Before I got into VC, I spent a decade at Morgan Stanley covering both the incumbent Retail brands and new eCommerce names. It was there that I became fascinated with Retail, Beauty and Consumer Packaged Goods (CPG) and developed a deep appreciation for the power of brand.
Earlier this week I announced Lightspeed’s investment in Brandable, which represents where I think CPG companies are heading. Brandable joins other innovative CPG companies in Lightspeed’s portfolio including Daily Harvest, Hungry Root, The Honest Company and Goop. We believe in this space and will continue to invest in it.
CPG is a sector ripe for disruption that can ultimately be broken down into three key areas: 1) what the consumer wants now, 2) what incumbents are doing poorly, and 3) what new entrants are doing well.
- Increased personalization is important given Millennials and Gen Z don’t want their products to have the same look and feel as every other product out there. They look for companies that speak to individual customers with individual needs.
- Consumers are demanding transparency and knowledge of exactly what goes into their products.
- People are increasingly listening to their friends, celebrities and influencers. They want to know what a brand stands for, who else is using it and whether their favorite celebrity or influencer is behind it.
- There are several categories where consumers are buying the same products as their grandparents. When looking at the R&D budgets and plans for incumbents, there’s a clear lack of innovation, and that’s unlikely to change.
- The level of M&A shows the extent to which the incumbents know they need to make acquisitions to stay relevant — I wrote a post after the Dollar Shave Club acquisition on why I expect more M&A to come. 2017 alone saw over $300B of Retail and Consumer acquisitions.
- The CPG conglomerates are often not in touch with the customer. I went to the WWD Beauty CEO Summit two weeks ago — the largest CPG companies were there scouting for insights on emerging customer trends.
- Brands don’t need to exclusively sell through one retailer now. They are taking back the power and can sell through multiple brick-and-mortar retailers, boutique stores, Amazon or through their own website / store.
- Brands are becoming smarter in they way they market and reach customers where they spend the most time. They can now market 1:1 and know the exact price to acquire a customer on Facebook / Instagram vs. the old method of placing a magazine ad and hoping for the best. Knowledge is power in marketing.
- The speed with which new entrants are able to move, innovate and launch products will continue to be a competitive advantage. A CPG conglomerate told me yesterday that when they think of an idea, it usually takes 12–24 months from idea, to reaching customers. This can be <12 weeks for startups.
These are the things that I think about as an investor when talking to founders and companies in the CPG space. If you believe your company is reinventing CPG, I’d love to hear from you. The best way to contact me is on email: firstname.lastname@example.org.
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