When Small Brands Get Greedy and Do a Deal with the Devil
Not too long ago I watched a smaller start-up nutritional company sell their brand to a larger company with the thought that the larger company will help them scale quickly and make their business explode. The start-up company was very lean, they had around a handful of employees which included the owners themselves and had a sales team made up of brokers who were great in their individual markets. While it might not be the case here, I see too often where small brands get greedy and are willing to do a deal with the devil just to make money or “think” they are making the right business decision.
This start-up company literally had the best product on the market – hands down, and I’m being dead serious. It filled a void in the market and was exactly the product consumers were asking for. Their account list grew very quickly, picking up huge retailers like Whole Foods all the way down to the mom and pop natural food stores. Everyone loved the product, then one day, the wheels fell off.
The beginning of the end?
This start-up nutritional company decided to do a deal with a large supplement manufacturer, which came with its own set of challenges, yet they tried to push through them in order to make the deal work and land themselves a nice payday. Once sold, the product changed completely, and not for the better. This is where it can come back to bite people in the butt when small brands get greedy.
What was once the best product in the category, has now turned into just another mediocre tasting product like everything else on the store shelves. In fact, consumers actually stopped purchasing the product after it changed formulations. The flavor profile changed. The texture of the product changed. It completely turned off many of the customers they once had. Again, when small brands get greedy it can cost them business.
This start-up company who just sold their business completely lost their market advantage. They did a deal with the devil in order to make money from the sale of the business as well as the thought process that this large supplement manufacturer would be able to blow up the brand and get it into all of the doors they were unsuccessful with when they personally owned the business.
The list of accounts that the brand had early on in their business are now long gone due to the change in the quality of the product. I completely understand why the supplement manufacturer made the changes, and it has every bit to do with money. The original fresh product while having great margins, was fairly difficult to scale due to the product being produced fresh before being shipped out to fill orders. The fact that the product went to a shelf-stable version allows the supplement manufacturer to mass produce the product and store them in a warehouse somewhere as well as set up distribution for the product. The ability to mass produce allowed them to lower the cost of their raw materials, increase their margins, and not have to worry about sitting on some product until it sells.
A change in company culture
Consumers aren’t dumb. We have some of the brightest consumers when it comes to supplement and nutritional products today than we did in years past. People are slowly starting to care about what they are putting in their body and want to know exactly what is in the products they consume. But, they also want to feel the same sense of appreciation for being a loyal consumer.
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