Market Research Might Disprove Your Assumptions

There are so many things to consider when doing market research. This includes researching the trajectory of the category the product is in (is it growing? is it crowded?). This includes researching consumer needs and preferences as a whole to determine where the consumer is trending so that the entrepreneur can design products and messaging that resonate. And, because the entrepreneur and their products do not operate in a vacuum, market research could also include competitor research and researching the actual market size/market potential of particular products in particular locations and channels. That is a lot of research!

Market research also includes figuring out, as best the entrepreneur can, the precise profile of the target consumer they are trying to reach. Realistic assumptions need to be made about whether the product resonates with consumers and these assumptions need to be tested and changed if necessary. These assumptions can be validated through formal or informal methods, including having a minimum viable product that is demoed and tested in a limited way with real people. Assumptions can also be validated through aggressively monitoring velocity data once the product is in grocery stores, as well as how much promotional spend is necessary to move the product (i.e. is the product only moving when the price is radically discounted?).

Sometimes, market research can confirm things about the changing consumer that don’t fit with your location’s perceived identity or strengths. In our most recent podcast interview, Barnett Sporkin-Morrison, the Director of the Great Falls Montana Development Authority’s Food and Agricultural Development Center in rural Montana reflected on the tension and opportunity in plant-based protein production as a means of rural economic development. Barnett sees the biggest opportunity for his region, in the short term and the long term, in the plant-based alternative proteins foods market, given his area’s reputation as the “Golden Triangle” for producing pulse crops. However, plant-based and especially cellular based protein and meat alternatives are sometimes met with controversy/skepticism in Montana, where cattle is king.

Market research can feel daunting given the sheer volume of things that must be considered, tested and acted upon. But, good research helps ground the entrepreneur in reality and iterate on products and business models that can achieve their business goals, even if it disproves their original assumptions.

And now, our roundup of the best food and beverage finance news, events and resources from around the web…

Consultant With Tablet

Business Model Insights

Raising CapitalRaising Capital

  • How Companies Should Prepare Their Forecasts (Harvard Business Review) – “A great forecast has five attributes. First, it includes projections of operating results and resource needs for the next 3-5 years. Second, a great forecast reflects the firm’s industry context. It should be consistent with estimates of the size of the firm’s total addressable market and insights about how that market is evolving. Third, the firm’s strategic choices should form the basis for assumptions about how it will grow and what resources it will require. Fourth, projected growth rates and margins should reflect the competitive dynamics the firm faces. Finally, a great projection and the subsequent after-the-fact analysis involves action items for non-financial executives and their teams.”
  • Female founders: Hitting roadblocks raising capital? Here’s what you can do. (New Hope Network)
  • 4 things investors want to see in your food tech startup (New Hope Network)

National Wholesale Brands

CPG/National Brands

Grocery Store Produce Section

Market Trends

Regenerative AgricultureFarming and AgTech

Mergers And AcquisitionsDeals/M&A

  • What are the key ingredients to highly valued food and beverage brands? (FoodDive) – “A significant part of achieving a premium valuation is crafting the story, positioning the brand and articulating the future growth potential. The fundamental question then becomes: which attributes of a food and beverage brand really drive value? Investors generally like to see gross margins in excess of 40% for branded food and beverage companies, but each category is different. For instance, frozen food margins may be lower. A high gross margin is evidence of a brand offering something unique or value-add to a retailer.”
  • NCN News May 2019 (Nutrition Capital Network)
  • Kroger launches brand accelerator (GroceryDive)

EventsIndustry Events