154. Building a Resilient CPG Brand for 2024.

Building a Resilient CPG Brand for 2024

Jordan Buckner: [00:00:00] The past year has been excruciating for a lot of emerging CPG brands. You know, the lack of capital, the rise in expenses, and sales challenges have been really tough. There's no way around that. And at least for the beginning of this year, it looks like we're going to have more of the same. The good news is that you can position your business, not just to survive, but really find ways to thrive and grow throughout this year.

So today I wanted to share some of these strategies on how to build a resiliency B brand and invited on Jeff Grog, who's the CEO of JPG resources. Jeff, welcome. Thanks for having me, Jordan. I wanted you to come on because you have experience of working with brands, big and small, and across all areas of the business from manufacturing, sales, marketing, and everything in between.

So I'd love for you to give a sense of how you're viewing the opportunity [00:01:00] for brands this year in 2024 and things that brands need to do to really be more resilient. 

Jeff Grogg: Yeah, thanks. Yeah, I've been fortunate to be on the brand side and on the manufacturing side and all and on the funding side. So all around.

And you know, it's tough economy right now or a tough market. I do think things are getting brighter. I think the back half of the year is going to be markedly better. You know, and I think in the near term, it's just, you know, continuing to get your business lean and to run tights and to be on top of every, every aspect of your business along the way.

You know, and we can get into more details of that, but I do think that you know, every business needs to really be run with an eye on the bottom line not necessarily saying you have to be profitable, but to be really cognizant of of running a business that's as tight as it can be. 

Jordan Buckner: And, you know, one thing I love is you started JPG back in 2009 and you've seen the industry rise and fall and rise again and so I love to kind of hear like how you view [00:02:00] this moment in time compared to what you've seen before.

Jeff Grogg: Yeah, I mean, 2009 was a lot of corollaries to today. The money was tight, but we had come off of a boom cycle where it seemed like everybody got funded , in the mid to late 2000s and then 8, 9, 10 was pretty lean. You know, so I think those fundamentals apply and fundamentals, including, you know, you really have to understand what's a good sale and what's not a good sale and only chase the good sales, meaning sales where you have a chance to make money.

I mean, it's understanding your P and L, you know, by customer and by item and not just in a generic fashion that way, you know, what's working and what's not too often. And we talk to brands who don't really understand how the internals of their P and L work. And then finally, just touching quickly on, you know, the funding side when the economy is tougher, not only does money get harder to come by, but.

You know, it flows in larger chunks to less companies. Some of those companies that get money are that much stronger. And that's part of what pulls us back out of it because it shows some [00:03:00] optimism because companies do well. There are some winners. And you know, it's important to understand PE and VC, they have to put that money out there.

They can't sit on it forever. So they do have to be active. 

Jordan Buckner: What, from your perspective helps brands stand out to really get investment right now? 

Jeff Grogg: You know, the basic fundamentals I think are still the most important and one is velocity and one is margin. You know, we don't expect profit from brands in their first couple of years.

We don't expect a brand at 2 million or 5 million generally to be profitable. But if they've got good velocities and they're pounding on that depth. And winning at the stores they're in that shows they can almost always do that more broadly. And then secondly, if you've got good margins, you can continue to invest.

So those still, I feel like these get pounded into people's heads. And then over time, you know, we hear a lot more about, well, I want to invest in a founder I believe in, and I want to invest in brands that you know, I relate to and all those things, which are true. But [00:04:00] fundamentally what always has to be true in addition to those other things is velocity and margin to me, those are like in always going to be true.

Jordan Buckner: You know, one thing that I will call a mistake, but I think one thing that's going out in the industry right now is there's this balance between innovation and product innovation, the role of it versus having a product that can actually grow to be a sizable business as well. Right. And you've known Teasquare since close to the beginning when I started that company.

And looking back, our product was niche, but it was almost too niche where like there wasn't a market for it. And it's more easy to see that now after kind of being in the industry for a while. But I see that happening from a lot of founders where they have a great kind of product itself, but there's not necessarily an inherent, I get great from like a taste, a flavor, maybe an ingredient innovation, but there's not necessarily a market for it.

And they're out seeking funds oftentimes because. It's [00:05:00] very expensive to educate and to get it out there. And so I guess my question is, how important do you think is that balance between having a product that's innovative, but also has a market to grow into? 

Jeff Grogg: Yeah, it's really important because if you don't have a market that's big enough to grow into, then you're starting a small business.

And that is a very different thing than starting a CPG brand. You know, look, I'm an innovator. I've been a product developer and innovator my whole career. I love doing new products. But it's you know, and there's a lot of stuff that we see both in JPG and in our fund our CV frontline that we love.

We love the product and love the idea. I love the founder, but sometimes we just don't believe there's a sizable market there. And, you know, in that case, you know, we would say, well, look, you need to make this be sustainable from very early days because. if the opportunity is 10 investable brand.

Right. That's that's a business , that needs to stand on its own very early. So we actually turned down a lot of [00:06:00] innovation work at JPG because we feel like it just, you know, doesn't have legs or we want the founder to move out their base before they start launching lots of other SKUs or items, so.

I think one is to your point, you have to have a brain that can scale and a market need. That's demonstrated that you can scale into. And secondly you know, you really have to not over skew. You know, it's really inefficient when you've got way more items , than you should have. , so we want to see that there's a good pathway to a million dollars per skew, you know, before you start adding lots more.

Jordan Buckner: You know, it's interesting because I wonder if you see this too, but whenever I see a brand who starts off in one category, right, maybe it's they're starting off a refrigerator, they're frozen or a lower velocity island and they move to another category early on. For me, it's almost a light bulb, like, Oh, they realize just how difficult it is and how expensive it is for that category.

And so they're like let me move to something else that seems a little bit easier. But then they were kind of working across [00:07:00] different categories and it adds a lot more complexity to their business. Do you kind of see the same as that? Like why you think people expand early into new categories or maybe they're just excited about products?

Jeff Grogg: Yeah, I think there are a lot of reasons to do that cross category expansion and a lot of them are good reasons, but maybe at the wrong time, we look, if your base isn't working, then you need to pivot and, you know, maybe you keep that base for a little bit while you translate people to a better category where you can make money, but ultimately you probably need to let that go.

and then, you know, also we just see too many brands that go to multi categories way too early. You know, you look at a lot of the bar brands built huge, huge company as well, ever going outside of bars and you see a lot of other, you know, cauliflower build a giant pizza brand before doing anything else.

So I think there's too much of a hurry to go into other categories. And I think brands often underestimate the complexity and cost of doing that.

Jordan Buckner: Yeah, especially at this time in terms of [00:08:00] focusing on what's going to bring your brand the most gross margin rate and velocity so you can succeed right now.

And then because other every category takes a lot more effort and education and time to build. Separately. So I think that's great advice. 

Jeff Grogg: Yeah. We just see, you know, I mean, when I was head of R& D at Kashi, we expanded into about like every category in the store at some point, but you know, we were also, we didn't really start doing that until we were about 150 million.

And you know, and then by the time we were kind of proliferated across the store, we're 750 million. You know, we see brands trying to do that at 7. 5 million and it just doesn't work, you know, so I think patience on getting into other categories. I think there's very few brands that should be cross category sub 10 million unless the base isn't working and you really need a pivot.

Again, you know, it happens, there's always exceptions, but I think most brands prefer a 

Jordan Buckner: And I think there's a lot to be said about kind of learning at these early stages, you know, the work that I'm doing is all about educating brands. I know you've [00:09:00] been working with smaller brands for a long time as well.

Just launched a new, what are you calling the JPG cohorts program? Tell me more about that, kind of how you're looking to help educate and work with brands as they're getting started. 

Jeff Grogg: Yeah, we do these Founder Cohorts years ago. Companies like be out of foods and, health warrior and scouts and maybe eight acres all came out of those cohorts were members of those cohorts early on.

And we set that aside for a while when there was a real proliferation out of accelerators and so forth. And now those have largely kind of dropped by the wayside. We decided to bring it back. We felt that it was timely knowing that founders need a lot of help these days. So yeah, , we do a lot of work with emerging brands.

You know, we started working with Gail at Call of Power before she launched. And so we're happy to be involved early. And we just feel like, especially when the market's tough, having these cohorts provide a lifeline within the market that you've got lots of network, lots of people that you know, and you can get information and advice [00:10:00] from.

And it also provides you a cadre of other founders who are in the same stage and you can share and learn from and commiserate with and celebrate with the way we think that's also important. 

Jordan Buckner: That team is so helpful. And, you know, one of the things I found as well is I've been through a lot of those accelerator programs and they're kind of great while you're doing them, but then can kind of fall off without that continual support.

So it's great to have a network of other people who understand what you're going through as a founder and in this space, Jeff, one thing I was thinking about as well, so. There's brands who have figured out at least a strong foundation, they're starting to grow for this year, but they're really trying to understand where do I put my money and my investment so that I can support that growth in a sustainable way?

You know, they're thinking about hiring. Do I hire someone full time? Do I hire someone part time? Do I hire someone who's very experienced or someone who's just starting out that I can train? I'd love to kind of hear what your perspective is and the challenges that you see founders going through a little [00:11:00] bit.

Jeff Grogg: Yeah. I mean, you look at getting lean, right? And all the ways you do that. One is you're very careful about where you sell and how you support, you know, and drive velocity. And the more you drive velocity, the easier it is to sell, the more picky you can be. So that's always, you know, one way to be lean and cash efficient.

Certainly also on the, on the internal staffing side, you know, I, I think that wasn't that many years ago, though, a lot of investors were encouraging brands to build their own internal teams. But ultimately that tends to be fairly inefficient. And so we see more and more now that people are using a fractional model.

So whether that's an outs, outsource sales team, outsource finance team, outsource ops team. Which we do by the way or, you know, we, we, or just hiring individuals at fractional levels. So we did launch JPG talent last year, which allows brands to, you know, bring on a part time CEO, for example, or, [00:12:00] or a project manager or a product developer, you know, or three months or whatever, so that you have a lot more flexibility, you can manage your costs better and get exactly what you need.

And these fractional teams, by the way. You know, part of what makes sense with them is you get somebody at the senior level really understands what you're doing, who can be your COO or chief sales officer or CFO, but you don't need that person full time when you're 5 million bucks, right? But you need the grinders that are below that, that get the daily work done and you get them at the right price, but led by somebody who knows what they're doing instead of by a founder who maybe doesn't know how to manage them.

So I think that model is going to continue to grow. We've seen it a lot and I think from an efficiency standpoint and from taking some load off the founder. You know, it's a model that, you know, will have durability even as the economy and funding gets better. 

Jordan Buckner: You know, Jeff, when I started T Squares, they, I had three other co founders and myself, and none of us has CPG experience.

And, [00:13:00] you know, on one hand, it's great to go in kind of not having experiences and you're not limited by the rules, but at the same time that got us in so much trouble that created problems that we wish we didn't have later. And so I remember when we were getting started, there was this quote around, you know, you don't know what you don't know, oftentimes when you're starting in the new industry.

And I think that mistake gets a lot of founders in trouble because They put in a lot more work and effort just to learn in ways that can become detrimental to their business. And so I really love the idea of being able to find someone who's seasoned and experienced but has also evolved through your business.

Because I think advisors are great, but typically you might get a half hour call with them and they're doing their own thing and The incentives aren't always lined up for them to really be invested in and help you out. And so I've become a big advocate of, especially for, for emerging brands, partnering with someone who actually is in the business, maybe part [00:14:00] time, who is an expert that can set the strategy.

And as you mentioned, and have people below that can actually execute it at a much cheaper rate, because in that way you learn from their knowledge and experience without having to pay them 40 hours a week when, you know, they're not even best skilled to do the grinding work. 

Jeff Grogg: Yeah, no, I appreciate that story, Jordan, because it rings so true.

You know, we, everybody as, as founders, one of your, like every founder superpower to some extent is their naivete, right? Like if you knew it, it's so hard to do it again, or you wouldn't do it if you knew how hard it was going to be. So you know, that matters a lot, but it also matters that you get the right help along the way.

And there's a very high correlation between. People getting the right help and being successful and, you know, I, and I agree by the way, as part of the reason I think some of these accelerators and incubators having worked is because the help has been very transient. As you mentioned earlier, you had an hour here, half an hour there, and all that advice is very [00:15:00] genericized as opposed to, as you say, you get somebody in your business, they get deep with you, they understand it.

Now all that advice is custom. And their, their 20 years of experience or whatever is now being applied specifically to your scenario. That's way more valuable than the one off here and there. You need that one off, you need those, that general learning but to really apply it and be smart in your business you need to help translate it and, and I agree with you that having somebody tight to your business to help translate general knowledge to specific action is super important.

Jordan Buckner: I'm curious too, Jeff, like, have you found healthy tension or not, where a founder's coming in and they want to break all the rules and then someone who's more seasoned comes in and they're like, well, you could do it that way, but here's a better way, or here's how it's traditionally been done.

Do you see that conflict? Or do you usually find people who are, you know, understand the industry but are willing to push it in new ways? 

Jeff Grogg: Yeah, it's always a tough one. I mean, on the [00:16:00] one hand, you need the founder of vision and sometimes you need that founder push to do things that are outside the norm.

And, you know, I, when I was at Gallagher and Kashi, I used to always say, you know, an expert is somebody who tells you, I cannot be done. You know, so, so we have to be careful that we don't, we don't shoot down dreams or, or. You know, talk people out of things that can be done at the same time, you know, there, there are so many ways that founders do the same kind of self harm to themselves and their businesses that, that if they would listen to advice, they could be you know, they could learn from somebody else's mistakes instead of their own.

So I think it really requires a good level of respect and conversation between. The advisor or that senior person, experienced person and the founder to have a productive relationship where, you know, you're bought into realizing the vision while helping provide experience as opposed to, you know, if you bring in somebody who's just saying, no, you can't do that, no, you can't do that, no, you can't do that, you [00:17:00] know, that's probably not the right partnership.

Yeah. 

Jordan Buckner: You know, it's, and similarly, like backward T squares, I know what we talked to is around manufacturing and out of your SACWRST facility. And one thing of making T squares is. Even, like, our first mold for our, our squares were, like, laser cut off of a free library printer. Then we, like, had these stainless steel molds created.

And I think in talking with your team, it was like, alright, there's three ways of making bars, right? There's a rotary molder, which is the most expensive. There's extruders, and then there's slab lines. And really, I was like, those are the three main things. If I would have understood that at the beginning, And then I could have made a very tactical decision in terms of how do we want to design a recipe and our product and what's really most important so we can know the rules and then specifically and consciously break them, right?

The worst is when you're breaking rules, but you don't even know what rules are out there. 

Jeff Grogg: Yeah. I think that's absolutely true. I mean, we do see a lot of founders create products that just cannot scale. [00:18:00] Either, either at all, and you're going to require happy ends forever you know, or they can't scale in an efficient way, or at least into a contract manufacturer.

And they said, well, I want to go to Coman. So, well, you know, your process is very unique and very, you know, so then you have to build yourself or you have to build a or take it to a hand, hand shop. And those are always expensive. So, you know, there's a rationale at times for, for doing your own. And doing it very uniquely, but, but again, like you say, like ignorance is not the best way to build that.

And you know, like literally three months ago I was talking to a group and somebody said, well, I built my own plan because nobody else could make what I make now, like I know three people who could make what you make, you just didn't know them, you know? So it's a matter of like, well, maybe it's fine.

You build your own plan, but that might've been the wrong reason if you really wanted to command. And so. Again, you know, finding, finding the help you need. So you've got [00:19:00] context. I love the way you say, like, know the rules you're breaking. I think that's exactly a great advice. I love that. 

Jordan Buckner: Jeff, thanks so much for being on today and having this conversation.

As you mentioned, I'm really excited about what this year has in store for a lot of CPG founders out here, but especially if you have that right foundation from the beginning that you can build off of with the opportunity to start opening back up. 

Jeff Grogg: That's been great, Jordan. Thanks for having me. And yeah, this is an industry where people love to help each other.

So always encourage founders to go out and find the help one way or another. 

Jordan Buckner: Excellent. Jeff, I'm gonna include information about how to get in touch with you about the JPG cohorts and the JPG talent program in the show notes for any of our listeners who are interested in those programs. And Jeff's always very open.

He's been helping founders for, for years now. And so if you have any questions, feel free to reach out to him as well. Jeff, thanks so much. Thanks Jordan. Take care.