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Revenue is Vanity, Profit is Sanity, But Cash is King!
Many people focus on a CPG brand’s amazing marketing, innovative products, or great leadership. We love that stuff too, but without the fundamentals of a company being incredible at financial management, there is no storybook ending. Simply put, if you’re running a CPG brand, you should be measuring and optimizing your cash conversion cycle regularly.
Corporate Venture Capital & Supplement Retailers
Did you know that the specialty supplement retailer GNC had a venture investing platform? This is what they call corporate venture capital. It’s essentially a practice where a large corporate entity takes an equity stake in a small but innovative or specialist company with the objective of gaining a specific competitive advantage. As an alternative to traditional acquisitions, companies are making more of these minority investments. In fact, corporate venture capital now accounts for nearly a quarter of all venture capital investing and its deal value have increased more than tenfold over the past decade. When most people familiar with corporate venture capital think about the concept, they tend to beeline towards large tech companies like Google or Facebook, but this type of investing is done by every sector in the economy. That includes retailers, especially those that have the financial wherewithal. These retailer-owned (or affiliated) venture funds and/or incubators formed by retailers is becoming more common as retailers are having to evolve more rapidly to meet the needs of customers.
Supplement Industry Innovation Dilemma: Condition-Specific vs. Multifunctional
Condition-specific versus multifunctional. This juxtaposition in product development approaches has been on mind for a while now. There are so many considerations at play here coming from both the brand-level and supply side of the supplement industry, but also with how it all interacts to consumer behavior. So, what’s the future of product development within the supplement industry heading towards?
Future of Distribution is Controlled
Saying NO to some revenue creating opportunities will help minimize business continuity risk long-term in today’s market! Huh? Isn’t a company’s main goal to maximize shareholder returns, and it would be tough maximizing returns if you are turning down revenue, right? Seems counterintuitive…unless you understand that not all revenue is created equal. When you can master sales velocity, you really have something that is valuable long-term to shareholders…and the best way to do that is by controlling your distribution to focus on partnerships that enhance your company’s goals.
Supplement Industry First-Mover Advantage is a Mirage
The first significant business to serve an uncontested market has an advantage over competitors coming into the space at a later stage, right? If you’ve read the famous business book Blue Ocean Strategy, it essentially focuses on the first-mover advantage and how it allows you to build brand ubiquity and loyalty before everyone else. While there are many strategy games (or consumer marketplaces) where the player who goes first has a greater likelihood of winning than their opponent…the supplement industry is no longer an example of one!
PepsiCo Identifies Sports Nutrition Opportunity with Gatorade
The fourth-largest beverage brand in the U.S. market just launched an energy drink, which is cool, but shouldn’t industry professionals be more interested in what the Gatorade Fast Twitch product innovation means to PepsiCo’s entire sports nutrition portfolio strategy?
Sports Nutrition “Battle of the Ages”
Maybe it’s the mere 300ish miles between their respective company headquarters. Or maybe that both own a leading global sports nutrition brand that does north of $500 million annually in mostly the protein powder category. Or that each company has a vertically-integrated business model. Regardless, it’s natural to see that Glanbia versus The Hut Group (THG) is turning into the sports nutrition “battle of the ages.” If we had this battle handicapped by the Las Vegas sportsbooks, Glanbia would be the huge betting favorite heading into this year’s “All Valley Karate” championship. But as anyone knows the classic 80s movie storyline, Glanbia shouldn’t underestimate the Crane Kick from The Hut Group.
Biggest Supplement Industry Trends in 2023
What do I see in my crystal ball this year for the Top 5 Supplement Industry Trends in 2023? Gut Performance (purchasing Gut Health Ingredients for athletic performance), Load Up on Only What You Need (Affordability and Value-Orientated Consumer Behavior), Big Brick Poppin' (Large Retail channels winning the share of dollar sales and contribution to growth), Flex Your Brain (proactive consumption for a high achieving life), and Supplementing with Purpose (Rise of purpose-drive sports nutrition brands).
Dissemination of the Supplement Category Changed Everything
In a “choose your own adventure shopping” world, consumer speak with their actions (and wallets). By 2025, the Nutrition Business Journal predicts that categorical sales will be evenly distributed across e-commerce, mass, and natural/specialty retail. Whether it’s Wal-Mazon or another large retailer, it’s apparent that recent merchandising strategies shows us they want more than entry-level buyers…they want the whole category. The question remains, will being a “Wal-Mazon brand” still have some level of negative (yet always misplaced) connotation in the next 3, 5, 10 years?
Supplement Industry Transparency Goes Beyond “Prop Blends”
If you mention proprietary blends (aka prop blends) in the supplement industry social media groups, you tend to get a visceral reaction. In any other CPG category, a “prop blend” is considered a highly valuable trade secret. Do you know what goes into a can of Coca-Cola? How about that Oreo cookie? And the list goes on…Those formulas are a main part of what makes them $1B CPG brands. Which side is right? Is the supplement category unique? Should “prop blends” still be around today or not in the supplement industry?
Modern Supplement Brands Must Understand This Shift
Challenges notwithstanding, frictionless omnichannel retail is here to stay. It’s more than a trend, it’s a reflection of how today’s consumers live, and brands are well advised to take this into account. Just like the Choose Your Own Adventure books, alternate paths to the shopping journey speaks to the desire of control that consumers seek. Choice will become more important in an age of personalization. The future will be rich with personalized products, endless customer service options, 1-to-1 marketing, and loyalty programs that make us feel like special snowflakes. For all that, I guess we can thank Edward Packard.
New Normal: Supplement Industry
It’s irrefutable that “COVID-19 Effect” headwinds/tailwinds changed almost everything about the supplement industry. With markets evolving quickly because of elevated consumer interest in the space…it positions the supplement industry as a key gateway into the $1.5 trillion global wellness market. This increased market growth is also bringing additional commercialization activity to an already ultra-competitive space. The fact is that brands must stay ahead of the curve by identifying specific trends earlier and being more aggressive in their actions to fill demand. My intent for this content is to provide supplement industry professionals with a snapshot of what benefitted, evolved, paused, and was damaged by most powerful “COVID-19 Effect” headwinds/tailwinds. These insights will surround the following marketplace variables; product Categories/Attributes, Business Strategies, and Shifts in Consumer Behavior.
Recession + Dollar Stores = Opportunity
As more customer cohorts shop at dollar stores, trade downs will naturally happen across a broader range of CPG categories. This will show that not all aspects of the “race to the bottom” is negative across the functional food, functional beverage, and nutritional supplement categories. Brands positioned in each of those functional CPG categories should explore dollar stores in their sales channel strategy as consumers shift spending with the upcoming recession. So, if consumers are breaking down dated channel beliefs, why shouldn’t your functional CPG brand?
Wellness Isn’t Just About Fitness & Nutrition
Wellness is a modern word with ancient roots. As a modern concept, wellness gained popularity beginning in the 1950s, when subject matter experts largely shaped the way we conceptualize and talk about wellness today. Throughout the past seven decades, wellness has morphed into a multi-dimensional trillion dollar market…one that could unlock immense opportunities for functional CPG brands.
What Can Nike Teach Sports nutrition Brands?
It probably doesn’t need repeated, but Nike is the heavyweight champion of sports brands. There are only a few brands that achieve ubiquity in popular culture like Nike. No matter where we turn, it feels like there’s a swoosh just around the corner, right? So, why do I think Nike is giving every sports nutrition brand a masterclass on their needed evolution over the next 5-7 years?