TUCSON, ARIZ. — SkinnyPop, Chobani and Kind are examples of what James F. Richardson, PhD, deems “Skate Ramp champions.” These disruptive brands achieved exponential growth and toppled established category leaders.
The Skate Ramp is “the competitively advantaged growth model” for most entrepreneurial consumer brands, said Dr. Richardson, founder of Premium Growth Solutions and author of “Ramping Your Brand.”
“I advocate and write about a phased approach to growth,” Dr. Richardson said. “The point of these phases is to hold the right priorities at specific levels of scale.
“In the beginning, you are just turning the engine of positive cash flow on and getting operations smoothed out. But you have to proceed slowly enough to learn from your fans and iterate as needed. This is why I advocate exponential growth off of a small revenue base (i.e., $500,000 to $1 million). It gives you and your team time to learn, iterate and pivot. When it comes to measurement, slow and steady velocity growth is critical.”
A cultural anthropologist turned business strategist, Dr. Richardson has helped more than 100 consumer packaged goods brands, including those owned by Coca-Cola Venturing and Emerging Brands, The Hershey Co., General Mills, Conagra Brands and Frito-Lay, as well as emerging brands such as Once Upon a Farm, Mother Kombucha and Rebel Creamery. He also hosts the podcast “Startup Confidential.”
Dr. Richardson is the keynote speaker at the Food Entrepreneur Experience digital event on April 28. He shared some key insights during a recent interview.
Food Business News: What are the biggest or most common mistakes you see CPG startup founders making?
Dr. Richardson: It’s tempting to assume your initial product is “finished” across all touchpoints at launch. It’s taken a lot to get to launch, and founders want to grow and scale. The problem is that most entrepreneurs are doing something off-center from category norms …
Founders need to be ready to iterate in-market and to co-create with their initial fans. They also need to be prepared to pivot when they’re still small. Another huge mistake is to believe that distribution breadth, especially store count, correlates to growth and scale.
What is the “death funnel,” and how can startup founders navigate it?
Dr. Richardson: It’s the period from zero to $500,000 in trailing annual sales when most growth-oriented CPG startups flame out. The metaphor is not referring to hobby businesses selling below $50,000 a year that don’t require much capital to sustain indefinitely.
I wish the failure rate were entirely due to product design issues because these are the easier problems to solve. But it is often about inexperience with low-margin businesses, cash flow analytics, and the taking of terrible advice. Many “flame-outs” occur because founders agree to over-distribution before they have figured out how to build awareness out-of-the-store.
The result is often expensive initial sell-in followed by weak to inadequate velocities to remain on the shelf. Or velocities that are too low to cover fixed costs. These are classic minor business problems made much worse in a low-margin revenue model of retail CPG brands.
I urge founders in this phase to bone up on CPG unit economics and route-to-market costs if they want to enter retail. Generally, if you are shelf-stable, it’s much wiser to get through the funnel online via platforms like Amazon, where strong ROAS (return on advertising spend) is proven and repeatable for small brands at low, monthly marketing costs versus what it takes to drive consumers to the retail from social media.
How has the pandemic changed your playbook for emerging brands?
Dr. Richardson: It’s changed the feasibility of some critical best practices in building Skate Ramp brands in CPG. Mainly the ability to engage in highly targeted, high-volume event sampling and the ability to enter retail early on. Both are pretty constrained right now for very young brands.
Otherwise, the Skate Ramp brands I’m working with have grown exponentially despite the pandemic. The model works fine regardless of mass external shock because the demand for premium is a decades-long restructuring of consumer demand that started in the 1980s.
What drew you to consulting premium consumer brands?
Dr. Richardson: I'm a cultural anthropologist. We're a "tribe" fascinated by anyone or anything marginal to civilizational norms. In the case of CPG, the norm is Lay's, Oreos, Tide, and Pepsi. The market shares alone reveal the cultural norm. My clients may want to become the next Oreo, but they're starting from the position of a marginal insurgent in America's product consumption norms. I enjoy helping them irritate arrogant incumbents whose bureaucracy cripples any attempt to react quickly. I especially love it when a superior product innovation patiently sold and marketed scales when no one thought it ever would.
I specialize in locating and helping clients 5 to 7 years ahead of American cultural norms that have a product line and marketing machine capable of changing how ordinary Americans eat, drink, clean, and enjoy daily existence. The book emerged from my need for a superior business development tool, obviously, but I also want it to level the playing field for entrepreneurs with excellent products who will never attract top CPG talent or large seed raises, entirely due to their newbie status in the industry. I refuse to believe that success should be limited to the 1% with deep industry connections.
Any client success stories you can share?
Dr. Richardson: I don't "strategize and tell" in my line of work. Since I don't execute for my clients, I never take public responsibility for their successes. I'm a strategist and advisor focused on coaching ambitious teams on building custom, competitively superior playbooks to ride the Skate Ramp given their specific competitive situations. I have multiple eight-figure clients riding the Ramp right now, and you'll hear about them sooner than later in the press, I'm sure. But I won't be in those press releases. Ever. As a proud introvert, you can imagine I prefer to remain behind the advisory curtain. You don't do what I do for glory. You do it because the puzzle each business presents is fascinating to solve in collaboration with your clients.
What will you be discussing at the Food Entrepreneur Experience?
Dr. Richardson: I'll be taking listeners through a rough outline of my book's key points, starting with the critical problem the book set out to solve: the temptation for undercapitalized entrepreneurs with limited industry connections to hit the gas on distribution too quickly before they have truly iterated and confirmed the offering itself. For product lines that 5 to 7 years ahead of the market (like Siggi's and Kind bar were), you have to be much more patient. This talk is ultimately a call to ignore the unicorns and re-calibrate an intelligent pace to scale.
Register for the Food Entrepreneur Experience on April 28 here.