How Velocity Growth Steepens the Ramp
It is possible to double your store count every year in an exponential ramp up of distribution. If your product is good, you will achieve a stable (i.e., not declining) velocity plateau. Great. You’re doing better than many brands.
This will still appear ‘slow’ to the trade and industry like any other Skate Ramp brand does early on. It just tends to tank velocities, if you rely solely on it. And if you overshoot, your business will generally collapse. Spray and Play lead to dissolution far more often than not.
But to be honest, only a prior CPG track record and high levels of trust from the trade (i.e., as only a serial entrepreneur would garner) would allow you to ramp up distribution aggressively without demonstrating strong velocities first (i.e., doubling doors every year or doubling %ACV every year in the early years.
FIGURE 1
In Figure 1, I’ve taken real-world data from a Skate Ramp CPG brand and simplified the math into a YoY comparison to show how velocity growth was critical for exponential growth in this business. How do I know this? Because the distribution increases from Year 2 to Year 3 were 250%, yet exponential growth wasn’t achieved that year when we remove the effect of velocity gains.
The challenge with velocity growth is to measure it in a more nuanced manner than one tends to do with
distribution gains. Because velocity fluctuates in relationship to total demand, not just in relation to how many stores you sell through in any given year. In the months after a surge in distribution, mathematically, your average velocity will generally slip and then rebuild. However, if the underlying trend is growing velocity, month over month, you will recover, and exponential growth will likely occur. Thou must have faith.
In Ramping Your Brand, I discuss known, cross-category best practices to build velocities through out-of-store levers of brand enthusiasm and awareness. This is not just marketing babble. It works. But you have to put in lots of time and energy, later money, to make it work.