It shouldn’t be this hard. The winds have shifted. The way the world is being fed is changing. Consumers have different demands and expectations of their food and the companies that supply it. Billions of dollars have shifted from big brands to smaller innovative ones. There is an expanding awareness of how food is grown, processed, and distributed and a heightened desire that it is done so in a manner that nourishes not only people but planet and profits as well. It is a good time to be in the food business. Yet, too many cool brands founded by bright entrepreneurs fail. Why? There is no one answer. The food business is complex.
One explanation for the high failure rate is the food industry itself. Many parts of it have yet to catch up to the tectonic shift away from large multinationals towards small entrepreneurial brands. This is especially true in conventional grocery and the distribution system that supports it. Although more and more conventional grocers recognize the need to feature local and innovative brands on their shelves, for the most part, their decades-old business models don’t make that viable for those brands.
The same holds true for wholesale distributors. Vilified by many, they are merely victims of an infrastructure and model that no longer serve the brands today’s consumers are seeking. Built for high-velocity quick turning items, it is hard for them to carry the varied and differentiated offering that are being demanded of them. Couple that with rising costs, increasing regulatory and compliance requirements, and constant pressure on margins, it’s a tough business. They are being forced to find new and creative revenue streams and often at the expense of the manufactures. Small emerging brands can’t afford it and either spend when they shouldn’t or find themselves locked out of the market.
Another reason for the alarming failure rate is the emerging brands themselves. Too many follow a flawed strategy, using a playbook that has become obsolete. They chase retail shelves and doors, failing to recognize that doing so offers no assurance that their products will actually find their way into the consumers’ stomach.
Often, brands don’t take the steps needed to validate product/market fit, they don’t prove velocity, they just grow for the sake of growth. That often does nothing more than increase their burn rate and shorten their runway.
This failure rate must and will improve. The industry will catch up. Every day new ideas and solutions are trying to make their way into the market. We are seeing a disintermediation of distribution, a change in format, size, and assortment from brick and mortar stores, and the slow but continual upswing of direct to consumer and third-party e-commerce platforms.
We need more brands that refuse to follow the well-worn path, that hack growth and take a more empathic approach to understanding their ideal consumer. Entrepreneurs need to validate product/market fit and prove velocity prior to worrying about the number of shelves or doors that their product is found on or in. They need to explore alternative channels and other paths to market.
The entire food ecosystem needs to encircle its innovators and disrupters refusing to allow them to fall prey to the many traps and obstacles that litter the way. There is no stopping this tsunami, the waves of change are upon us. As an industry, we just need to do a better job of helping our explorers find safe harbor.