How to Be “The Next Big” Food Brand in 2023: The “Secret Sauce”

How to Be “The Next Big” Food Brand in 2023: The “Secret Sauce”

Thousands of brands launch in the food space every year – selling everything from adaptogen-infused vitamin waters to nootropic-tastic candy bars. Many have dreams of being “The Next RXBar” (sold for $600 million in 2017) or “The Next Quest Bar” (sold for $1 billion in 2020). But if you study the hottest CPG deals of the last 12 months, a new ingredient to being the next billion-plus sale has emerged. Since the pandemic, the most lucrative brand buyouts in food have all had this surprising yet common ingredient - which isn’t a traditional food ingredient like you are probably thinking of like avocado oil or plant protein: a special relationship with their manufacturer. 

Brands’ Most “Special Relationship”: The One They Have with Their Manufacturers

The 2010s were rife with ‘brand only’ buyouts, like RX and Quest, which did not offer any significant manufacturing relationships when they signed their deals because they used distant co-packers who their buyers broadly replaced as soon as the ink dried. In contrast, the roaring 2020s have been marked by buyouts prioritizing intimate brand-manufacturer ties. For example, in November of 2021, Hershey’s bought Dot’s Pretzel brand with their co-man for a whopping $1.2 billion. Industry experts believe the sale directly resulted from the intimate relationship that Dot’s had built with their co-manufacturer, which meant that Hershey’s wasn’t “taking a gamble” on whether the business would work out after the buyout – because the manufacturing was already locked and loaded. “Hershey’s didn’t want just the brand,” says one industry source, “They wanted a business that had true integrated value. They wanted the brand and the relationship that brand had developed with their co-man.”

In a very similar vein, in June of 2022, Mondelez bought Clif for $2.9 billion along with all of its manufacturing, putting in the press release that they planned to continue to produce at the existing manufacturing facilities in Idaho and Indiana. A third example: as of the end of 2022, Impossible Foods, the vegan meat company that notoriously controls the manufacturing of the ‘heme’ ingredient at the core of its food products, has raised over $1.2 billion in funding from investors, including Khosla Ventures and Bill Gates. 

The Era of Superficial Brands 

These new deals show that the ‘old days’ of brands being bought just for the brand name are over. Now, it’s all about the entire ecosystem. Back in the earlier 2000s, CPG giants like Nestle, PepsiCo, Mars, and Kellogg, developed the thesis that their value wasn’t actually in making foods – but instead in marketing food and leveraging their relationships with traditional retail (which was exploding in power then too) to control all the shelf space that American consumers would ever be able to see. This allowed brands to become the ultimate ‘middlemen’ – shifting manufacturing to the booming rise of co-packers they didn’t own or control, like Hearthside, Treehouse, and Nellson, and investing mightily in buying up all the ‘superficial brands’ they could - that is to say, brands without close or well-developed relationships with their co-mans.

These ‘horizontal integration’ shopping sprees had one core aim: for big CPG to own every brand sold to American consumers, whether the consumers knew it or not. Case in point: a whopping 60% of potato chips bought by American consumers every year in the 2010s were of brands owned by just one company: PepsiCo (under dozens of superficially-separate brand names, including Lays, Ruffles, and Fritos). At the same time, Hershey’s controls 44% of U.S. chocolate confectionery sales, and Mars - with everything from Dove to Twix to M&M - controls a further 33%. To put it another way, two behemoth umbrella brands own almost 80% of the candy bars Americans buy yearly. Both brands do some of their own manufacturing but not the lion’s share; thus, getting precise numbers is virtually impossible because of how secretive the industry is.

Bar manufacturing

Building True Value

Fast forward to 2023, and the model of CPG just being brands is starting to look ancient. Thanks to Amazon, new start-ups in the food industry can get shelf space in one of the largest retailers in the United States (Amazon!) without needing to “know the buyer” or buy expensive in-store advertising. Getting on Amazon is as easy as signing up for an FBA account. Getting noticed is as easy as inking a deal with a brand-relevant social media celebrity (they don’t need to be huge, just huge in a small niche). As a result of this gigantic shift, big CPG realizes that they can no longer bank on just controlling the shelves of supermarkets. They need to build value by owning brands that manufacture their products with co-manufacturers whom they are connected and have relationships with.

Being a successful brand from the late 1990s to the late 2010s just meant getting on the shelves of grocery stores where Americans bought almost all of their food. Being a successful food business in the next decade (from 2023 and beyond) will mean being a brand with a mission they stand for and that builds its products in lock-step with a co-man who they have invested in developing a tight and close relationship with. In short, superficiality was so last year.

If you are looking for the perfect co-manufacturer or co-packer that can help take your brand to the next level, YouBar has got you covered. Get in contact with YouBar today to start developing your next new food innovation.