At direct to consumer baby and toddler food brand Raised Real, San Francisco-based founder and CEO Santiago Merea said that his business model has “many appealing qualities [for these unusual times]: long shelf life (frozen), nutrient-dense, delivered to your doorstep, flexible for your kids (and adults).”
But he noted: “People are not in the mood to be shopping and they are consumed by the news, which makes sense. So far we haven’t seen a decline in acquisition, but we are planning in advance as we expect that might start to happen at some point.”
As for how to get the word out, he said, a lot of e-commerce marketing depends on digital ads and, as browsing behavior changes, “CPAs [cost per acquisition] will go up and this spend will become very unreliable. Instead, we are looking at search and organic as a heavier percentage of our spend. Meet people where they are, when they are ready to engage with us.”
‘Priorities have changed and gaining your customers’ trust is more important than ever’
He added: “We are also going to be investing a larger share on customer retention vs acquisition. This is an opportunity that subscriptions services, like ours, have because we own our relationship with our members. Last week, our revenue retention was over 100%. Our members know and trust our product.
“Having a direct relationship with our members allows us to be super transparent and share our safety protocols and certifications and answer any questions our members might have. This was a revenue driver last week and we are sure it will continue being an essential part of our communication strategy going forward. Priorities have changed and gaining your customers’ trust is more important than ever.”
Liquidity vs growth.... money will dry up
As for financial planning, said Merea, “This is not the time to get cute with crazy growth. This is survival time. Liquidity is the name of the game. We’ve always strived to have a sustainable business model - we are a few months from profitability. Companies that need sustained growth at all cost with upside down unit economics are going to have a hard time as money will dry up.
"This includes being very careful with inventory. Again, an area where being 100% in control of your POS [point of sale] is an advantage. We can keep a pretty tight forecast of inventory and we have an algorithm that takes into account customer preferences and current stock to form boxes. It’s something we developed to be more efficient, but it is now critical.”
Scrubbing the budget
Asked what emerging brands should be doing now, Ben Goodwin, co-founder at fast-growing functional beverage brand Olipop, added: "This really will be different for each brand and where they are in their life/funding cycle but at the broadest level I would suggest seriously assessing or modifying the existing opportunities at play
1) Can you double down and support existing retailers more?
2) Do you have an ecommerce platform to shift your resources towards?
3) Can you build and prepare your systems to be better positioned for when the crisis is over (including bringing on brokers, getting out a helpful message or bringing on other support systems)?
4) Can you 'scrub' your budget to help you be more capital efficient during this time of upheaval?"
Nick Desai, CEO at PeaTos brand owner Snack it Forward, said: “Your 2020 plan just went out the window. Be nimble, stay strong, and ready to react quickly. Be very careful with your cash.”
Overall, food and snacks are much more recession resistant than many other industries. In many ways new food items are a small and safe indulgence as people are spending a lot of time at home and likely very anxious. Nick Desai, CEO, Snack it Forward (PeaTos)
Retailers are delaying shelf resets
Jeff Richards, CEO at plant-based dairy brand Mooala, said he was "fortunate to be in the dairy/alternative dairy sets of stores, which is a high-demand section for at-home consumption," although he noted that he had seen "delays or cancelations of resets with Giant and HEB as well [as Kroger]. I think essentially every retailer is 100% focused on keeping existing items in stock."
But he added: "If a new brand is already in market, there is a silver lining to all this in that 1) grocery sales will be strong, 2) most retailers are canceling promotions (which tend to be very expensive for brands, especially new ones), so sales will be more profitable, and 3) consumers are grabbing whatever is on the shelf – that is a free demo in itself."
'Consumers will be glued to their screens and phones for the next few weeks'
Asked how brands should brands modify marketing, he said: "Focus marketing on items the consumer can enjoy at home, since that is where people where be spending most of their time. How can people enjoy your product in their home if they usually enjoy it on the go or in groups? Consumers will be glued to their screens and phones for the next few weeks, so that will be the obvious place to try out new or modified messaging."
Only medical and household essentials and grocery items will be allowed into Amazon's FBA (fulfillment by Amazon) warehouses until April 5
Julia Stamberger, founder and CEO at Spinning Wheel Brands - which makes Hope & Sesame sesamemilk (shelf-stable and refrigerated), Mozaics organic popped veggie & potato chips, and Veggicopia portable plant-based snack portions (shelf-stable single serving dip cups and olive portions) - said sales look set to almost triple on Amazon in March vs January.
“We are pulling out all stops to pack and send as much inventory to Amazon as possible. Amazon just came out this morning with an announcement that only medical and household essentials and grocery items will be allowed into its FBA (fulfillment by Amazon) warehouses until April 5, possibly longer, which will mean more available warehouse space and faster check-ins for our goods. Meanwhile, we are sending in all possible inventory on all SKUs to FBA.”
Bricks and mortar retailers, however, are starting to delay shelf resets, she noted. "Kroger just announced today that they are freezing shelf resets for the near term."
Comfort food and junk may rein in the short-term, but healthy eating will be a priority longer-term
Business priorities have also changed, she said, and her plans to launch a barista version of sesamemilk for the coffee market are now on hold, although more retail-focused plans are accelerating.
As for consumer shopping habits, while some commentators predict a rise in consumption of junk food and comfort food, longer-term, people will be more focused on staying healthy, and experiment more in the kitchen, she predicted: “We think consumers will move more to cooking and experimenting with culinary, because they will be getting menu fatigue from standard home prep items…”
She added: “We believe the interest in shelf-stable will linger after the epidemic subsides, as well as single portions, there will be more concerns re: hygiene overall that stick around.”
Yolele Foods: 'People will continue to be people: some like old-fashioned comfort, and some like exploration'
Philip Teverow, co-founder and CEO at Yolélé Foods, a startup on a mission to introduce Americans to a nutrient-packed, gluten-free ancient African grain called fonio, told us: "All demos are cancelled, as are quite a few sales and marketing opportunities."
Foodservice sales and even prospecting within that sector have stopped,
While retail sales are way up, foodservice is in limbo, he said: "Foodservice sales and even prospecting within that sector have stopped, but retail sales are way up for us, both in stores and online. We’re calling stores to suggest they fill up empty shelves with fonio. This is one instance in which it helps to be selling a shelf-stable staple food."
As for the long-term impact of COVID-19 on purchasing habits and behavior, he added: "People will continue to be people: some like old-fashioned comfort, and some like exploration."
"We have had no interruptions within our supply chain. In-store traffic and on-line traffic has picked up. Our site, eatnudge.com, has seen an increase in average order size and frequency and our inventories are very healthy. Interestingly, both repeat customers have increased, and new customers due to the insight of 'at-home foraging,' we believe."
David Burke, CEO, The Whole Coffee Co (which has just launched the new 'edible coffee' brand 'nudge')
Marketing during COVID-19: ‘Don't just repeat ad copy from before this crisis. Show you're awake and listening’
“For the immediate future, marketing itself is going to be tuned out, online and offline. The best marketing message for now is empathy with the emergency itself, for those living alone, for those with no family.
“If you can connect with that, your brand may reap rewards later on in terms of memorability among your current fans. Just don't 'sell' during this abnormal time. The Great Recession of 2008-9 is our most recent economic trough. During this time, we saw consumers retreat to traditional, comfort categories in their homes.
Don't just repeat ad copy from before this crisis. Show you're awake and listening.”
James Richardson, Premium Growth Solutions
"Anytime things get stressful, people are going to be more open to genuine/useful content that addresses their headspace and real world concerns.
"If you have a brand that can seriously communicate something uplifting or helpful, the coming months would be a good time to do so.
"I would also suggest not trying to communicate in a way that seeks to be profiting from the situation, just offer some help and otherwise sell your products as normal or offer a discount to people in need."
Ben Goodwin, co-founder, Olipop