Do your prices need to match inflation?

When discussing inflation, increases in the price of goods sold (COGS), and raising prices of your products, there isn’t a silver bullet that every company should use. This is a complex conversation that can be more nuanced than just saying “yes” or “no” to raising prices. There’s a myriad of market factors to consider.

Here are some things to consider when making this call for your business: How elastic is the demand for your products? Can you find ways to lower your COGS? Did your COGS actually grow as much as other markets did?

We wanted to provide some context for how things are changing and some insights to help make the decision process a little easier on you. These stats come from what we have seen some of our clients doing in the first half of 2022.

• We saw a pretty significant range when it came to Price and COGS increases:
  • Price changes had a wider range: 13% to as low as 4% vs. COGS increases: 10% to a low of 6%
  • For our sampled customers, the average Price Increase was around 8% vs. COGS Increases of 8.3%
• We began to see COGS increases in Q4 of 2021 into Q1 of 2022, and most Price Increases were implemented within 1-3 months
• The biggest takeaway is there have been no material velocity changes post price increases, leading us to believe their current market is inelastic to the changes in the first 3-6 months

If you would like more information about how your business is doing and some help making sense of the data, you can book a demo with our Business Intelligence Team to have a look at our Reporting Solutions.

Follow along with a DEMO of our reporting solutions for the Distributor Reports

Join our head of Business Intelligence as he demos the important reporting solution for Distributor Reports.

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It’s our most popular reporting solution because it’s so fundamental to a business and its future success.  Take a look and see if this might make the difference for your business.

The powerhouse snack bar brand and our close partners Munk Pack have landed a new round of funding, $5 million! 

Michelle and Tobias Glienke are the wife-and-husband team that created the delicious Munk Pack brand and products. They began this venture because of the lack of healthy snacks that were low in sugar but high in taste. Theirs was the first Keto Granola Bar as well as the first Keto Nut & Seed Bar. 

“We are pleased to see our products resonating with such a broad consumer base, and we believe that our simultaneous distribution and velocity increases attest to that,” says Tobias (originally shared in their press release through Business Wire).

With strong sales and distribution, they are primed to continue growing with this new investment. You can find their products in 11,000 locations nationwide. Check out their products and learn more at store.munkpack.com

Read Munk Pack’s full press release here.

Discover more partner news here!

The data and information your business has access to can feel overwhelming. We know the feeling. It can also feel like a huge task just gathering all of that data into usable reports, and then you are stuck with the task of analyzing, understanding and implementing that information. It’s no wonder some business owners cringe a little or roll their eyes when you bring up reporting. The good news is it doesn’t have to be that way.

You can have all of your reports in one location and have them created automatically without gathering them manually. You can have polished reports created at the click of a button and ready to share with investors. You can even see valuable information on a much faster cadence than just monthly.

Just look at how our reporting solution can take all of those different data sources into a Tableau dashboard. Then, out comes refined, convenient reports, premade for all the important purposes you have for them. It’s time to work smarter, not harder when it comes to your reporting solutions.

It’s more than just saving you time and improving your data organization. We also play a pivotal role in analyzing that data to derive actionable takeaways. It’s why we are experts in the CPG reporting space. Years of experience with hundreds of brands have given us the ability to help direct your planning. It’s why we are both a software and a service solution.

If you want to learn more about our Business Intelligence: Reporting Solutions, please give us a call and see what you’ve been missing. It could easily be the difference between securing that next round of funding versus having to continue bootstrapping your business.

Tough economic times ahead? 3 steps to prepare

With concerns escalating around a possible recession coming, our team at Stage 1 Financial wants to address the potential impact on your companies, vendors, and customers. Our team of experts has identified 3 critical steps to help your company thrive in this potentially difficult business climate.

To develop a more in-depth understanding of the impact this might have on your company, please reach out to schedule a meeting with one of our CFOs to talk about this topic in more detail. We’re here to support you!

Step 1: Cash is King! Start Conserving Cash

It’s critical to review expenses to ensure your operations are optimized and non-essential spending is minimized to preserve liquidity. Take a fresh look at your operations including:

• • Right size expenses – Forgo expensive in-house hires when you can outsource expertise at a fraction of the cost.
  • Lower Fixed Expenses – Categorize expenses by fixed (e.g. rent) and variable (e.g. raw materials) and understand which fixed costs may need to be reduced in the event of a decrease in consumer demand. Keep in mind that paying for fixed costs requires a minimum amount of monthly sales and that any decrease here reduces that pressure while increasing cash flow.
  • Ensure Marketing Cost Generates Cash – Confirm your understanding of the Return on Investment (ROI) of marketing spending and align spending levels with forecasted changes in revenue.
  • Optimize Cost of Goods Sold (COGS) – Reviewing and benchmarking the pricing of input items (e.g. raw materials), labor, overhead, 3rd party manufacturing, and supplier pricing (e.g. payment terms and tier pricing).
  • Leverage Working Capital – Collect A/R faster!  Reduce inventory by running more frequently (even at higher costs) and work with vendors to the right size terms.

Our CFOs and Finance team can help you in analyzing your cost base to determine opportunities for improvement and support you in the process of renegotiating contracts with key vendors and suppliers.

Step 2: Adjust Expectations for Raising Capital and Start the Process Early!

Companies may struggle to find financial support as interest rates continue to rise and total capital being invested shrinks. For those companies considering fundraising, there are a few key tips:

• You might only have 1 chance, don’t miss your shot – When pitching, bring your A-game. If you can’t confidently say “This is the best pitch deck we can produce,” or if your financial model does not answer all the questions investors and lenders are asking, it’s a good time to talk to our transaction services team. Their expert advice can be the difference between being properly capitalized or not during this turbulent period of the business cycle.
• Start raising before you need it – Give yourself more time to raise capital. If you’re thinking about raising capital in the next 6 to 18 months, we recommend starting the process NOW! A typical process takes 6 months, plan for 9 – 12 months in this environment.
• Back up planning – Have as many levers to pull as possible, agree on a plan with existing investors and leverage the debt options. Also, try to figure out a scenario to get to cash flow break-even (or close to it).  Raising will take time, give yourself as many options as possible.

Step 3: Continually Re-Forecast

Your place in this shifting economic world can change quickly. With the possibility of a recession on our hands, companies need to continually review their financials and respond accordingly. While we entrepreneurs love to plan for the long-term, right now, we need to focus on the months just ahead and be ready to respond quickly. To ensure you are prepared, we recommend the following planning tools and processes are in place and operating effectively:

• • Great Sales Forecasting is Everything – Track sell-through, as changes in consumer behavior can be identified earlier by watching weekly and monthly buying behaviors
  • Update frequently – Update revenue forecasts with any changes in sell-through patterns, helping understand where sales are trending
  • Run Scenarios – Running a wide range of scenarios allows you to prepare for the worst and execute for the best.  Understand how to work towards cash flow break-even, what levers you have to reduce burn short and long term, and what KPIs you need to be at to look attractive for raising capital

Our seasoned group of CFOs and Finance team can help you through these trying types, unfortunately, this is not our first rodeo in terms of managing downturns!  Fortunately, we’re here to help you navigate these challenges.

Stage 1 Financial will continue to provide more information as it becomes available, please share any information and we’ll be sure to disseminate it. 

In the meantime – reach out with any questions or concerns.

We’re here to support you!

When you give Lemon Perfect some lemons, they make a big pitcher of funding out of it.

Equally as impressive as the funding is where some of the funding came from—Beyoncé!  In Lemon Perfect’s press release, they shared this quote from her: “I don’t typically enjoy drinks without added sugar, but Lemon Perfect is delicious,” said Knowles-Carter. “It was an easy decision to invest in something that not only tastes great and is healthy, but also, and most importantly, allows choosing a healthier lifestyle to be affordable and accessible to everyone.”

Lemon Perfect has just closed its Series A round of funding for $31 million. This new infusion of cash will allow Lemon Perfect to scale the brand’s distribution to exceed 40,000 points before the close of 2022.

“Stage 1 Fund initially invested in the Seed Round of Lemon Perfect, and it has been incredible to assist in the explosive growth that Yanni and the Lemon Perfect Team have executed thus far.  This is especially impressive considering how tough it is to succeed in the beverage category.  These early milestones are a reflection of Yanni’s tenacity and his willingness to surround himself with experts early on in the process.  Stage 1 Financial & Stage 1 Fund are proud to have provided outsourced support and capital for the brand, and we look forward to Lemon Perfect’s continued success and growth moving forward within the beverage marketplace.  The Company is now well-positioned and capitalized to continue execution on its explosive path,” shared David Bartholomew, a Partner at Stage 1 Fund.

Stage 1 Financial has been a key partner of Lemon Perfect since the very early days. Their commitment to a healthy hydrating solution free of sugar has led them to create a truely delicious beverage.  Check out their products and learn more at LemonPerfect.com.

Read Lemon Perfect’s full press release here.

Discover more partner news here!

There’s no slowing down our good friends at Scotch Porter. Calvin has once again secured a big round of funding that will see Scotch Porter continue their growth in the men’s grooming sector.  This is their Series B round and nets them $11 million in new funding led by Pendulum! Our sister company Stage 1 Fund also contributed to this raise for Scotch Porter.

The Transaction Services team here at Stage 1 Financial played a critical role in securing this funding assisting Scotch Porter in prepping, finding, and vetting the deal. Our Transaction Services team brings the skills and experience that small consumer businesses need to raise capital. 

Scotch Porter aims to use this new capital to scale its operations, which will help to level the playing field for them with the big players in the market. They will also seek to expand their product line as well, so keep an eye out for more fantastic products from them in the future. 

The founder of Scotch Porter, Calvin Quallis, began this enterprise by quitting his job and opening his own barbershop. He wanted to follow his passion for making people feel their best, and this led him to experiment at home to create new, better products. Flash forward to today and Scotch Porter is a fast-growing men’s personal care brand that stays true to its roots. Check out their products at ScotchPorter.com.

Read Scotch Porter’s full press release here.

Discover more partner news here!