2022 Was A Year Of Decreased Valuations, Celebrity Brands, And Beverage. Here’s What It Takes For CPG To Win In 2023

FABID is a food and beverage specific database that tracks investors, brands and their stakeholders … [+] fund events.

FABID

2022 has been nothing short of mixed feelings for consumer goods. Debates continue as to whether direct-to-consumer is still relevant, coinciding with a number of brands pushing into retail and proactively lowering their valuations to attract institutional dollars amid skyrocketing customer acquisition costs and inflationary pressures. Meanwhile, more influencer entrepreneurs are getting into CPG, with beverages retaining the best-funded sector while categories like meat substitutes saw a significant shake-up.

What does all this mean for the consumer space and what does a successful CPG need to take with them in the new year? Read the exclusive analysis below from FABID, a food and beverage specific database that tracks investors, brands and their funding events involved:

The capital market is turning to growth opportunities

Total VC funding in CPG reflected the stock market trend, peaking at $1 billion in the first quarter of 2022 and subsequently declining for the remainder of the year after the Fed approved the first of seven straight rate hikes in March.

Annual equity investments fell 12% to $2.3 billion from $2.6 million in 2021, with total deals falling by nearly 100. However, average VC investments are up year over year, suggesting that funds are increasingly participating in larger, later rounds of funding for a safer bet. Prominent investment firms — Siddhi Capital and PowerPlant Partners — have both shifted their focus from early-stage opportunities to growth-stage opportunities.

Struggling for limited dollars in capital markets, consumer brands, including the best funded, have cut their valuations significantly, with some halving their multiples compared to 2021:

Top 10 brands by funding, according to Food & Beverage Investor Database FABID

FABID

Liquid Death canned water brand is backed by Live Nation Ventures and Velvet Sea Ventures; and SCSC Holdings-backed herbal supplement company Athletic Greens topped the list of most-funded brands, raising $148 million, or millions in grants.

However, Liquid Death has dropped its multiples from 14x in 2021 to 4.8x last year. Chilled chocolate darling Mid-Day Squares, whose co-founder Jake Karls was named to the Forbes 30 Under 30 list this year, also saw multiples fall after raising $10 million in Series C in April during the prebiotic Soda market leader Olipop saw its multiple fall from 5.7x to 2.8x in 2021 after completing a $30 million Series B in February.

Coupled with Lemond Perfect’s $31 million Series A funding and BeatBox brand’s $16 million Series C funding, beverages maintained their position as the most funded CPG segment in 2022 and accounted for a whopping 47% of total funding, followed by snacks and beverages sweets at 13% and dietary supplements at 8%.

One Enemy Brands Amidst a Growing Influencer Economy

2022 was undeniably a year for brands endorsed by celebrities and influencers. Even as the market declined, an engaged fanbase can still offset the high customer acquisition costs.

FABID data showed that prominent brands from Kendall Jenner’s backed 818 Tequila to Logan Paul and KSI’s Prime Hydration have amassed nearly $160 million in total funding. Other notable brands contributing to this category are Feastables developed by YouTube sensation MrBeast; Katy Perry’s non-alcoholic appetizers De Soi; sustainable hazelnut spread TBH co-founded by Stranger Things actor Noah Schnapp; and Chamberlain Coffee by influencer Emma Chamberlain.

Other celebrities chose to go head-to-head with longstanding staples in mass categories with “better for you” claims to appeal to the consumer. Goodles, co-launched by Wonder Woman’s Gal Gadot, squarely targets Kraft Heinz’s Mac & Cheese with better nutrition, while Chubby Snacks and Olyra emerged to compete squarely against Smucker’s Uncrustables and Mondelēz’s belVita breakfast cookies .

“While poking the bear can be dangerous, it also helps identify a potential exit path,” wrote Ryan Williams, founder of FABID, in its annual report, emphasizing how these newer brands can thrive by owning just a small percentage take market share from these giants.

Operational Excellence and True Market Fit

FABID continues to forecast opportunities for CPGs that operate successfully across the value chain, controlling both their manufacture and distribution.

Finally, in-house production allows companies to test ideas, adapt them, create interesting content, and ultimately have more control over their margins, Williams noted, adding that those companies should also set up a co-packing fallback if their own brands Having trouble.

The top-funded home-made brands in 2022 include Athletic Brewing, Good Culture and Mush, which together brought in about $162 million. AF Ventures-backed companies Eastern Standard Provisions and Clio Snacks also received $13.5 million from Oreo Mark Mondelēz and $18 million in additional funding, respectively, in 2022.

“Our long-term optimism about the future of the industry remains unwavering,” Williams wrote. “Returning to basics will create sustainable innovation and enduring businesses. Brands with operational excellence and true product-to-market fit will endure.”