This is the first post in a series that will continue to discuss these issues and go more in depth with specific stories from those involved in the industry.
What natural products brands need to consider when blazing their trail in this ever-budding industry.
Let’s face it. The Natural Products industry has hit mainstream for quite some time now, but with the selling of Annie’s Homegrown to General Mills for $820M, it’s as great of a time as any to discuss the implications, pros and cons, and other topics surrounding what it means to stay independent vs. going mainstream.
Similar discussions of “Indie vs. Major” have long been debated in the music industry anytime the main players recognize the revenue potential of key artists in expanding genres. I witnessed it firsthand through my experience as a musician in the 90’s and 00’s, and I can’t help but sense a strong parallel between then and what the natural products industry is experiencing now. Similar to the rise of what was once considered “underground music”, retailers like Wal-Mart and Target eagerly fill their aisles with natural products that were once only found in independent natural food stores in years past.
As the natural products industry gains steam and evolves as a whole, so will the consumer base and the options available to brands. So what are the issues natural products companies should consider when making business decisions?
Let’s first look at how we can best define Indie vs. Major in the natural product’s industry. I’ll note that we’re looking at these as the far ends of the spectrum, as there are plenty of “transitional” brands that would lie somewhere in the middle of the two.
Being Indie means still holding all the cards. A business where the owners are still actively involved, wearing many hats and are very often the story behind the brand, embodying the values it stands on and mission its employees follow.
Going Major is overtly selling the business to a large holding company or another large brand not known as a pure play ‘natural foods’ company in exchange for bringing on external resources to grow a business bigger than the internal resources or existing sales revenue would allow.
The integrity of the brand has always been very important for natural products. In this industry more than others, consumers tend to look deeper into the brand and business beyond the products, seeking out more information on the ingredients, values, story and the people involved. A brand with authenticity will have an upper hand on those that do not and keeping autonomy is certainly a significant factor in maintaining and evolving a brand’s story. Additionally, when a brand gets in bed with a larger company, they become affiliated with parts of a story that they can no longer control.
Take the Annie’s example. Annie’s as a brand has been an advocate of GMO labeling while General Mills recently invested over a million dollars to shoot down ballots supporting labeling initiatives. Whether they want to be or not, Annie’s is now affiliated with both sides of the coin in that debate.
On the topic of distribution, first consider where your products are made available and what that can do to the perception of your brand as well as what types of audiences you’ll be exposed to with the different options. For the same reason a band who has played the club circuit achieves a higher level of credibility, natural products should consider what it means to have time on the shelf at independent retailers vs. jumping straight to the shelves of big box stores. Independent natural retailers often have higher standards for the products they put on their shelves, so their niche consumer base trusts and recognizes the built in vetting that these retailers do for them. But of course, being available in larger chains means more product out there and exposure to larger consumer bases that may not be looking as deeply into a brand’s story as much as the hardcore independent store shoppers would. The degree to which this is a determining factor leads back to the overall business goals, and whether a brand’s growth strategy involves honing in on a core, like-minded consumer base or if it favors making product available to a more mass but potentially less-invested audience.
And then of course, there is the issue of appropriately scaling a business to meet the needs of distribution. For a small brand, it could be tempting to fill a huge order with a major retailer but that could require artificially ramping up capacity and production without a guarantee that they will place a second order. The safer route would be to create demand and build sales in a more natural way before quickly jumping into the mainstream.
Infrastructure & Resources
The resources available to independent brands are limited and often the biggest factor affecting what they are able to achieve. The decision to go Major alleviates that factor but can also come along with some baggage, positive and negative. On the positive side, a major partner can bring specialized institutional knowledge to the table and connect a brand with other resources to tap into, including supply chains, manufacturing, product development and marketing. On the negative side, more people involved will most likely mean a slower moving business with more executive control and a higher emphasis on profits. Independent businesses maintain freedom to make decisions as well as nimbleness to evolve quickly to meet consumers’ needs.
There is no one route that makes sense for every business in the natural products industry, and as you can tell, the natural products industry is unique from other industries given the scrutiny around brand values, ingredients, manufacturing practices and overall transparency that consumers expect. But as businesses in the space continue to grow, the more they can chart out their appropriate growth path while keeping in mind how that may effect the value of their brand, the better poised they’ll be for the particular goals they set out for themselves.
Luke Garro is the EVP, Content Director at GYK Antler and leads digital marketing programs for a number of natural products brands. Luke is also a fifteen+ year veteran of the music industry, as a drummer for various bands, including indie rock staple, Piebald. His experiences include multi-national tours with bands such as Jimmy Eat World, Dashboard Confessional and A New Found Glory, topping 1,500 shows, six recording contracts, seven full-length albums and various other releases. In his personal life, Luke firmly believes in the practice of sustainability and lives on a gentleman’s farm in Western Massachusetts with his wife, daughter, and chickens. Luke will be in Baltimore for Natural Products EXPO East this week. If you see him, say hi. He looks like this (when he’s harvesting hops, atleast):