Pivoting For Growth Versus Pivoting for Gross Profitability

This is a crucial prioritization to set BEFORE you plan a major pivot to your product mix in a vulnerable, early-stage consumer brand. 

When brands sprawl across non-adjacent categories, it is common for one of them to offer a higher product margin than the others. Every nervous fiber in your founder body will motivate you to make that higher margin line grow. 

But, what if your lower margin line, the new one, is doing much better in terms of unsupported, intrinsic velocity growth?

Then, you go with the lower margin line and devise a long-term margin enhancement plan. You do this IF growth is your top priority and you have the working capital to withstand the near-term pain. 

Eventually, scale yields profitability to most consumer brands sometime late in Phase 4 (excluding debt used to get there). And believe it or not, the difference between 40% and 50% product margin won’t save a financially distressed small CPG business early on, not if your expense load is too high. 

Cutting out virtually all ancillary, growth-related expenses is how you get profitable in the near term. You can, if you choose, pull back on expenses and rely entirely on the package and current placement. But you may easily kill your growth rate in doing so, even after pivoting to a slightly higher gross margin product. 

It’s far more beneficial long-term to pivot to a product that is minimally profitable (e.g., 35-40%) and grows without much support. When you do support such a line with promotional activities, it is very likely to accelerate. 

Please join me this Friday,  February 14, for a special free webinar event where I’ll share a process for thinking this through and a brief case study of how pivoting can unleash your inner Spindrift!