New brands need to avoid temptation of over-distribution – Food Business News

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KANSAS CITY — Opportunity for national distribution may come early, perhaps too early in some cases, for new brands and startup companies.

“Today it is easier than ever to get the attention of national chains,” said James Richardson, PhD, author of the book “Ramping Your Brand” and founder of Premium Growth Solutions. “They want cool and innovative brands, and if they discover you in the ‘media-verse,’ they may come to you, and now you have a temptation, and that temptation is to go way too fast before you actually know what you have.”

Dr. Richardson, who spoke April 28 in the Food Entrepreneur Experience digital event, said companies need to know their product better, which could include finding faults, before seeking national distribution. They should pay attention to fans of the brand, focus on growing same-store sales and conduct sampling events.

Food entrepreneurs who successfully scale new brands tend to pace distribution.

“They are able to build cultural awareness in the top urban markets well ahead of appearing, well ahead of appearing at all in a local city but also well ahead of appearing in an omnichannel matter in any city,” he said.

Pacing distribution by restricting the number of stores selling the new product forces entrepreneurs to find growth in same-store sales.

“That discipline, I guarantee you, will then create the mathematics and the momentum in the business, which will turn into explosive growth on the back half of the curve,” he said.

He advised companies first to reach $1 million in annual sales by using specific channels, a mix of both online and retail. Sampling may take place, even during a pandemic. COVID-19 has limited in-store sampling and out-of-store sampling such as at triathlons.

“But sampling hasn’t stopped,” Dr. Richardson said. “I have clients who are literally driving their product to key influencers in their home cities, driving cases to their doorsteps. They are having lotteries online and then mailing lists. There are digital sampling companies that will drop box the stuff to people.”

The rate of repeat purchases should at least eclipse 50%. Not meeting benchmarks like that one could signal a problem with the product.

“That’s when you want to step back and say, ‘You know what? I think I have a problem,’” Dr. Richardson said. “Believe me, you want to find that out when you’re $500,000 or $1 million in sales, not $25 million because you over-distributed it into Walmart and Target.”

Startups with new brands should not expect a sales growth curve like a rocket ship launch. Less than 1% of brands in any given year reach $100 million in annual reoccurring revenue, Dr. Richardson said. Instead, the new brands may be more successful with a sales growth curve like a skateboard ramp.

He gave the Kind bar as an example of a brand that successfully paced its way to national distribution. The company sold multipacks in stores and had a high price premium that allowed Kind to have the money to fund field marketing and field sampling.

“The market rewards early-stage stage brands that are patiently aggressive on the way to scale,” Dr. Richardson said.

Register to watch the Food Entrepreneur Experience on-demand at foodentrepreneurexperience.com.

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