Over the past decade I have been involved in several food brand launches; I’ve learned what it takes to build a brand from absolutely nothing into a business that is both growing and profitable. Over that time I have also developed what I call a rulesheet – criteria that I believe any new product, whether it be meal kits, drinks, or snack products – should follow.
Sidenote from the start: I recognise that for some more established companies, with distribution and the network already in place, some of these may not apply and with a ton of capital behind you, you can essentially do what you want. But in the world of start ups and tight budgets, this is my personal criteria when considering starting from scratch.
I understand what it’s like to create your own product – you become passionate, obsessive even, about a new diet craze that no-one else knows about. You conjure up a recipe at home and you’re convinced there’s nothing like it on the market. You have the next big thing that everyone will go crazy after, and maybe you do!
Unfortunately experience has taught me that interest, demand, and a great concept doesn’t necessarily make a profitable business. I have worked with several startups that failed shortly after bringing their product to market. I wish I had more confidence and experience back then to give the best advice I have, ‘Stop where you are’. Stop before you spend more time and money on a project that will only bring stress and exhaustion.
Even if you’ve invested money in the project, it’s better to absorb the loss and call it a day, than continue to throw money at something that isn’t going to work – that will only lead to larger problems further down the line.
You may be aware of our success with our Keto snacks brand (KetoKeto) (that didn’t come without problems by the way), but you should also know that I had begun 3 other food and drink brands beforehand. These brands failed to meet the criteria at some point during their creation, and I had to make the tough decision to stop. Money had been spent, trial production runs had been done – the whole shebang. Yet still it was the right decision to call time on the brand when I did, and stop where I was.
It’s difficult to let go of a project you’ve worked hard to build and invested so much energy and capital into. But regardless of how fantastic you think your idea is, or how much interest you receive from your prospective audience, I think it’s critical you use a thorough criteria to check whether it’s going to go the distance.
So whenever I’m involved in developing a brand, whether as an agency or personally, I ask the following questions to ensure it’s a safe and certain investment.
Rule #1: Price Points, Margins and AOV
This might seem pretty obvious, but you would be amazed at how many people get this aspect wrong, myself included.
There is no rule of thumb when it comes to margins and how much you make on your product. But please be aware that when you factor in all your overheads, marketing spends and promotions, a 20% margin isn’t going to be enough.
This is something I think we got wrong with KetoKeto, and something we are always working to tweak and improve. In fact, with KetoKeto I was happy with the initial price of the bar – the cost for us to make it. However there was a moment during the first trial run that the manufacturer commented,
“I think you’ll be looking at £1.00 – £1.20 a bar.”
I turned to him at that point and said,
“If that’s the case, we don’t have a business”.
By the time we’d factored in all expenses, VAT and any other costs that needed covering, this price point would mean we’d have to sell the bars for nearly £4.00 each to make the product profitable. It was a no go. Big fat protein bars don’t even cost that, and we knew that KetoKeto needed to sit at a price point between a healthy snack bar and a protein bar (around £2.25).
Thankfully that wasn’t the final price, and we were able to move ahead.
I have however pulled out on two drink product ideas previously because the costs didn’t match up. I believe the product would have been a huge success, even to this day, but the profit wasn’t there. For our size production runs, we would have been making no more than a 20% margin from us directly to a retailer.
Some other things to add here: As you grow, most of your retail orders will come from retailers. They will need to make their margin too, so if you’re operating at a 30-35% margin base, you will make even less with wholesale. You need those guys to win the big retailers, so you can skip past them. They are crucial to getting you out there, and most retailers would rather work with recognised wholesalers than a small business.
Margins and costs have been a big learning curve for me. I have sought lots of advice since beginning my own brand, and now we have someone on our team who really understands commercials and what things cost.
I heard recently that some big name brands who have grown remarkably well in retail and online, operate at a margin of 50-60%. So much wiggle room to play with – money for promotions and marketing to exponentially grow the brand’s reputation and loyal customer base.
I’ve included in this rule, AOV (Average Order Value), as we like to progress with a digital approach first and foremost. It’s important to have a product that has a big enough value that it can sell online and the profits can cover the shipping costs and ad spend. A simple way to make sure e-commerce will work for you is to ask yourself, ‘Will my product sell in bulk?’
Selling one jar of peanut butter for £4.99 online isn’t going to get you too far, whereas protein powders, mix boxes, or bundles of product will optimise your AOV. The shipping cost, plus the marketing spend is going to leave you deep in minus figures if you’re only selling one or two products per order. You have to consider whether people are likely to buy your product in bulk, and let’s be honest some products won’t work – people aren’t looking to buy 20 jars of peanut butter every month!
(More on digital later in Rule #4).
Sidenote: From experience, winning a listing is much easier than retaining the listing, and it’s a lot harder to win more retailers once you have been kicked out of a few big ones.
Rule #2: Shelf Life and Storage
This rule is a deal breaker early on in the process of launching a brand. If the product doesn’t have a good amount of shelf life from the moment of production, then the project isn’t sustainable.
In my experience shelf-life must be a minimum of 8 months. In fact with Brexit and the implications it now has with exports, I would say 10 months is a better minimum. We started KetoKeto with 5 months of shelf life on the products (just to be safe), whilst we took it for further testing. In the meantime we experienced huge problems with short-dated stock as we were growing so quickly.
Why do I think 10 months is the minimum amount for a good shelf life? It comes down to the production cycle of the product. First the product is manufactured and then it is shipped to your Fulfilment Centre. At the Fulfilment Centre it’s then added to your stock count, by which time 2 weeks have already passed. Then how long is it likely to sit there before it’s sold? You have to find the right balance, as we did, between having too much stock or not enough.
A month later a customer from Germany may place an order. Your Fulfilment Centre would need to make the pallet, weigh the pallet, and inform you of the weight. You would then need to book the logistics company. At this point, another 4 weeks could have gone by. Even once your product has begun its dispatch journey, there could be hold-ups such as problems with customs. The client finally gets the product with 7 months of shelf life remaining, giving them a month or two realistically to deliver it to their customers and get it onto supermarket shelves.
If your product only has 5 months shelf life, this process isn’t possible before the product is out of date. To make it work you would need to move stock fast or operate only as an online direct to consumer business. But this would limit your potential growth as you’d lose all the advantages of export and retail channels for your business.
The second component of rule #2 is storage. This is maybe a little personal to me, but I rarely touch a product that can’t be stored efficiently. The cost of moving frozen or chilled goods for a small startup is just too high and brings a lot of problems.
Having been involved with several healthy dessert start ups, I would avoid this type of product unless you have strong distribution from the get-go. It’s expensive to store and very difficult to sell online directly to consumers. I know there are freezer packs and dry ice these days, but those resources are far too expensive and significantly cut into your margins. An easy to store product that fits into packaging neatly without fragility is easier to ship (glass packaging is one to review).
Rule #3: Can It Grow Digitally?
Some of the rules above lean into this one slightly. It’s ideal to launch a brand that hits the ground running which typically requires generating traffic, a certain amount of hype and selling directly to consumers online.
Many times I’ve witnessed brands launch without a digital presence or e-commerce in place. This will often mean the first production run sits ready while you wait for retailers to respond to your emails. In most cases they don’t, and it usually takes months if not years to establish productive retail relationships. Meanwhile you’re not selling the product you’ve spent time and money on.
Building food brands isn’t for the faint of heart!
Taking a digital approach means you can take your growth into your own hands. Products can begin to move, your customers grow, and you start to establish a trustworthy and reliable business model that retailers take notice of.
So two important questions to ask yourself are,
‘Can you get that AOV right to make a decent profit as you grow your customer base?’
‘Can your product be efficiently stored, packaged and shipped out without losing its sell-by date or its integrity by the time it reaches your customer?’
Glass packaging isn’t a definite no in every scenario. Packaging can be prepared in such a way that the product is properly secured for transit. But it is definitely something to consider when deciding on your product packaging.
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Rule #4: Define Your USP
It’s vital for the success of your brand that you understand and define your message from the start. Clearly outline the one or two problems your product solves. It’s best you stick to only one or two USPs. If you attempt to be everything to everybody, you’ll be nothing to no-one.
From past experience with brands who have tried that approach, it hasn’t worked out.
Focus on one or two of the strongest selling points of your product. Of course there are likely to be more than a couple of benefits, but if you highlight them all your product becomes confusing and uncertain to customers. For example our Crunch Puffs for KetoKeto are gluten free, low in calories, high in fibre and high in protein, but we don’t headline all of those things on our product.
Ask yourself, ‘Why would someone want to take time out of their day to buy my product online?’
From experience we found that products which have a defined purpose and solve a specific problem, perform better. In fact, outlining in detail how your product suits your audience’s lifestyle and the benefits they’ll receive by frequently using it, is an effective way to increase sales.
To achieve this, you’ll need to understand your prospective customers’ needs, wishes and lifestyle. Essentially, you have to ‘get inside their heads’, so you can perfectly pitch your product to suit your target customers.
Take time to think about why your target audience will want to purchase your product, and what will make them buy bulk orders or increase the frequency of their purchase. Certain products lend themselves better to online sales and bulk orders than others. You’ll have to carefully consider if your product will do well in this way online, or you may not have a suitable or profitable product for e-commerce.
Sidenote: We had a drinks product we worked with years ago that failed to define their ‘why’. The product was sadly unsuccessful, and I think it was due to the lack of a definite USP. The product was great, but without a clear USP or an outline of the specific benefits, it didn’t grab attention or catch enough sales. This is an easily solvable aspect of your product launch, it requires some thorough forethought, but is necessary and worthwhile for a thriving business.
Rule #5: Taste Is Still King
That’s pretty much it – your product has to taste good!
It can have every benefit under the sun, but if it tastes bad, no money or defined USP is going to make it profitable.
You’ll have to work out what the priorities are for your product – taste vs. health, texture vs. durability. These are all difficult components to balance and get right. Often it comes down to some compromises in order to get the best product for manufacture and sales.
We’ve witnessed many brands create the healthiest food or drink possible and on paper it sounds amazing; it has phenomenal amounts of protein, no sugar and plenty of vitamins. It’s the perfect health drink! But then you taste it, and you know you’re never going to buy it because it tastes awful. Your food or drink product cannot compromise all taste for other benefits, because it simply won’t sell. It has to taste good!
Also bear in mind when choosing the ingredients for your product, particularly if you’re aiming to target health-benefits, opt for ingredients with Rule #1 in mind. Healthier ingredients tend to be more expensive, and you’ll need to keep an eye on your margins and price points.
Thanks for taking the time to read and learn from our experience. Please comment with your thoughts, I’m always happy to hear your feedback and learn from you too.