Avoid These Common Mistakes When Developing Your CPG Strategy: A Guide for Founders
Many founders make critical mistakes that slow down growth and hurt profitability. Here’s a look at the most common pitfalls and how to avoid them so you can build a thriving brand.
Common Mistakes CPG Founders Make When Developing Their Strategy (And How to Avoid Them)
In the fast-paced world of consumer packaged goods (CPG), building a strong foundation for your brand is essential. Yet, many CPG founders fall into common traps that can hinder growth and profitability. Whether it’s expanding into retail too quickly or failing to create a solid direct-to-consumer (DTC) channel, these mistakes can have a lasting impact on your brand’s future.
If you’re feeling the pressure of competing in the CPG space, this guide will walk you through the most common strategy pitfalls and, more importantly, how to avoid them.
Expanding into Retail Too Quickly
Getting your product into a major retailer can seem like the ultimate goal for many CPG brands. But expanding into retail too early, before you’ve established a strong foundation, can lead to supply chain challenges, high operational costs, and underwhelming sales.
How to avoid this mistake:
Focus on building a customer base: Grow your brand through DTC channels first, ensuring there’s demand for your product before moving into larger retailers.
Build strong operational systems: Make sure your supply chain, manufacturing, and logistics can handle the demands of retail before committing.
Paying High Slotting Fees
Some founders are willing to pay hefty slotting fees to secure space on major retailers' shelves. While it can seem like a good move to increase visibility, the high cost of these fees can quickly eat into profitability and disrupt your cash flow.
How to avoid this mistake:
Negotiate smarter deals: If slotting fees are required, negotiate for better terms or look for smaller, niche retailers that might offer better opportunities with lower fees.
Build demand first: Before approaching retailers, create demand for your product through DTC sales and marketing, which can help you negotiate better deals when the time comes.
Neglecting Direct-to-Consumer (DTC) Channels
Focusing too much on retail without building a strong DTC presence can limit your growth potential and customer engagement. DTC channels offer the opportunity to control your brand narrative, build relationships with your customers, and gather valuable insights.
How to avoid this mistake:
Develop a DTC strategy early: Invest in e-commerce, email marketing, and social media to build a direct line of communication with your customers.
Leverage customer data: Use your DTC channels to gather insights that will help refine your product, messaging, and overall strategy.
Failing to Differentiate Your Product
Creating a "clone" product that lacks a unique value proposition (UVP)—is one of the most common mistakes in the CPG industry. Without differentiation, it’s nearly impossible to stand out in a crowded market.
How to avoid this mistake:
Develop a clear UVP: Identify what makes your product unique and communicate it effectively. Whether it’s your ingredients, sustainability, or mission, make sure customers know why they should choose your brand over others.
Test and refine: Conduct market research and test different product features, branding, and messaging to ensure you’re offering something unique.
Underestimating Marketing Needs
When entering new retail channels or launching new products, many founders underestimate the amount of marketing needed to drive awareness and sales. Without a strong marketing plan, even the best products can struggle to gain traction.
How to avoid this mistake:
Allocate sufficient marketing resources: From digital marketing to in-store promotions, make sure you have a marketing strategy in place that supports your product’s success in retail and DTC channels.
Invest in brand-building: Consistent messaging, a memorable brand identity, and ongoing customer engagement are essential to long-term success.
Maintaining Unsustainable Margins
Pricing strategy can make or break your brand’s profitability. Many CPG founders struggle with finding the right pricing balance, leading to margins that are too low to support growth.
How to avoid this mistake:
Understand your costs: Know your cost of goods sold (COGS) and factor in additional expenses like shipping, slotting fees, and marketing when setting your prices.
Price for profitability: Your pricing needs to not only cover costs but also leave room for growth, innovation, and marketing efforts.
Neglecting Cash Flow Management
Poor financial planning is a common issue for CPG founders. Without a solid handle on your cash flow, it’s easy to run into operational challenges that limit your ability to grow.
How to avoid this mistake:
Monitor cash flow regularly: Keep a close eye on your finances, and make sure you’re planning ahead for upcoming expenses, especially when expanding into retail or scaling production.
Seek financial advice: If cash flow management isn’t your strong suit, consider bringing in a financial advisor to help you stay on top of your finances and plan for growth.
Lack of Clear Brand Identity
Without a strong, memorable brand identity, it’s difficult to stand out in a crowded market. Consumers need to understand who you are, what you stand for, and why they should choose your product.
How to avoid this mistake:
Define your brand identity: From your logo and packaging to your brand story and tone, make sure every aspect of your brand is clear and consistent across all channels.
Invest in professional branding: If needed, hire a branding expert to help you establish a brand identity that resonates with your target audience and makes you memorable.
Inefficient Product Development
Some founders struggle with slow product development, which can lead to delays in innovation and time-to-market. Whether it’s rigid formulas or inefficient documentation, these challenges can prevent your brand from keeping up with consumer demands.
How to avoid this mistake:
Streamline development processes: Invest in tools and systems that speed up product development without sacrificing quality.
Stay flexible: Be open to iterating on your product quickly to meet market demands.
By avoiding these common mistakes, CPG founders can build stronger, more sustainable brands. Developing a comprehensive strategy that addresses your branding, marketing, sales, financial management, and operations will help you navigate the competitive CPG industry and set your brand up for long-term success.
At Vanp Brand Studio, we work with CPG founders to develop strategies that help you avoid these pitfalls and build a brand that thrives in the marketplace. Whether you’re just starting out or scaling up, we’re here to guide you every step of the way.