Ep. 39 – The Skate Ramp – An Excerpt from Ramping Your Brand 

FEB. 1, 2021


Optimal Growth Rate for CPG Brands

Every year, I meet more smart and capable entrepreneurs who either set unrealistically fast growth rates or want to grow quickly but struggle to grow fast enough to gain leverage with the trade. Many have a distorted view of what their optimal growth pace should be. This is due, in part, to the lack of transparency around the actual growth rates of new CPG brands and to the media’s excessive coverage of unicorns (e.g., Caulipower).


Another contributing factor is that some CPG founders are influenced by the nearly vertical growth that happens when large public firms launch new brands or product-line extensions. That is definitely not an optimal (or even possible) growth pace for entrepreneurial CPG brands. BigCo’s approach to growth only sets irrational expectations for founders who futilely aim for that kind of trajectory. (Figure 1) No entrepreneurial CPG brand has ever matched the year-one (Y1) pace to scale shown in Figure 1. Not Halo Top. Not Chobani.


Not Bai. Not Caulipower. Not CORE. No one. Nielsen calls these rare BigCo launches the Sprinters. For today’s CPG entrepreneur, they are simply a mirage. Media-darling, early-stage, unicorn brands do grow slower than the BigCo launch model, but only slightly. These brands reach peak scale in two years instead of one. But that is still unrealistically fast for any founder to contemplate. Much too fast.


So, how can CPG entrepreneurs set a reasonably fast growth rate?

The fastest growth curve that CPG entrepreneurs can realistically plan to achieve looks like something no brand manager has seen before. This mystery curve is something I call the Skate Ramp. (Figure 2) The Skate Ramp is simply my name for the first half of the Sigmoid curve, or S-curve. This graphic representation of sales-volume growth over time is actually not new to business strategists. However, The Hartman Group made waves when it re-awoke everyone’s attention to it in a seminal 2013 industry white paper.1


The Skate Ramp is based on at least doubling sales every year- again and again and again. If you open a blank Excel worksheet and enter 250,000 in any cell and then double it repeatedly, moving to the right in a series, you will generate a line chart that looks awfully similar to a quarter-pipe ramp at your local skate park.


The logarithmic math behind the curve is exponential. Typically, however, the YoY growth rate decelerates as revenues approach $100 million (unless you’re Kind, Chobani, or Skinnypop). The most important feature of this growth model is that the vast majority of growth is generated on the back half of the curve. In other words, founders are rewarded for their patience in scaling.


Over and again, the Skate Ramp has allowed CPG innovators to sneak up on arrogant and complacent category leaders—who, by the time they realize what is going on, can’t get to market fast enough to block the challenger’s growth. They become fast followers, at best. Fingers start pointing. Middle-aged general managers quit to open yoga studios.


The most famous example of a Skate Ramp attack in the last 25 years was Chobani’s utter thrashing of the flat-footed yogurt incumbents in the United States market. Even more incredible was that the author of this stunning upset was not an Ivy-league educated MBA brand manager with years of brand marketing experience. And, trust me, this was incredibly humbling for general managers in other categories, as well. The faces of executives throughout the industry took on the solemn gaze of funeral attendees whenever the name Chobani came up.


A recent, internal study at The Hartman Group determined roughly 70 percent of early-stage, premium food/beverage brands that crossed the nine-figure threshold since the Great Recession of 2008–2009 rode the Skate Ramp all the way.3 The inference we made at the time is that the Skate Ramp is the growth curve that best predicts a new CPG brand’s capability to scale into a middle-market company. Today, I still believe the Skate Ramp is the competitively advantaged growth model for most entrepreneurial CPG brands. Not the Unicorn ramp. Certainly not the ADA ramp. (Figure 3) This book will uncover what this exponential growth curve reveals about the power of the branded product line driving it.


Another fascinating aspect of the Skate Ramp is that you can mathematically determine if you’re on it anytime you’d like, as long you have 18–24 months of rolling quad week point-of-sale (POS) data. You don’t need to wait five years and then look in the rear-view mirror. Around 30–35 percent of premium CPG brands launched each year ride the Skate Ramp for at least their first three years, with an average year-one (Y1) revenue of $134,000.4 This is a bit misleadingly optimistic, though, because the analysis upon which it is based included brands that grew fast off of a tiny year-one revenue base, and quite frankly, the sample was small (28 of the 72 premium food/beverage brands that launched in 2011).


Staying on this ambitious growth curve gets much more difficult over time. Many brands fall off the Skate Ramp as they grow, much like the newbies who invade the neighborhood skatepark and don’t make it halfway up the steeper ramps before losing momentum and their balance. That’s why only about 10 percent of early-stage premium CPG brands are riding the Skate Ramp at any given time.5 That’s also why, once they leave the giddy early years of launching, only 2 percent of such brands selling between $1 million and $100 million in point-of-sale (POS) revenue are still riding it.6


The Ramp is challenging. But you can learn to ride it.


Why Chasing Doors Is No Way to Scale

Traditionally, most CPG entrepreneurs have worked with sales consultants and brokers to add account after account as their primary, and often only, growth technique. They manage the company basically like a business-to-business (B2B) operation. There is little contact with the end consumer. Stakeholders in the value chain rarely bring up the end consumer. They are institutionally too focused on managing their mark-up percentages and on tweaking fees and chargebacks to you, the supplier.


Brokers, distributors, and to some extent even retailers are subconsciously aligned on one key performance indicator (KPI): absolute case-volume movement. The base income of brokers and distributors is a percentage of the case dollar-volume moved through the supply chain to the shelf. In the short-term, these go-to-market stakeholders have no real incentive to pace growth or to be terribly strategic about it. Any case-volume growth is good growth to the less scrupulous among them.


Although few brokers I’ve met would promise clients 600 percent YoY growth without a massive pile of slotting cash on hand, and prob- ably not even then, brokers and distributors are not good-faith advisors to CPG entrepreneurs on what is reasonably fast growth. Their position in the value chain makes them a dangerously biased source of primary strategic business advice.


Time and again, new CPG founders have seen large door-count gains the first year only to see their products delisted (dropped by retail buyers) and their topline (gross sales) reduced the next year. I recently worked with a frozen prepared food client with an amazing, on-trend product. A very reputable brokerage firm had led him to a premature national expansion via stacking account after account after account. When shelf velocities fell far below declared minimums, accounts began to delist his brand.


By the following year, the brand had lost more than 50 percent of its initial sales volume. Months before, when the founder told me about the impending national expansion, I had warned him not to aggressively expand until he knew more about his consumer and had developed a multidimensional playbook to create demand. About a year after that conversation, I got a random, out-of-nowhere LinkedIn message from him:


Client: “You were right, James.”

JR: “Hi, Sam. I’m lost. . . . Right about what?”


My audiobook is coming out soon on Amazon’s Audible platform. Keep checking!