launch a consumer products company. M&A is at an all-time high. Funding has increased 8x since 2011. Consumer values are shifting too fast for big brands to keep up. Social networks have facilitated inexpensive viral marketing campaigns. And the proliferation of e-commerce has slashed distribution and overhead costs.
Last month, the $1 billion acquisition of Dollar Shave Club by CPG giant Unilever prompted headlines like Who’s Next? and brought increased investor attention to the burgeoning opportunities in early-stage consumer startups. As millennials mature and reach peak purchasing power of $200 billion, consumer demands are shifting in line with the generation’s values-oriented spending philosophy, and startups that are better equipped to innovate and meet those needs are increasingly undermining staid legacy brands.