The Next Wave of Skate Ramp Brands May Be Culinary

Q1 is done. But it’s hard to tell where premium brands are headed this year. A mild recession will not do much damage due to the premium CPG spending of America’s upper-middle-class. And this group is also much larger than in 2008. Top-income households do more and more to float the economy and mask counter-trends down the market (like the continued explosion of Aldi and Dollar store sales). They can afford to buy premium CPG items in most categories because the per unit trade-up is a de minimus dollar increase in their $20-50,000/month cash flow streams. When they trade down, it’s in fine dining, transportation, travel, and home renovation.

This is still a great time to start premium brands with sufficient seed money. But, when I read the usual sources on this end of the CPG industry, the trends everyone tracks seem overweighted to health and wellness. The seeming rationality of Nutrition Facts Panel comparisons appeals to many bankers.

But there is also a continued Nordic/Anglo/German bias to those in the natural products industry media and other stakeholder groups. I pick on those ethnic groups because of the point to folks who didn’t grow up with sophisticated cuisines at home. But America has changed. Tens of millions of Gen Z and Millennials grew up with Asian, Middle Eastern, and Latin foods. 

What is getting lost to some is that plenty of untapped white spaces remain beyond health (i.e., the thousands of brands chasing low-carb, low-sugar, or nutrient-dense formulations). 

The origin of premium food and beverage (circa the 1970s and 1980s), which we often forget, was purely hedonic: specialty Italian foods, artisan cheese, wine, chocolate, craft beer, and premium ice cream (without the excess air). And these drivers remain the ones with the most considerable addressable markets long-term IF you can figure out how to commercialize them. And if founders can get beyond the artisan trap.

It’s what Raos has successfully done, what Fever-Tree has done. What Frontera is doing. What Huy Fong Foods has done. And on and on. The narrow focus on health and wellness innovation in the last fifteen years will look silly in a few decades. Not because there was no demand but because these outcomes only scale when tied to weight management. I see it again and again.

If it only takes 2-5% of U.S. households to scale $100M brands, then the usual dismissal of ‘ethnic’ or foodie innovations as too niche just doesn’t fly anymore. I wrote an entire book on this phenomenon.

Expanding our multi-sensory pleasure usually has a much broader audience long-term because only the price needs to be reduced vs. educating millions on adaptogens or turmeric. Keep your eye on brands like Baozza, OmSom, Ithaca Hummus, Fly By Jing, Fillo’s, Somos, and immi. America is rapidly becoming very multi-cultural, very post-meatloaf. Very post-Boomer. 

It’s time that Baby Boomer investors look beyond their personal bias toward healthy and see more opportunities in food and beverage.