10 Questions a Creator Must Ask When Launching CPG

March 22, 2024 by Mike Booth

RockWater Roundup

RockWater analysis to make you a better investor and operator. Today we discuss the questions creators need to ask before launching a CPG brand, and then apply those questions to assess the viability of Ninja’s new almond milk brand, “Nutcase”.

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Most creator CPG brands fail, but that shouldn’t deter more from trying.

The most common pitfall creators make is seeing CPG as a passive cash grab that they don’t need to actively market to their audience. This is a recipe for failure.

But even highly engaged creators fail when launching CPG brands. More often than not, this is a result of poor planning.

Our team at Rockwater is frequently asked whether it’s a good idea for [INSERT] creator to launch [INSERT] product.

This led us to develop a 10 question rubric that assesses business viability:

Market Size: is there a sufficiently large market for the product? Ideal products sit within billion dollar industries that are experiencing explosive growth. e.g. Hard seltzer = Large and high growth → great market to enter. Black licorice = Small market → bad market to enter .
Community Size / Quality: how large and active is the creator’s fandom? e.g. A large and rabid fan base with active subreddits → High purchase conversion. Fragmented and dormant audience → Low purchase conversion.
Price Point / Audience Accessibility: can the creator’s audience afford to purchase the product? $10 impulse purchase → High purchase conversion. $300 luxury purchase → Low purchase conversion.
Margin: are the gross margins attractive? e.g. 70-90% gross margins = High margin → a lot of revenue can be reinvested back into growth channels. 20-40% margins = Low margin → barely any revenue to cover opex.
Repeatability: how often will customers buy this product? e.g. Snacks = Highly repeatable purchase → once a customer is acquired their LTV has a high ceiling. e.g. Mattresses = One time or very infrequent purchase → LTV is very low after first purchase
Production & Shipping Logistics: does the product require complicated infrastructure to produce and ship? e.g. Clothing = Quick to scale → easy and low cost produce and ship to global customers. Ice Cream = Slow to scale → strict health regulations and requires cold storage supply chain
Social Demonstrability: how repeatable are the content formats for both brand led content and UGC? e.g. Slime = Highly demonstrable content that have easy to replicate viral formats → large top of funnel lead gen. Rugs = [Viral format pending] → small top of funnel lead gen
Audience Overlap: does the creator’s audience align with the product’s demo? e.g. Cooking creator launching kitchenware set = High purchase conversion. Cooking creator launching a skincare line = Low purchase conversion
White Space: how many other creator led or social commerce products already exist within the product’s category? e.g. There aren’t many creator sunglasses brands → Easier for new brands to capture market share. There are already 50 creator led coffee brands → Harder for new brands to capture market share.
Product Fatigue: how many other products is a creator already trying to sell their audience? e.g. A creator that is actively promoting 3 different CPG brands they’ve launched will have a harder time creating oxygen for a new brand than a creator launching their first product.

Let’s talk about “Nutcase”, the almond milk beverage line recently announced by Ninja. I’m going to put the above checklist into action, grading each critical success factor from 1-10, and I’ll conclude by predicting the success of Nutcase.

Market Size: Almond milk is a $4B market expected to grow at 12% through 2028. A 10 figure market with double digit growth is a great one to be in. 8/10
Community Size / Quality: Ninja’s top of funnel is big – 20M followers on Twitch (#1 on Twitch) and 24M on YouTube, but it’s the views that matter. Hours watched for Feb ranked #459 on Twitch and avg concurrent viewers for Feb was 7.3k. For perspective, TurboTax had 19k avg concurrent Twitch viewers for Feb. Suboptimal performance. His subreddit has 4k members and there hasn’t been a post in 2 years; also suboptimal. Net / Net – this is a creator that’s passed their heyday. Large reach, but most of his fans have moved on, hence asymmetry between subscribers VS viewers. 3/10
Price Point / Audience Accessibility: Pricing not yet released but almond milk is accessible to most consumers with a carton retailing for <$10. No would-be purchasers are turned off by <$10 price. 9/10
Margin: alternative milk manufacturers avg 40% gross margins. 40% margins are workable for CPG, esp if marketing costs are low. But I’d want to see it closer to 60-80% to get a lot of confidence. 3/10
Repeatability: almond milk is a highly repeatable purchase (as are all f&b products). 10/10
Production and Shipping Logistics: regulations for beverage production shipping are tighter than other product categories. That said, there are existing supply chains that can be tapped into and the product itself is small. 5/10
Social Demonstrability: it’s easy to showcase product on stream, but it’s harder to make compelling repeatable creative formats. Even other beverages, like wine, you could imagine “drink along with me” formats, but those wouldn’t work for almond milk. 5/10
Audience Overlap: Ninja’s audience skews young millennial + GenZ male gamers. Milk alternatives do appeal to a younger crowd, but when I think gamers, I think of snacks, sodas, and pizza… not almond milk. 4/10
White Space: There are many DTC alt milk brands that are active on socials, but they’re not creator led. There is def white space for a creator led alternative milk brand to land grab social commerce. 8/10
Product Fatigue: Ninja sells merch, but its high quality and limited sku count. This doesn’t feel like an influencer who is inundating their audience with crappy products. 8/10

In total that’s 63/100 for Nutcase. Solid D- territory. 🤔

My bet is that Nutcase gets an initial surge with Ninja’s core fans, but doesn’t see meaningful growth thereafter. Fizzles out after 6 months and shuts down completely in a couple yrs.

What do you think; did I grade Nutcase appropriately?

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Author Mike Booth is a Director at RockWater Industries. We do financial and strategy advisory for media, agencies, and creator economy. From M&A and fundraising to consumer research and go-to-market planning.

DM Mike on LinkedIn or email mike @ wearerockwater dot com