The consumer packaged goods (CPG) industry is one of the hottest arenas for entrepreneurs and investors. CPGs can have an extremely low barrier to entry, so it’s easy to jump into business with a product you are passionate about. However, most entrepreneurs do not realize there is only a 15% success rate for CPG companies. While there is no perfect formula to guarantee success, here are three keys to success.
Mentoring is one of the most crucial components to seeing a CPG company through to success. For many new companies, funding is viewed as the key to expanding their business into a household name. However, most young companies are not trained on how to best allocate these funds. This is where the importance of mentoring comes in. When CPG company leaders are coached by successful entrepreneurs, their likelihood of successful growth dramatically increases.
Now that you have a solid product offering, getting people to know and love your product becomes an entirely new challenge. When it comes to marketing as a new CPG company, you essentially have two routes—internal or external.
For internal marketing success, bring on a marketing pro with experience in social media and media relations. This allows awareness of business to travel through both new and traditional media. If you would rather seek external assistance, find a marketing agency that can meet the demands of your business, but also complement your company culture.
Founders often bootstrap their CPG company launch with their own money as well as money from friends and family and/or a Kickstarter campaign. Because the initial launch of a CPG product can be relatively inexpensive, especially when compared to how much money it takes to actually grow the brand, CPG founders are often surprised by how much money they need to effectively scale. Founders are understandably hesitant to dilute their ownership through equity funding, and should seek good advice on the right kind of funding to meet their goals, but CPG companies often require a lot of money to grow. Founders are encouraged to keep in mind that the right investors and the right mentorship can help them go from owning 100% of something small to owning a smaller percentage of a much bigger and more lucrative brand.
The CPG industry is a dynamic industry attracting many founders who are creating products they are believe in and want to share with the world. CPG companies can seem inexpensive to start since the first product is often not that expensive to make, and enthusiastic founders and friends are happy to help. Founders need mentoring, marketing expertise and money to effectively scale, beat the odds and succeed.