Retail

CPG Accelerator Sees Growth In Delivery Services And Beverages

Grocery Delivery

Consumer packaged goods (CPGs) entrepreneurs face many decisions as they grow their businesses. Distribution, packaging and funding can create challenges for those seeking to get their products from the farmers market to shelves of big box brick-and-mortar stores. It can be particularly difficult to overcome these challenges without experience or contacts.

Enter SKU, an accelerator focused on growing CPG companies by providing entrepreneurs with networking opportunities and education. In some sense, the program seems like a soft resource, but it’s “incredibly powerful,” SKU Managing Director Genevieve Gilbreath told PYMNTS.

Through a 14-week program that is, in some ways, like an MBA tailored to consumer products, entrepreneurs learn to scale their businesses from the inside out with the help of mentors who can provide them with knowledge and experience.

“It’s all about connecting the dots and getting the resources and the skills that these companies — and their CEO entrepreneurs — will need to be able to scale,” Gilbreath said.

 

Good Candidates

Entrepreneurs with all sorts of backgrounds enter SKU’s program — from someone who has 15 years experience working in CPGs to a musician who has a passion for entrepreneurship. But all of SKU’s entrepreneurs have similar traits: They’re smart, dedicated, willing to do what it takes and coachable, Gilbreath said.

Beyond having the right approach, entrepreneurs need to have a product that’s on trend — whether it’s in a growing product category or one that has the potential for growth. And the product itself has to have some built-in demand, according to Gilbreath.

As its entrepreneurs are diverse, so are the growth stages of companies in the SKU program — from companies starting out in farmers markets to others with more than 1 million sales. Either way, entrepreneurs can benefit from an accelerator like SKU. “There’s always some education and some help that can be given that will allow them to scale faster,” Gilbreath said.

SKU has had five cohorts so far, with five to seven companies participating in each class. Companies that are alumni of the program include Epic, which manufactures protein bars made of grass-fed meat, and Goodseed, which makes a hempseed burger. Beyond packaged food, SKU has worked with The Seaweed Bath Company, which manufactures bath, body, hair and facial care products.

When SKU starts working with a company like Epic or Goodseed, they conduct a SWOT (strengths, weaknesses, opportunities and threats) analysis to see where companies need the most help at the moment, and then they make a plan to identify future areas of improvement to help the company scale. Working with mentors, entrepreneurs can identify channels for success for each stage of their business and how to work within those channels. They can also work out financial strategy, such as deciding whether to take out a loan or give up equity. Mentors, too, can help entrepreneurs with a manufacturing strategy, such as finding the right co-packer.

To help entrepreneurs get their products onto store shelves, SKU has a relationship with the sourcing department at grocery retailer H-E-B (the retailer is also one of SKU’s sponsors). H-E-B’s category buyers “get a first look at our brands and a chance to get to know them to see if it’s a good fit [for H-E-B],” Gilbreath said. In addition, SKU mentors can teach entrepreneurs how to structure a sales presentation around what a particular retailer needs in terms of margin and trade strategy.

 

The Future of eCommerce

With the advent of eCommerce retailers like Jet.com getting into the grocery business, Gilbreath said she hasn’t seen large-scale changes to packaging designs, even though consumers may just be looking at an image of a product rather than holding a box or a container. But she did say some companies that market directly to consumers are moving to multipacks or adjusting pack sizes since they want a cart value of $20 to $30 when selling through their own channels. Subscriptions, too, were popular with CPG companies, but she said consumers can get exhausted by all the subscriptions they may have.

“What we see more of is [consumers] tending to use Shipt or Instacart or shopping like that on demand,” Gilbreath said. Beyond eCommerce success, she said strong online sales may indicate that a brand could do well in another channel: “If you can show that you do well already online and that you would be an ideal candidate for a Shipt-type situation, I think that could be some good ammunition for helping you to get into [other] specific channels.”

Amid the trend of consumers using grocery delivery services, Target announced in December that it had completed a $550 million cash acquisition of Shipt to help bring same-day delivery to its customers around the country. Customers in communities like Laredo, Texas, can order from H-E-B through Instacart, while H-E-B customers in other Texas cities can order through Shipt.

Going forward in CPG trends, Gilbreath predicts more functional and unique-tasting beverages — and those that are medicinal in nature. “People are using food more and more as a healing product rather than straight nutrition,” Gilbreath said.

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