Most FMCG start-ups fail – A list of some more risk mitigation actions

Missing demand / generally bad product performance is the most frequent reason why food start-ups fail – also due to several different mistakes ranging from PMF to marketing and cashflow issues.
Simply said: 𝘁𝗵𝗲 𝗽𝗿𝗼𝗱𝘂𝗰𝘁𝘀 𝗻𝗲𝗲𝗱 𝘁𝗼 𝘀𝗲𝗹𝗹 good enough for the company to work.

𝗕𝘂𝘁 𝘁𝗵𝗲𝗿𝗲 𝗮𝗿𝗲 𝗺𝗮𝗻𝘆 𝗿𝗶𝘀𝗸𝘀 𝗶𝗻 𝗱𝗮𝗶𝗹𝘆 𝗯𝘂𝘀𝗶𝗻𝗲𝘀𝘀 𝘁𝗵𝗮𝘁 𝗰𝗮𝗻 𝗾𝘂𝗶𝗰𝗸𝗹𝘆 𝗵𝗶𝘁 𝗮 𝗰𝗼𝗺𝗽𝗮𝗻𝘆 𝗼𝘂𝘁 𝗼𝗳 𝗮 𝗴𝗼𝗼𝗱 𝘁𝗿𝗮𝗰𝗸, 𝘁𝗼𝗼.
In order to increase the chances of long-term success, such large risks should be mitigated because a major issue in one of these can turn into a substantial crisis that could threaten the business.

I gathered some advice from my experience on 𝗵𝗼𝘄 𝘁𝗼 𝗿𝘂𝗻 𝗮 𝗳𝗼𝗼𝗱 𝗯𝘂𝘀𝗶𝗻𝗲𝘀𝘀 𝗮𝘁 𝗮𝗻 𝗮𝗽𝗽𝗿𝗼𝗽𝗿𝗶𝗮𝘁𝗲 𝗿𝗶𝘀𝗸 𝗹𝗲𝘃𝗲𝗹:

✅ 𝗦𝘁𝗮𝗿𝘁 𝘄𝗶𝘁𝗵 𝗮 𝗱𝗲𝗳𝗲𝗻𝗱𝗮𝗯𝗹𝗲 𝗽𝗿𝗶𝗰𝗲 𝗮𝗻𝗱 𝗰𝗼𝗻𝗱𝗶𝘁𝗶𝗼𝗻𝘀 𝗺𝗼𝗱𝗲𝗹 that considers future negotiations and cost increases.
✅ 𝗦𝘁𝗮𝘆 𝗰𝗹𝗼𝘀𝗲 𝘁𝗼 𝘆𝗼𝘂𝗿 𝗲𝗻𝗱 𝗰𝘂𝘀𝘁𝗼𝗺𝗲𝗿𝘀 and continue testing & improving your products, to keep them as a loyal returning customer base, and to understand how and why your product is (not) used.
✅ 𝗗𝗶𝘃𝗲𝗿𝘀𝗶𝗳𝗶𝗰𝗮𝘁𝗶𝗼𝗻 𝗶𝗻 𝘁𝗵𝗲 𝘀𝘂𝗽𝗽𝗹𝘆 𝗰𝗵𝗮𝗶𝗻: Reduce dependence on single retail customers / products / suppliers.
✅ 𝗗𝗶𝘃𝗲𝗿𝘀𝗶𝗳𝗶𝗰𝗮𝘁𝗶𝗼𝗻 𝗶𝗻 𝘁𝗵𝗲 𝗯𝗿𝗮𝗻𝗱: Do not rely on a single person / USP / marketing channel for promotion.
✅ 𝗛𝗮𝘃𝗲 𝗮 𝗴𝗼𝗼𝗱 𝗾𝘂𝗮𝗹𝗶𝘁𝘆 𝗺𝗮𝗻𝗮𝗴𝗲𝗺𝗲𝗻𝘁 to avoid the risks of recalls or even worse: personal injuries (have crisis processes ready for the worst case).
✅ 𝗚𝗿𝗼𝘄 𝘀𝘁𝗲𝗮𝗱𝗶𝗹𝘆 and only run on / above the production limit for a short period to allow for the necessary maintenance for a reliable supply.
✅ 𝗢𝗻𝗹𝘆 𝗮𝗶𝗺 𝗳𝗼𝗿 𝗯𝗶𝗴 𝗽𝗿𝗼𝗺𝗼𝘁𝗶𝗼𝗻𝘀 𝘄𝗵𝗲𝗻 𝘆𝗼𝘂 𝗰𝗮𝗻 𝗰𝗼𝗽𝗲 𝘄𝗶𝘁𝗵 𝗮 𝗰𝗮𝗻𝗰𝗲𝗹𝗹𝗮𝘁𝗶𝗼𝗻 – D2C channels and existing B2B partners should be able to absorb such cancellations.
✅ 𝗟𝗶𝗺𝗶𝘁 𝗹𝗼𝗻𝗴-𝘁𝗲𝗿𝗺 𝘀𝘂𝗽𝗽𝗹𝘆 𝗰𝗼𝗺𝗺𝗶𝘁𝗺𝗲𝗻𝘁𝘀 𝗶𝗻 𝗮 𝗵𝗲𝗮𝗹𝘁𝗵𝘆 𝗿𝗮𝗻𝗴𝗲 – The increasingly volatile supply chains require advanced planning, but it gets riskier the longer it goes into the future.
✅ 𝗗𝗼 𝗻𝗼𝘁 𝘁𝗮𝗸𝗲 𝗶𝗻 𝘁𝗼𝗼 𝗺𝘂𝗰𝗵 𝗰𝗿𝗲𝗱𝗶𝘁 𝗰𝗮𝗽𝗶𝘁𝗮𝗹 in case you want to remain self-directed – venture capital is only a good idea when it truly is a VC case with the required market potential.
✅ 𝗔𝗹𝘄𝗮𝘆𝘀 𝗵𝗮𝘃𝗲 𝗮 𝗽𝗹𝗮𝗻 𝗕 𝗮𝗻𝗱 𝗿𝗲𝗺𝗮𝗶𝗻 𝗳𝗹𝗲𝘅𝗶𝗯𝗹𝗲 𝘁𝗼 𝗽𝗶𝘃𝗼𝘁 𝗶𝗳 𝗻𝗲𝗲𝗱𝗲𝗱 – as long as you’re not profitable yet or when you're still a start-up.

It’s not possible to take all these mitigation actions directly as there is always too much to do, but they should best be implemented in steps while a growing food start-up establishes itself in the market.

❓ Which other risks have you seen kick food companies out of their path and what would you do to mitigate them?