1/ Love this question @jamestmurphy_ in part because I don’t think most people know to ask it. For context for others, emerging CPG brands with <$15m in revenue almost never buy data- particularly syndicated sales data.
It’s a very bizarre dynamic.
It’s a very bizarre dynamic.
2/ The syndicated sales providers would love to sell to them and the emerging CPG companies are desperate for insights.
Wait a minute.
You’re telling me the customers want to buy the product and the sellers want to sell it to them?? I don’t get it.
Wait a minute.
You’re telling me the customers want to buy the product and the sellers want to sell it to them?? I don’t get it.
3/ First- important to understand syndicated sales providers. Each has been around for decades. Big businesses – several billion in revenue. My somewhat educated guess: ~99.7% of the that revenue comes from large CPG (companies with >$500m in rev).
4/ Next: how they get their data. In most cases retailers give it to them for insights. I talked w/ CEO of a mid-sized grocer the other day. I said “why don’t you just sell your data directly- why give it to [Syndicated sales provider YYY]?” “What else would I do with it?”
5/ [BTW -It doesn’t occur to many they could sell it themselves- they are set up to be grocery businesses, not data businesses. A shame, because the higher margin data business would help to subsidize the existing lower margin (~1-3% net margin) grocery biz.]
6/ So why do I bring up how the retail sales providers get their data? Because each time they want to get a new retailer, they have to convince that retailer- often after months or years of negotiation- to give up their data.
I just lost the audience.
Wait.
Stay with me.
I just lost the audience.
Wait.
Stay with me.
7/ Because of the highly intensive and manual way they get the data, the retail sales providers cant get to the long-tail. The corner stores, the 5 store chains that are in your home town. Those are often not captured by any provider consistently.
8/ Think about it- if you were the head of a retail sales provider, how much effort would you put to go get a 5 store chain? You have to think your Fortune 500 companies aren’t asking for that data.
9/ That matters because CPG innovation starts from below- emerging CPG brands, not from large CPG. And emerging CPG doesn’t start at Safeway or Costco. It starts in those 5 store chains. The ones that aren’t covered by data providers effectively.
10/ So problem one for the syndicated sales providers- they don’t cover long tail of retailers. That also means they don’t cover long-tail of CPG companies. Largest covers about 40k companies, which is <10% of the total universe of CPG providers.
11/ Next problem. They have a sales team that sells into large companies. Think about their incentives. They would much rather upsell the @KelloggsUS account than try to sell a $10k contract to the $5m popcorn company.
12/ BUT the syndicated sales providers know these smaller brands are the future. They want to work with them. A quote one gave me this year:
“We are seeing these emerging brands grow quicker now to $75m in rev than we’ve ever seen......
“We are seeing these emerging brands grow quicker now to $75m in rev than we’ve ever seen......
13/... The problem though is our sales teams aren’t set up to get to them when they are <$10m in revenue. …..we want to hook them on the drug earlier. If they get to $75m in rev without using our data then they think they never need it.” Wow. ‘Hook them on the drug.’
14/ OK back to @jamestmurphy_ original question. So the data providers don’t have all of the data that the emerging CPGs would want, and the data providers are structurally/financially/culturally set up to focus on the larger customers. Those are the major issues.
15/ But on top of that the emerging CPG brands don’t have teams to dig into the data. Let’s be clear- I’ve said this before and I’ll say it again- IMO the avg CPG entrepreneur we work with is more sophisticated than the avg tech entrepreneur I’ve met.
16/ But the teams in CPG are much much leaner (read: more capital efficient!!). They can get to $10m in rev with 10 employees, and almost never have people just dedicated to data analysis at that level.
17/ So on the emerging CPG side there are resource issues. How do we regularly analyze the data, how do we afford the data, how do we use the data after we analyze it. Those are why most don’t buy the syndicated data on a regular basis.
But here is another fun one.
But here is another fun one.
18/ They get it for free. An expression you’ll hear from emerging CPG “we will just beg, borrow or steal our way to get this data.” Scrappiness. They find a way to get the data. A larger investor or ibank is usually best free option. Sometimes distributors. But they figure it out
19/ Complicated set of interlocking issues. Also an amazing opportunity for a technology solution to disrupt the industry. Another example of how the disruption in consumer, driven by emerging CPG companies, will remake all parts of the value chain over the next decade.
