ReGen Brands Recap #45

Kyle Krull & Anthony Corsaro

The Biggest Problems Facing Regenerative Brands & What We're Building To Help Solve Them

After 44 episodes, 42 blogs, and more than 1,000 conversations, now seemed like a great time for a major recap and visioning episode. We share some of the biggest differences between regenerative and conventional CPG, and we discuss what we believe are the biggest problems facing regenerative brands. We also give a behind-the-scenes look at the three organizations we are building to try and help solve some of these core challenges. (ReGen Brands / Regenerative Coalition / Outlaw Ventures)

What are the two biggest operational differences between regenerative brands and conventional CPG?

1) The Supply Chain

Most CPG brands work with a co-manufacturer that handles raw materials and ingredient sourcing on their behalf.  

Many regen brands work directly with farmer partners and have to get creative with their sourcing. For example, Oatman Farms, Alexandre Family Farm, and Artisan Tropic use straight-up vertical integration. They grow and directly source their raw materials from their own farms (unlike Alec’s Ice Cream, Lil Bucks, and Wild Orchard which source from  traceable farm partners). Others, like Hickory Nut Gap, Force of Nature, and SIMPLi use a direct-trade aggregation model.

Sourcing directly from farmers versus commodity markets allows regen brands to create better economics for their farmer partners. But it can add cost and complexity to operating the brand's business, manufacturing schedule, and cash flows. Having fewer intermediaries, however, allows farmers to become stakeholders in the brands, and both parties capture the margin that usually goes to middlemen entities. 

2) Product Development & Innovation

Because regen brands work so closely with their suppliers (aka, farmers), they’re able to give them a seat at the table when it comes to product development and innovation. Traditionally, CPG brands base their product portfolio decisions solely off of category research and consumer insights. Regenerative brands take this a step further and think about what the land and its stewards need to bolster the operations of their regenerative ecosystems. The brands and farmers can work together to target what needs selling – whether it’s a crop they’re already growing or want to add to their operation.

In essence, regenerative brands are enabling biodiversity by creating stable, profitable market outlets for existing or new farm outputs.

For example, GoodSAM commercializes the full agroforestry rotation of their farmer partners in Columbia – including coffee, chocolate, nuts and more. Here in the US, Lil Bucks, Patagonia Provisions, and Simple Mills source different crops from A-Frame Farm’s regenerative organic grain rotation with some intermediary support from Mad Agriculture’s Mad Markets team.

In some cases, product innovation acts as a necessity to create new or better market outlets – particularly more premium markets. Brands with a single hero ingredient product (like beef, chicken, or pork) are created to establish a more consistent and accessible market for ranchers that rewards them for their regenerative practices (for example, Singing Pastures pork sticks). It’s also a great way to use and sell less premium cuts / byproducts like bones (Kettle & Fire) or muscle and organ meats. 

How can we better support regenerative brands?

1) Find ways to help brands scale supply to meet demand

Regen brands are supply-constrained in many commodities. This keeps them from scaling up to meet demand. Projects like The Almond Project, non-profits like GreenWave, or broker entities like Mad Markets provide great inspiration on how brands can work together to build regenerative supply and demand. As certifications become better defined and gain traction, the hope is they will also develop sourcing solutions and aggregate opportunities. We’re already seeing this being explored at Regenerative Organic Alliance (ROA), Land to Market™, and Regenified™. 

Ultimately, we believe that we’ll need one “center of truth” for regenerative raw material supply – a digital source where brands can access regenerative supply based on commodity, region, growing conditions, availability, and more. This can also serve as a hub for collaboration where various supply chain stakeholders can see what commodities need the most support. GreenWave’s Seaweed Source is a great example of this kind of thinking in practice, where 44 producers and buyers have connected on the platform to transact 444,000 lbs in forward contracts.

2) Put the onus on retailers and distributors to reward regen brands

Operating any CPG brand has become more expensive in the last 10 years. Between reduced barriers to entry for new brands, increased capital investment in the space, plus three years of COVID-19, the war in Ukraine, and inflation – it’s harder than ever for new brands to gain traction and be capital efficient.

There are now a myriad of potential costs that distributors and retailers can charge between when a product leaves production to when it’s sold to the consumer. Both distributors and retailers are asking for more from brands for basic functions like getting on shelf, reducing the cost of goods (discounting pricing to distributors / retailers), and promoting the products in-store (discounted pricing for consumers).

The current model isn’t sustainable, particularly for smaller, emerging brands trying to build profitable businesses and regenerative supply chains at the same time. Distributors and retailers can better support their own sustainability goals by eliminating or reducing the operational price of doing business for regen brands. Whether it’s reducing free-fils, costs for off-shelf promotion, or off-invoice purchase periods – we need to build incentives for more brands to build regenerative supply chains. We need to support and reward the brands that are truly creating value for people and the planet.

How can we create some tools and systems to enable this approach in a way that is earned incentive versus preferential treatment? It seems like retailers, distributors, and brands need to come together to:

  1. Outline specific positive outcomes that are occurring
  2. Identify which ones can be measured and verified
  3. Decide if there is some economic incentive that can be tied to them

3) Market “regenerative” claims like other simple, binary product attributes

Right now, it’s becoming more and more clear that no one certification is going to "out-compete" the others and become the one true verifier of regeneratively farmed land or regeneratively produced products. With multiple regen-specific programs gaining steam, legacy platforms that serve as a proxy for regeneration (Demeter Biodynamic), and countless non-certified or self-certified programs, everyone is lining up to define what regenerative agriculture is. Hell, we even have governments getting in the mix with these recent efforts from the State of California.

What has all of this created?

A massive amount of consumer confusion and an entirely too complex pathway to driving meaningful changes in consumer awareness and demand.

If you look at other successful, highly adopted on-pack labeling or certification programs like certified organic, non-GMO, paleo, gluten-free, etc., they all share some common threads:

  1. These programs are all clearly defined by one central third-party governing body.
  2. That third party aids retailers and consumers in understanding (simply) what those claims mean and why it should affect a consumer’s purchasing decisions. 

Regen brands need a framework that unifies “regenerative” under a single consumer-facing marketing strategy – but still allows brands and products to express the unique aspects of their operations through various certifications and definitions.

That’s what the Regenerative Coalition is now striving to do. The Coalition’s mission is to increase consumer awareness and demand for regeneratively produced products.

As an official 501(c)(6) Trade Association, The Regen Coalition can unite a diverse set of regenerative brands under one banner to solve their shared problems in a collective, programmatic, and impactful fashion. Solving for a unified messaging strategy, shared marketing collateral, and programmatic retail execution is our stated goal for Phase 1 of the organization.

4) Build new investment entities, models, and tools to invest in regenerative brands

We’ve said it before. While it’s essential to start with empowering and supporting farmers and ranchers to adopt regenerative practices, we can’t forget the brands. 

As Juan Guzman of Artisan Tropic articulates so perfectly, “Brands are the face of the food system. And brands can lead the generation of demand, which will in turn affect the rest of the food system. If brands have the financial capital support, they will promote the creation of supply systems, and all the other parts upstream will see effects towards regeneration.”

Just like farms, brands need capital to transition and grow regenerative supply chains. But we need new solutions for regen brands across equity, debt, and philanthropic capital. We need to balance investments upstream (farmland, ag-tech, etc.) with investments downstream (processing infrastructure, brands, etc.), and right now that distribution is far from even.

We need to support the promising cohort of young, regenerative brands that are having great success even while being significantly capital-constrained. We need investors to see regenerative CPG as a viable asset class that can produce compelling financial returns and societal impact.

That’s what Outlaw Ventures is now striving to do. Outlaw is currently building a team and strategy dedicated to funding emerging regenerative brands. Once launched, it would be the first CPG venture fund with a core strategy focused on regenerative agriculture and the first regenerative agriculture focused fund with a core focus in CPG.

You can check out the full episode with Kyle & AC HERE.

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This ReGen Recap was produced with support from Kristina Tober

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