CEO @ Cheers | $50m+ revenue, #1 on Amazon, 10k+ retail locations, & 100% YoY Growth! 🥂🍾
Cheers is early in its brick & mortar journey, but we already have some interesting data to share about how marketing drives brick & mortar shelf performance. Our initial math shows that $1000/spend/week on Meta ads is currently driving $.01/retail sales/week per POD. (I shared this a few months ago, but given how many new CPG/retailer followers I received recently, it's worth re-sharing for new people to see!) Generally speaking, for the Cheers brand, December is our best month and January is our worst month. By the time we get to February, things are more stable from a general, organic demand perspective until the summer. This means February serves as a decent data set to understand how mid-month changes in marketing affect performance. So far we have found that for every additional $10,000 we spend on Meta ads per week, on-shelf performance increases by ~$100 per sku, per 1000 stores, per week in the drug channel. In other words, we recoup about $.01/week in retail sales per point of distribution (POD) for every $1000/week spent on Meta. At first glance… this seems terrible! And there is likely a few reasons for that, such as our brand being on the corner of the bottom shelf and being hard to find, not enough stock so best performing stores can’t fully capitalize on demand generation, etc. These are all things we’re collaboratively improving with our partners. But, even if the math holds true and doesn’t get better with time, the math starts to make more sense as you add in more points of distribution (PODS)—which are defined as: (total number of skus in a store) * (number of stores). E.g., If you have 2 skus in 1,000 drug stores that’s 2,000 points of distribution. At low levels of distribution, you’re wasting your money on marketing. If you have only 1000 PODS, then $100,000/week in spend only becomes an extra $1000/week in retail sales. Ouch! There just isn’t enough distribution surface area to capture the demand generated by your marketing efforts… so the marketing investment all slips through your fingers. But, if you can get to 100,000 PODS, then $100,000/week in spend becomes an extra $100,000 in weekly retail sales. Now you’re at least getting an extra $1 in incremental retail sales for every $1 spent. Of course, this still doesn’t seem great, because no one has 100% margins… not to mention, the retailer/broker/distributor are all taking their cut on top as well. So how do you recoup the marketing investment? What we’re finding is that marketing spend recoups itself across all of your different channels, and then improves even further over time as first time customers become repeat purchasers who then also spread the news with their friends, growing the amount of both recurring customers and organic new customers that keep coming even when you turn marketing off. (Continued in comments...)
Matt Custage
1mo
Great share from your POV. I think one thing that will resonate with many brands I work with is that need to invest early even if that doesn’t equate to an immediate ROI. It’s a bigger effort underway and the brands that are too timid often don’t stick around long enough for those benefits you pointed out as they grow distribution.
Josh Blanton
1mo
How has the traditional (Meta ads) return been when compared to trade promotions within the retailers?
Really thoughtful share and advice. It is unfortunate that many of the funding providers do not understand this or don’t care. - They try to impose a different model of scalability on young CPG brands resulting in way too many negative outcomes. The inherent structure of the CPG marketplace driven by the existence of the distributor-retailer spectrum while being a function of broker (capability x intent) makes breaking onto shelf really hard and then more importantly getting off shelf (escape velocity), exponentially hard. Emerging brands need a lot of power ($$) to achieve escape velocity. This can be achieved over time like using the sling shot effect to get out of earth’s gravitational pull or by using brute force a la the SpaceX starship…very few have the ability to deploy the starship but go for it and flame out but even fewer embark on the more frugal yet longer time-line slingshot of getting targeted distribution then working on velocity growth followed by more targeted distribution, and so on!
Monique Benoit
1mo
You’ve explained this so well! What advice do you give to brands that are aiming to break even and want to maintain retail distribution? Is ample funding the new baseline for success? Is a big store roll out the answer? I’m passionate about emerging brands and am curious to find trends across the successful brands in this wild post-COVID, high inflationary environment.
Interesting perspective, Brooks Powell 🍻. Do you include all trade/shopper/digital marketing spend when looking at marketing? Or do you handle that differently?
Wayne Bennett
1mo
Excellent perspective Brooks Powell 🍻 sharing to my network of new and emerging brands to listen and learn from your experience.
Matt Matros
1mo
Interesting that your data shows a positive correlation between marketing spend and on-shelf performance, even if it's initially small Brooks Powell 🍻
CEO @ Cheers | $50m+ revenue, #1 on Amazon, 10k+ retail locations, & 100% YoY Growth! 🥂🍾
1mo(Continued from above) So for example, when we spend $70,000/week on Meta like we are now, we see $.01/week in retail sales per POD per $1,000/week spent, but we also see a ton of revenue come through our website and Amazon channels. Then 1/3rd of those customers come back and become repeat purchasers and also tell their friends. For references sake, $70,000/week on Meta leads to about ~3 million quality impressions. Of course, retailers have this important thing called “thresholds”. The threshold is the number of $ or units you need to sell per sku per week for the retailer to be happy with your brand’s performance and not kick you off the shelf. From a strategy perspective, what does this mean? Well, it means that you’re in a race to string together as much brick & mortar distribution as possible so as to scale your marketing budgets to a level where you can consistently meet threshold at all of your brick & mortar retail accounts without losing money on marketing spend. That’s a tall order for a new brand in an emerging category. (Continued in comment below)