Issue #59: How Can CPG Brands Get VC Funding?

How Can CPG Brands Get VC Funding?

The global CPG market is currently estimated to be roughly $2.4T by Pitchbook. That is a huge portion of consumer spending that is not showing any signs of slowing down. Pitchbook expects it to keep growing and have an annual CAGR of 4.1% for the next five years to reach almost a $3T market size. Despite that growth, VC investments are not keeping pace. After big spikes in investments in 2018 and 2021, in terms of deal volume and deal size, the market has crashed recently. 2024 was the lowest in terms of VC deal count for consumer startups in Pitchbook data since 2017.

However, CPG brands are not going anywhere. Sure, the market is dominated by big players and really hard to be a new company, but given the immense market size, there will always be opportunities to generate returns for smart investors. Investors are starting to bring more money to the space, with one, Sugar Capital, raising its third fund, and declaring that consumer is back! Plus, all the exits, like Poppi and Siete Foods to Pepsi, certainly are helping show investors a path to return/liquidity!

For CPG brands, especially early-stage ones, there is a major window to raise capital in the next 6-12 months. This capital can help fuel your growth and get you to be the next Poppi, Siete, etc. In order to get funding, you will need to have your retail metric ducks in a row. Hopefully, this article will play a small part in helping you get there! For some context, I started my career spending three years founding, raising, and building Hillside Ventures, UConn’s early-stage venture fund. Since then, I have spent my career building and operating across the retail industry. Blending those two experiences, here are the FIVE metrics I think you need to nail to get early-stage funding as a CPG Brand (not in any order of importance).

Metric #1: Market Size

As established in the prior paragraph, the global market size of CPG is huge, but what about the segment you are going after? There is no way to touch every category, so your segment needs to be big enough to make the exit VC worthy. That can be because the market size is huge, or because people purchase the product super frequently, or because it is a very expensive product. Some quick VC math below on the exit valuation needed:

Back to the market size, even the top brands are typically only commanding a 20-30% market share of a given category. So to hit that $300-500M valuation, the market size needs to be at least $1B, or 0.04% of the total global CPG market size. There are many sectors where this is doable, present, or in the future. Remember, it’s not just about now, this exit will take place 5-15 years later, so if there is faster growth than 4% CAGR in five years, that is also great. Make sure to mention that factor! Plus, there are so many ways to finance in CPG, VC is not the only way.

Metric #2: Units Per Store Per Week

The retail business has so many layers. Manufacturers, distributors, brands, retailers, redistibutors, comanufacturers, and the list goes on. Tracking performance can be tough through all those layers, so I have found that two metrics can be helpful, depending on if you are a brand or retailer.

• For brands: Units Sold (over a certain time period, usually trailing 52 weeks) / Number of Stores You Have Distribution (same time period) / number of weeks in that time period

• For stores: Sales (over a certain time period, usually trailing 52 weeks, at the price end customer at the store pays, needs to clarify whether that is before or after discounts) / Number of Stores You Have Distribution (same time period) / number of weeks in that time period

From an investor's POV, units are more important because of all the layers, so this truly shows how you are doing. At the end of the day, there are many ways (tastings!) to get the product in people’s hands, but this shows that customers actually want it. Bonus mention here is your retail distribution plan and ability to scale it.

Metric #3: Current vs Future Margin Profile

In some ways, given the scale of the acquirers, their ability to drastically lower the costs of inputs, and the lack of CPG startups going public (anyone know the last CPG startup to go public?), margin could be viewed as less than important. After all, the CPG conglomerates typically acquire a company to extend their brand, category, or sales, not because it boosts their bottom line. However, this overlooks the power of a strong margin of a product that is in line priced to its competitors. A strong margin allows you to last longer in the market. It also allows you to run promotions, expand to more retailers, drive trial, and more. Still, current margin isn’t everything, as you scale your units per store per week, how will the margin improve, allowing you to feed the flywheel more?

Metric #4: Repurchase Rate

The earlier you are, the more this stat matters. If you can’t get people to buy it again after purchase, you are most likely in trouble, unfortunately. All the work above is great, but people need to want your product repeatedly. Even if the category isn’t a super high-frequency item, your repurchase rate should be beating all the competitors.

Metric #5: Founder(s) / Founding Team

Building any startup is really hard, especially slogging through the CPG space. It is super important that the early team and founders understand this space, as well as what it takes to succeed. The founder doesn’t necessarily need to have a whole big story for why they started the brand (this definitely helps, though), it can just be because I thought this product was needed or liked the category. However, what is definitely needed is an enthusiasm for boots on the ground. Getting out in the retail locations, talking to employees, getting customer feedback, sampling, and just getting as much feedback as possible. For some experts at this, I would recommend checking out Ben at Sauz and Joe at Smearcase. Not everyone will be successful in this journey, but the attitude and determination is a key driving force.

Enough of my thoughts, let’s hear from some experts in the space!

Industry POV: How Can CPG Brands Get VC Funding?

Audience Thoughts: How Can CPG Brands Get VC Funding?

Blue Apron Pivots Strategy, Boosts Convenience

Blue Apron, which started as a subscription meal kit service, announced this week that it will be pivoting its strategy to offer more beyond than just that traditional offering. This comes on the heels of its recent acquisition by Wonder, which I broke down most recently in Issue #41. On the menu innovation side, in addition to the original meals, you can have limited prep options, and heat-and-eat meals. According to the GM of Blue Apron, “Today’s consumer is really looking for more flexibility in how they eat, and then in addition to flexibility, they’re also looking for more convenience.” I think this is super accurate, as well as I think people are also looking for value and health. The time to make Blue Apron is not worth the price, you are better off ordering. On the Wonder/delivery app, I can foresee these doing very well. It will be interesting to see when they start to launch these in retail, both in frozen form and prepared heat-and-eat.

Target and Ulta End Partnership For Store In Store

Since 2021, Target has been building Ulta Beauty shops within its stores. As of writing, there are currently 610 Target stores with an Ulta in them. This partnership is being terminated early, as it was slated to expire in August 2026, but the real termination is on the expansion side, as all stores will continue to operate normally until then. The cracks in the partnership were exposed as Target was not properly staffing the stores. This led to shoplifting issues and a customer experience that was not good enough, given the competitors in the space (Sephora). In theory, the partnership was mutually beneficial, but these issues are very within the control of the retailer, so they should have been avoided. It seems like Target used this as a way to expand into the space and make a big statement. Target is now adding 2,000 products and 50 new brands in the beauty space. From an Ulta POV, it is unclear where they will proceed, as the breakup seems to hurt them more than Target.

Cava Invests In Chipotle-Backed Automated Restaurant Tech

Hyphen, a startup that builds automated production lines for fast casual restaurants, announced it raised $25M this week. Among participating investors was Cava, the fast casual Mediterranean chain. Not too weird to see a game-changing fast casual startup recieve investment from one of the leading fast casual restaurants. Except, Hyphen had already received investment from Chipotle in an earlier funding round. Its technology is even being piloted in Chipotle stores. Clearly, that tech is working as Cava wants a piece too. The plan is to use the automated digital makeline in Cava stores when digital orders heat up. That way, the employees in the store can focus on serving guests in the stores, where it is super important to be customer-friendly, as opposed to via a delivery app, where you do not have a relationship with the customer. The technology must really be something to see two rivals both invest like that.

Fast Casual Same Store Sales Declining

While the fast casual stores may be investing in some cool tech, the same store sales for the most part are struggling for these places. Below is a great summary of what is going on:

As you can see, Cava has really cooled off, and Chipotle went from solid success to declines. If you are surprised to see Chili’s doing so well, it is because they are thriving on TikTok, with everyone wanting to try the Triple Dipper, which has won over Gen Z. As foot traffic continues to decline, it is super important for these restraunts to be focused on giving the customer a great experieince, making sure their operations are super sharp, sharp pricing, strong value, and give customers a reason to come to their restraunt rather than a competitor. It will be interesting to follow when these trends start to reverse.

Additional Links:

1. A great breakdown from a16z consumer on how AI is reshaping digital commerce, like Google (read more here)

2. Mediterranean fast casual restaurant chain Naya receives investment from PE firm Pacific General (read more here)

3. August 2025 could be the highest month for eCommerce as a % of retail sales ever, surpassing the 20.33% from April 2020 (see more here)

4. Canadian retailer Knix is opening a store with Leap and a fulfillment center in the US (read more here)

5. The MTA, which controls the NYC subways, is bringing back alcohol advertisements (read more here)

6. Warby Parker and Amazon are no longer allowing home try on (read more here)

7. July retail sales grew, but growth is starting to slow, according to the US Department of Commerce (read more here)

8. Amazon is now offering same-day grocery delivery in certain markets, planning on expanding to over 2k now (read more here)

9. Bojangles plans return to New York, planning to open 20 stores (read more here)

10. Fast casual stores are leveraging opening more stores to grow the business (read more here)

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