1/ “Unilever for the 21st century.” I’ve gotten that pitch almost 1x a week for the past few yrs. I believe in concept but haven’t seen the execution yet.

Here is what I think about the ideas and what I think still needs to be figured out.

2/ First - almost everyone I’ve seen has a similar pitch on the problem to be solved. Massive market with stale incumbents that can’t innovate, yet consumers demand innovation. Incumbents focused on profitability > R&D while consumers are asking for personalized products

3/ And so the enterprising founder sees a massive industry and stale incumbents and says “I can build Unilever for the 21st century. New fresh brands, build it first on d2c so I’m not encumbered by legacy brands or retailer relationships.”

4/ Solution? I’ve seen founders attack the problem in a few main ways. a) acquiring multiple smaller brands and rolling them up; b) incubating several new brands and spinning out; c) starting new brands with the hopes of being cash flow from stable brands funding new launches.

5/ Why now: Distribution channels changing w. retailers hungry to provide innovation to consumers, onset of new data sources that could provide info advantage, lower barriers to entry in brand/supply chain/distr…..and ample capital from investors with giant TAMs in their eyes.

6/ Competition: Most decks focus on the public incumbents. But usually the competition section is vague because rarely does the founder know up front which categories they want to attack.

7/ Alright that’s enough on the pitches. Now my reactions.

First I’m probably biased but I’m very bullish that there is a big problem to be solved. I’ve talked publicly a lot talked about why I believe this but my thoughts are summarized here: https://twitter.com/ryan_caldbeck/status/974045873377239040

8/ Very few pitches I’ve seen address the following:

Why should the brands belong together? 50 years ago there were reasons P&G and @unileverusa should each own multiple brands.

9/ Too long to go into all the drivers here, but building trust with consumer (represented in part through a brand’s equity or pricing premium) took yrs and lots of traditional marketing. Also: building sales relationships with retailers took years of mediocre golf.

10/ Building CPG brands also took robust safety checks through a supply/dist chain that was hard to build. A CPG conglomerate could leverage marketing/supply/dist and talent/experience across multiple brands. It made sense that they were together under one roof.

11/ Today those things can be spun up in months frankly and the consumer often *mistrusts* older legacy brands. Most companies are outsourcing at least manufacturing if not big parts of sales and marketing.

12/ Third parties like @Shopify, @ShipBob, @get_flowspace, FBA help a brand to grow online more efficiently which can allow a brand to focus on community/awareness. Online scale + community + unique product help brand to get true scale offline ( @harrys).

13/ The retailer is hungry for innovation (better assortment) and that retailer loves those signals.
I’ve mentioned power dynamics have changed in retail right? https://twitter.com/ryan_caldbeck/status/1052985815775600640

14/ So while I believe @ProcterGamble and similar strategics will be dramatically smaller in 10 yrs than they are today, it isn’t clear to me that those insurgent brands that replace them will be rolled up. What’s the advantage of having them together? https://twitter.com/ryan_caldbeck/status/988473887628320768

15/ Yes Shopify et al lower the barriers to entry. That’s great for insurgent brands and consumers. But why does putting two Shopify stores together in a rollup create value? Is it 1+1= >2?

16/ Unilever & P&G’s created value decades ago by bundling, but it isn’t clear *yet* that there is enough value in the current bundling strategy of emerging brands.

I think there *will be* value. I just havent seen it YET.

17/ I also see a lack of thought about the product in these pitches. Founders saying “I will disrupt dog food and then toothpaste.” They are often less consumer centric. Consumers don’t care if the product is part of a rollup, they care if it solves their problem.

18/ Related….today’s consumers care about authenticity. A roll up can hinder the ability for the brand to be authentic…...lots of reasons including no true founder at the center of the brand who started it to solve a deep personal paint point and is sleeping 3 hours a night

19/ Next- what is their advantage? Most of the roll up strategies I’ve seen attacking this problem claim to have an advantage. The worst say they have “deep experience” and other things that provide no differentiation in 2020.

That advantage must be unique in a way that matters

20/ Some have pitched idea of economies of scale in influence and community (leveraging marketing channels/customer groups). I think it’s possible, but I haven’t seen the execution successfully. To date those pitches have included a lot of hand waving in my experience.

21/ The most interesting approaches typically focus on two key advantages. Technology powered with differentiated (and proprietary) data and a robust systematic process.

22/ Tech w/ data: *Almost* none of the approaches I’ve seen have fleshed out how they will use tech, why the data will give them a differentiated perspective or what the information edge should be. Frankly it feels like the 1st inning and a lot of hand waving. Hope it evolves.

23/ There are lots of reasons it's important to dig deep here. A less obvious one: if it isn’t clear what information advantage the tech/data provides, it's hard to know how to use it.

24/ It would be like counting cards in Vegas, but signing up for an unknown # of games. If you’re counting cards and playing 1,000 hands? Great. If you are playing 2 hands? The info advantage isn’t large enough to have an impact and you’ll get crushed.

25/ To be clear- I think this is a market where tech & data should be a massive differentiator. I’m just saying that *most* pitches I see gloss over defining what their info advantage is, what specific problems they are looking to solve w/ T&D and why advantage is sustainable.

26/ Process: The more sophisticated teams have laid out a robust test/iterate/scale process that leverages D2C to test out a new product and then offline to scale a product.

27/ People poopoo (that’s a technical term) operation process as a competitive advantage but there are more than a few technology companies that leverage a robust process, instead of only data or algorithms, to drive meaningful value for the customer (and their equity).

28/ I tend to believe that most great companies are not just one innovation but instead a lot of “little” innovations, sometimes online and offline, that are stacked on top of each other. I suspect that will be the answer for whoever builds Unilever of the 21st Century.

29/ I think some of this also explains why the most successful roll ups recently have been in the Amazon ecosystem (i.e. Thrasio)- they can apply the same suite of products to the same distribution system.

30/ Leverage common playbooks (i.e. Vista Equity style or Constellation Software) across many brands, also perhaps leveraging some tech/data advantage (cracking the Amazon rating algo), systematic analysis (clear a traffic/review threshold to be acquired) and ops processes

31/ To be clear, I’m not sold it is a slam dunk yet, but I think that’s where we have seen the most success to date.

Regardless, I do think some founders will have massive success attacking this problem, I just think we’re very early in the evolution.