Do you feel like your business is being pressured on all sides? You’re not alone. All CPG businesses are dealing with a multitude of business pressures ranging from supply chain issues to macro consumer behavior changes. We asked Jordan Buckner, the founder of FoodBevy, about three of the biggest challenges facing founders of emerging brands and how they are handling them.
Rising Ingredient and Packaging Costs
“The biggest business my challenge is facing is the increased cost of materials. A year ago my packaging, per box, was cheaper. I can save money by stripping out colors and minimizing complexity, but do I sacrifice branding when I’m this young of a brand?” Kimberly Behzadi, Bookmarks & Breadsticks.
As a founder, you’re likely feeling the cost squeeze and having to make some tough decisions like Behzadi. On one hand, you know consumers are having to pay more for everything, so why not your products too? On the other, your premium brand is just getting started, so will a price increase just lead them to choose a cheaper competitor?
Products that have good product market fit can navigate price increases and retain most of their customers. This means that consumers feel the value your product provides for them. If the value is real, then a higher cost is understandable, especially if it means you’ll stay in business.
If your product doesn’t deliver a strong core consumer value, then you may lose customers, but that was likely to happen anyway.
Supply Chain Volatility
“Our costs are so volatile that we have to price every single ingredient every time we need to quote a wholesale price to a potential customer.” – Steve Pickett, The Bahamas Rum Cake Factory
Not only are prices increasing, but there’s a huge variability in cost and delivery time. Many products contain 5-10 ingredients, each coming from a different supplier.
One supplier order may take one week to deliver, while the next could take 5 weeks. As a brand, it becomes incredibly complex to plan for manufacturing in this environment.
To help ease these pains. I recommend having 3 qualified suppliers for every ingredient, so you can choose between price and deliverability for each order.
Digital Advertising Complexities
“Getting to a meaningful ROAS (Return on Ad Spend) where it is possible to effectively use digital advertising.” – Patti Boyle, Rumi Spice
The digital landscape has drastically changed due to a crowded e-commerce environment, iOS email and tracking changes, and fewer consumers shopping online.
Ultimately this results in higher digital advertising costs for brands. So how do you effectively invest in awareness building activities?
You may be familiar with a marketing funnel: Awareness > Consideration > Decision > Loyalty > Advocacy
The first step to building a strong marketing funnel is optimizing automation at the bottom of the funnel, starting with Advocacy. This ensures each customer you bring in has a higher Lifetime Value. Then work your way up to Awareness. Taking this approach will actually increase your conversion rates and ROAS without having to spend more on advertising.
The next few years will surely be challenging for brands. Those who succeed will have strong products that consumers want and a business model to deliver it to them. Use your early days as a founder to prove that your brand can deliver on this formula and you’ll have a much easier time navigating any challenges the world throws at you.
Buckner created Foodbevy.com to help founders like you navigate these challenges. Foodbevy is an online community for food and beverage founders and partners with SKU to provide tools and resources to scale your CPG brand. Learn more about becoming a member at Foodbevy.