Consumer brands are emerging to serve unmet needs in everything from health and wellness to sustainability. Josh Beser and Samir Bakhru were fortunate to meet many of these new companies and investors at the Consensus Great Brands Show in New York this month.
Here are five key takeaways from the event:
1. Consumer brands are using a new capital allocation playbook. A newer generation of companies is raising less and leveraging venture capital more efficiently, focusing on marketing and customer acquisition spend. And they’re growing – in some cases reaching significant sales after raising much less capital than their earlier generations of digitally-native brands.
It’s no longer a grow at all costs strategy. The key to success for young consumer brands today, as Sahand Dilmaghani, the CEO of espresso machine manufacturer Terra Kaffe put it, is to tap a market by “spending wisely, selling efficiently and building a lifelong relationship with your customers.”
2. There’s been a recalibration of what a “successful” exit looks like. High valuations and large raises in the past several years set challenging growth expectations, often requiring triple or double-digit percentage growth for many years. In the current environment, IPOs and large M&A may be less common, but because they’re raising less capital and valuations are generally lower, younger brands are securing exits that still provide substantial returns to investors.
3. The investor landscape is shifting, as lending activity increases. Some investors have backed away from consumer brands as the market has reset, but there’s still a healthy pool of investors that understand consumer brands’ business models and are aligned with their goals. Although the pool may be smaller, investors who deeply understand consumer can add significant value for operators.
4. It’s essential to have a supply chain strategy. Companies should carefully monitor import and manufacturing costs, especially as tariffs have gone up and the political climate is likely to continue to drive change in this arena in ways that can substantially increase costs. Earlier-stage brands are also facing supply chain challenges sooner, so be nimble and proactive to mitigate these issues.
5. AI has a role to play. There is clear excitement around incorporating AI into existing tech stacks. Though it’s not always core to the product, companies are deploying AI to enhance customer experience and improve marketing and internal operations. It raises a host of compliance issues at the intersection of privacy, security and emerging AI regulation and the industry is searching for a roadmap.
