Episode 103 – Top Myths About Pivoting a Consumer Brand

October 1, 2023

This November on November 8th, specifically, I’ll be hosting a new paid training webinar Pivoting your Brand for Exponential Growth. Those of you who follow me have known, I hope by now, that for several years I’ve been training quarterly cohorts of founders, just founders, in strategic planning for exponential growth. That’s a two-hour paid training I do every quarter, but this is the first new paid training I’ve actually launched since 2020. I’ve been busy.

I’ve thought a lot about this topic, and I want to share this process that I use with clients to guide sometimes dramatic pivots in businesses that are, generally speaking, multi-category when they come across my desk. Now, when I read about or overhear discussions of pivoting in the world of early-stage brand building, I continue to hear many misconceptions from those newer to the industry, mostly induced by the understandable fear of tanking your entire P&L in the process of making a radical change to the very things being shipped out every month.

And then, of course, there’s also the psychological sunk cost of the original UPCs, which you may have spent a couple of years designing. And the original category they live in, which in many cases is not a good intersection most of the time, what I find is that the original UPCs are suboptimally designed or positioned to be worth rescuing. Admitting that the first go, your first attempt into the market was way off-center. Reminds me of a young author’s first manuscript being shredded by an agent to a prospective editor. This kind of pain is better to receive earlier than later. Trust me. It’s less expensive, for one thing, and you’re going to fight it less when the business has not scaled much at all yet and is struggling, because that’s really awkward when you’re 18 million and dead in the water.

But I digress. Here are the top three myths that I hear at the virtual water cooler, which is of course, LinkedIn. 

Myth #1    –   “My sales will dive in the near term”

Myth number one, my sales will dive in the near term. Can’t deal with that. Okay, look, most brands that pivot have UPCs in two or more merchandising categories. Sometimes from the very start of the business. It’s not uncommon at all, especially if founders get habitualized to trade show attendance. Trade shows by definition are pushing new items as the way to get buyer attention year after year. Why are you here again? The new items. Okay. And a lot of slow-growing larger brands in the eight figures, they only show up to push their new items into as much distribution as they can, but it’s not true that your sales have to dive when executing a pivot. There is a way to plan and track your progress such that the decline in the former base UPCs is being matched by rapid growth in the new hero UPCs.

This balancing act, however, could lead to a flat year or 18 months. That’s the reality, but it’s not true that your sales have to dive in the near term. That said, it is absolutely possible that you will take a trough depending on the situation that you’re in and how badly that base business is doing.

Myth #2   –   “I’ll damage retailer relationships”

Okay, myth number two, oh, damage retailer relationships by pulling the original UPCs out of their system. Now, this is a technical fear that some folks have in part because they work with brokers exclusively or too naively. Look, a certain kind of low-effort broker hates to pull any UPC that has at least stable velocities. This makes no sense to them. Can’t win them all kid. But if you’re reading this, then it makes no sense to invest in UPCs that can’t grow velocity organically, ie without you spending money outside the store month over month with just the package symbolism, product design, and decent placement.

Now, I’m not saying exploding velocities, but they should be at least growing on a month-over-month average with some ups and downs, right? Stability is not what you’re after. I have to assume if you’re listening to this and you read my book, your broker, on the other hand, doesn’t give a shit about that. They’re happy with stable velocities, because with that they know, ah, we can add retailers. Hey, I can add more UPCs if I can twist their arm. Or if they won’t listen to me, I’ll just find more clients to grow my business. They don’t need your core UPCs to grow month-over-month in velocity, as I describe in my book, is the not so secret sauce of exponential growth. You got Cadillac Dreams kid and the Datsun budget.

Pivoting generally happens by moving sales volume from one macro category to another, or from one format driven segment to another in the same aisle. In the former case, you will be switching buyers for sure. Buyers compete with each other folks for share of retail profit. They are not friends and you should understand this. So switching buyers is not really an issue at all for your brand or your business vis-a-vis the retailer as an account as long as you handle this professionally and deftly. It’s only really an issue if you can’t drive any sell route in the new category with the new buyer because now you’ve tipped off one sort of, but not really, and you have no friend. So that’s the situation you don’t want to be in. But simply moving your business from one buyer, one desk to another in a retailer is not the end of the universe. It’s not like there’s some central authority who’s looking at tiny little brands like yours and saying, “A-ha! They are flakes.”

So this is when you want to use your status as a low-stakes supplier who’s not being looked at too carefully. By who? Buy those SVPs up at the dippy dopey top, right? Now, once you’re a $90 million brand, a hundred million dollar, brand depending on the category, the SVPs are going to be very interested in every change you make and they may block some, right? But hey, you want to move from one part of the store to the other part of the store because you can, go for it if you can sell it in. If you’re staying in the same general area on the same desk, the buyer is actually going to need more of a story about why the new UPCs need to be allowed and why aren’t they just replacing the old ones. It’s actually going to be more difficult to do that than it is jump across the store in my view, because those are basically two different dudes with their own political agendas. And that’s why there’s a way to handle this where you actually start introducing the new hero UBCs at accounts where it’s going to be most friendly to do that or simply at new accounts, right? Because what we’re doing is managing an aggregate pivot across multiple accounts.

Myth #3   –   “It’s riskier than trying any possible way to make my current business perform better”

All right, myth number three, it’s riskier pivoting than trying any possible way to my current business perform better. Not necessarily. I mean, if your unit velocities are declining in your top accounts, you’ve got to now either add accounts to grow, add some new UPCs to mask the decline. Classic broker suggestion. Spend on trade promos, dangerous. Or do some kind of cheap out of store PR and marketing with the usual lag time in your Datsun budget. And this assumes that the unit velocity of decline is not related to poor product quality, bad flavoring, or simply a lack of sufficient innovation in your category. So usually folks, declining velocities in phase one and two is due to poor product quality. I’m sorry, that’s usually what’s causing it. So avoiding that issue and fiddling with your playbook is really, really going to lead to a problem. It’s prolonging the agony. I hate to say it, most phase one and phase two pounders I encounter, they don’t want to admit any more than an author wants to admit that poor book sales means there was no word of mouth because the book sucked.

I don’t see how any turnaround playbook tweaking on what are most likely suboptimal UPCs from a consumer perspective is any less risky than pivoting to new hero UPCs. I mean, think about it, especially if you’re already went into multiple categories and one of them is clearly doing better than others in the data. Pivoting is risky, but so is in your hands pointlessly with flat to declining velocities at same stores.

One alternative to pivoting, I’ll be honest, is when you’re in this situation and you realize the original product base is dudsville is simply to wind down the business. I personally would not give up unless you have a truly toxic running on fumes P&L, which my definition of that is you had less than six months of operating cash on hand and you have not one single fundraising lead including papa who’s given up. Then I would seriously think about winding down to avoid personal bankruptcy for one thing, which is, trust me, this is not something you want.

Good pivots, in my experience, they take about two to four years to yield overall aggregate nationwide faster growth result that you’re trying to obtain. And this is because you need to let the prior base UPCs die away carefully without screwing with your cashflow, without totally pissing off retailers. Although in some cases you could yank them, because you have no intention ever going back to Food Lion. Ooh. Until you sell the company. Oh my God. This is because you may need to let the prior base UPCs die away carefully, and that’s going to drag temporarily on your top line. So yeah, you may have a flat year, 18 months during a pivot, like I said earlier. That’s why good pivots take two to four years to yield that, woo, now we are humming result.

And you need to have access, oh, so important, need to have access to solid POS data, point of sale, cash registered data to track what is going on in real time. You can’t monitor a pivot that I am describing crudely with year over year rear facing broker data. Oh my god, no, thank you. Don’t fall for the myths. Please, don’t fall for the myths of pivoting that I just talked about. They’re promulgated mainly by stakeholders who don’t understand how it works, have never executed one, or even studied one, and frankly don’t want to work that hard and would rather stick with the very crude growth plays that they know really well, the broker playbook.

That’s all I’ve got, folks. I hope to see you all on November 8th at 11:00 AM PST. If you’d like to sign up for this paid training, please go. Please go to my webinar page, premiumgrowthsolutions.com/webinars. It’s going to be right up top. It is $249 per seat and VIP’s on my VIP email list, you know who you are, you get 25% off. Ba, ba, ba, ba-boom. That’s all I got folks. Be safe out there.