New Brand Entrants: 4 Key Questions to Answer for a Successful Listing
Small to medium-sized businesses are becoming the backbone of the Canadian grocery sector. For the 52-week period ending September 14th, 2019, sales growth for the Top 101 brands was 2.1% as compared to 1.3% for the Top 20. Over this same period, smaller manufacturers’ dollar market share of the grocery sector was 25.9%. [1] The same phenomenon is happening in the US.
For the 5-year period ending in 2018, more than $17B in sales had transferred from large players to smaller ones.[2] Unfortunately for every small brand that gets listed and succeeds in the grocery sector, there are far too many to count that do not get a foot in the door. With this in mind, I present the 4 Key Questions new brand entrants must be prepared to answer when calling on a broker, distributor, or retailer.
Question 1: What Makes Your Brand Unique?
Copy cats, no need to apply. In this era, brands must offer a unique selling proposition (USP). A USP is worth establishing to the extent it is:
- Important: The difference delivers a highly valued benefit to the brands’ target audience.
- Communicable: The difference that is established is communicable and visible to the brands’ target audience.
- Pre-emptive: The competition cannot easily copy the difference.
Though Beyond Meat was the first to introduce a plant-based burger, it was not that difficult for Maple Leaf Foods “Lightlife” to copy and surpass Beyond Meat. They did so by offering a burger that did not contain Soy – Top 10 food allergen. A well-developed USP is vital when you’re setting out any marketing strategy. It gives you clarity around the content you want to develop for your marketing communique.
Question 2: What Void Does It Fill and How Will It Increase Category Sales?
This question is so paramount for the grocery retailer. If they do not feel your product will increase sales, you will not get listed. Let’s examine this question in 2 parts:
- Part 1: What Void Does It Fill? This question relates to the consumer. What pain point is your product solving that is not being met by the competition?
Hey Jute is a start-up business in the tableware sector. Many consumers know where paper and plastic tableware go – landfills and as a result use their own cutlery. Hey Jute is launching biodegradable tableware made out of plant-based material. Communicated effectively, consumers will seek out Hey Jute knowing it can de-compost.
- Part 2: How Will It Increase Category Sales? This question relates to the retailer. Category sales are a key performance indicator as part of a retail buyers’ performance appraisal. Be prepared. Provide research on why you feel your product will have a positive impact on category sales.
Many consumers are trying to avoid products they know will end up in our landfills. Marketed properly by Hey Jute, they can bring a new generation of consumers to the tableware category that will increase category sales for the retailer.
Question 3: What is Your Products Suggested Retail Pricing Strategy?
Canadians are price conscious. Prior to COVID-19, 70% of consumers were looking to save on fast-moving consumer goods spending, [3] and 50% of fast-moving consumer goods were sold on a price cut.[4]
During COVID-19, there has been a shift to private label from branded: +42% vs. +31%, 4-week period ending March 28, 2020.[5] For new brand entrants to gain traction with consumers they must be competitively priced in their respective category. To remain competitive in today’s market your product should be priced + or – $.50 of the categories medium price point.
When presenting to retailers the traditional retailer seeks a margin in the range of 35% – 40%.
The retailers’ margin = (retail selling price – retailers’ cost) / retail selling price.
Question 4: How are You Prepared to Support Your Brand Launch Internally and Externally?
In today’s grocery era new brand entrants do not sell themselves. The consumer has too many choices in which to choose from. Let’s examine this question in 2 parts:
- How are You Prepared to Support Your Brand Launch Internally? This question relates to the retailer. How will you support your brand in the retailer’s store?
Here are a few examples they may seek out from you:
- In-store demonstrations (when they return).
- Endcap displays.
- Promotional pricing allowance so to reduce your S.R.S.P. up to 4 times per year.
- In-store couponing program.
- Support the retailer’s loyalty program.
2. How are You Prepared to Support Your Brand Launch Externally? This question relates to the consumer. With the choices they have, your brand has five to seven seconds to grab the consumers’ attention. What plan does your business have in place to generate brand awareness and stimulate trial purchases? Here are just three examples:
- Influencer marketing campaign.
- Sponsorship programs.
- Paid social media advertising.
Given the short probationary periods banners provide to new brand entrants, driving brand awareness is paramount to the brands success. Mentioning your traditional social media platforms (Twitter, Facebook, Instagram) will not pass the mustard test.
Richard Baker is the Founder and President of Food Distribution Guy. Seek assistance Getting and Staying Listed, forward us an email: richard@fooddistributionguy.com. We are here to help your brand succeed!
[1] Disruption in Canadian Retail, Nielsen, QTR3 2019, Carman Allison
[2] Smaller CPG Brands are Gaining Upper Hands on Giants, and Now the Big Want to Get Even Bigger, www.forbes.com, October 2018
[3] The Store of Tomorrow, Nielsen, Carman Allison.
[4] The Economical Canadian, Grocery Business, November – December 2019.
[5] COVID-19 Weekly Up-Date, Navigating the Impact on Canadian FMCG, Nielsen, March 2020