PODCASTS / E76
AUGUST 15, 2022
In Ramping Your Brand, I talk about two master KPIs – same-store velocity growth and repeat purchase – KPIs that many new founders either ignore or never focus on at all. Instead, they get sucked into a pure distribution growth model. Doors. Doors. Doors.
If you treat acceptance by UNFI and KEHE as some great honor, no wonder you follow a distributor-led model. Trust me, it’s no honor. They love tiny brands, as long as they do what they say they’re going to do. It definitely won’t feel like an honor the first time you have to dispute bogus chargebacks and deductions.
Growing simply by adding doors is the distributor-led model. It’s how they think as a trucking company. I don’t blame them. Smart brokers, however, know how to overlay a velocity performance approach to adding those doors strategically. But most cave to the distributor-mindset because they both have the same financial incentive – more cases = more money. Strategy can get in the way.
At some point, though, you realize that not every store is the same in terms of volume for your business. This appears on your very first sell-in reports from distributors. You may think this is related entirely to your product’s interest level locally. Alas, no, it is not just tied to that.
Once your business gets into the seven figures, you’ll see the effect of store traffic variation on your numbers. And this is the little-discussed fact that drives the calculation of something scanner data companies and pros call – All Commodity Volume or ACV.
ACV is a weighted measure of distribution. Every % pt = an absolute $ volume amount sold within the chosen channel, including all outlet datasets, during your chosen time period. Annual ACV and quad week ACV for slow moving brands can and often do show a marked difference in numbers, because a UPC doesn’t contribute your brand’s ACV if it doesn’t sell at all at a store during the period. If it just sits there for a month or more, for example.
So, a high traffic, high dollar volume store locations contribute more ACV than low dollar volume stores.
In All-Outlet data, of course, one store location is fractions of a % of ACV.
In regional datasets within a chain of 95 stores, each store moves the needle in your data.
Think of ACV percentages simply as a % of distribution breadth within a specific channel or set of channels. It helps address how widely available you are, how close you are to the maximum number of available households in the channel or set of channels.
There’s a very simple calculation you can do as your business grows to understand how powerful a beast you have. How efficiently you are generating money.
In the 2010s, the big surge in premium CPG Skate Ramp brands exhibited a phenomenal amount of financial efficiency with very low amounts of MULO or FMCG distribution breadth.
On average, the most impressive Skate Ramp brands generate $3-5 million of revenue for every % pt of nationwide, all-outlet ACV. This means that they are able to get to $100M with tons of upside in terms of distribution breadth.
This is the benchmark I use with ambitious clients and one that dozens and dozens of now-famous Skate Ramp brands have as they crossed the $100M trailing POS revenue threshold.
Look, the brands that hit this benchmark form an elite crowd for sure. But it has happened too many times to be mere chance.
And it isn’t.
Bringing in this much revenue per point of average annual ACV requires a) a strong innovation tied to a mass-market outcome, b) a disciplined founder and sales team focused on optimal zip codes first, then optimal banners, and c) extensive time (and money) spent out-of-store to drive brand awareness. The underlying key is a strong understanding of your optimal target audience(s) to drive price-insensitive, repeat purchasing.
It’s unnecessary to spend a fortune on field marketing either to hit this benchmark, but I wouldn’t assume you can ride a SkinnyPop wave of enthusiasm either. That was an impressive, but probably anomalous, a feat of gargantuan visual merchandising. You will need to spend lots of time and money out-of-store to seed word-of-mouth, hand out samples, etc. This can be done for much less than national TV ad campaigns (which start at $3M+ these days).
But the real key is to make sure that you are adding doors with a high density of your ideal audience, not 4,000 Walmart Supercenters, which, no matter what you’re selling, can’t match the door-by-door revenue-creating efficiency of a well-chosen supermarket chain for premium-priced CPG brands. In turn, this requires an approach to sales that is extremely selective and strategic, more so as you grow and garner more and more attention and interest among the retail trade.
$3M per pt. of MULO ACV.
Print this metric on your office wall and stare at it each morning. You may not hit it right away or at all, but committing to it early on will force you to build a smarter plan and to engage in a tougher self-diagnosis each year…around this time!