Throttling Distribution for Exponential Growth Brands

One thing I didn’t dive into my book, to keep it short, was how distribution growth pace alters as you Ride the Ramp. You’ll need to turn on a minimum number of stores, say 200-300, to even know if you have a business in retail. After this, you will probably double your store count for a few years AS you grow your velocity 50-100% annually. The two together are what generate exponential growth. 

But here’s the thing: you will quickly want to decelerate your store count growth in absolute store numbers once you start to see signs of lowering productivity per added store. When this happens will vary widely. However, I often see it in the 10-15% ACV all-outlet range. 

As I mentioned in my book, with medium-to-high velocity category offerings, you can easily scale to $100M in all-outlet sales with only 20-25% ACV distribution. And you should always, always shoot for $2-4M of annual sales per pt. of ACV for maximum efficiency as an early-stage, high growth business. 

The latter KPI is very, very difficult to attain IF you don’t refrain from adding 200% or more doors each year. Adding 5,000 doors at once in one year may sound like a problem you wish had, but just ask folks who launched in keto anything five years ago. Retailers were coming to them, tempting most of them with wild, over-distribution. Before that it was jerky, RTE popcorn, kale chips, plant-based dairy, etc. Some got control of their velocities, shrunk distribution to a productive core. But this kills the timeline to scale. You will need to decelerate your distribution gains, in terms of either ACV or doors as you scale. This will occur as your exponential topline is accelerating.

It’s ironic and takes discipline once the retail trade decides you’re hot. You will be tempted ever more to over-distribute and tank your velocities in the process.

Dr. James Richardson

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