June 1, 2018

Is Your Emerging Brand Ready for a Strategic Investor?

By Julie Pryor, Director, FMI Emerging Brands

At first glance, it would appear that capital would be the commodity startups are most in need of as they look to grow their emerging brands. In fact, that isn’t necessarily the best reason to get involved early on with a strategic investor.

But, Andrew Whitman, managing partner of 2x Consumer Products Growth Partners noted, “You need to know what you’re looking for.”

Many emerging brands harbor the mistaken belief that if they partner with an established company, their products will suddenly start being shipped out to retailers on its trucks and they will benefit from its massive sales force.

“That is possible but not necessarily a good assumption to make,” Whitman said. “If you don’t get clarity on where your help is going to come from, you’re going to be disappointed.”

What strategic investors often want is a seat at the table early in the growth process so they can make an informed decision later on about whether they want to make a more substantial investment.

In return, there are many ways the investor can help beyond the simple capital infusion.

Robert Wheatley, CEO of Emergent – the Healthy Living Agency, took note of some basic principles that sit at the front door of successful growth for emerging food and beverage brands.

“You can’t forget to focus on what got your growth fired up in the first place, and it’s not just a funding proposition.”

New brands must build on –

  • Fundamental product craftsmanship that conveys uniqueness and differentiation
  • Consumer-perceived “specialness’ of the product experience is what drives early adoption and sales
  • Brands thrive even with low awareness – when appropriately positioned for the most passionate, engaged consumer segments
  • Being sure the mine clear connections to health and indulgence ideals and symbols

Strategic investors can nurture these qualities while they also offer mentoring and research and development tools often unavailable to the startup. And there are sometimes production efficiencies that come with a larger partner.

Whitman used as an example a company (not one he is invested in) that was able to take advantage of the investor’s purchasing contract to buy raw materials at a substantial discount. And, of course, if the larger investing company can manufacture the emerging brand’s product in its plants, it may be possible to save on production costs and ramp up quickly as demand grows.

Professionals who work with emerging brands every day suggest a number of tasks that must be performed before the startup is ready to talk to strategic investors:

  • Know what makes your product special.
  • Understand the contours of the marketplace and how your product might fit into it.
  • Have a sense of which retail channels would make the most sense to you.
  • Take it slow.

Do those things, Whitman suggested, and maybe the investors will find you.

“If you build an interesting business in a space that’s relevant for them,” he said, “they will notice.”

From there, Wheatley reports, it’s vital to observe the “three rules of emerging brand strategy.”

  1. Reinforce the product’s symbolism by connecting seamlessly to food culture trends
  2. Recognize the importance of channel: online, natural and specialty retail serve as incubators – shoppers (food adventurers) who expect to encounter what’s new and different
  3. Focus communication on the product experience and backstory around ingredients, sourcing, recipe, creation and mission

All parties are ultimately interested in scale, at the right pace and done in a way that’s respectful of why consumers find the new brand enticing in the first place.

Partnership focused on added value and evolving consumer insight can help make the difference between a one hit wonder and a grand slam with staying power.