Four in five fmcg startups feel unsupported and abandoned by the wider industry, research by Young Foodies has shown.
Some 81% of fmcg startups believe the industry offers less support to small challenger brands than to established counterparts, affecting their growth prospects and ability to gain traction.
This is despite the fact that startups are the driving force behind 59% of the current market growth, according to the Food and Drink Federation.
Almost a quarter of entrepreneurs have considered giving up after facing “frustrating” operational barriers “disproportionate” to their capabilities and lack of specific support, according to the research.
The 102 surveyed brands highlighted pricing, payment terms and minimum order quantities (MOQs) as “major trading disadvantages” against larger businesses.
Almost 70% of startups felt excluded from providers’ best rates due to their size, while 57% cited standard payment terms as a “key barrier to growth” due to their more limited cash reserves compared with larger competitors.
More than half the respondents considered MOQs an issue, forcing them to “overcommit” to large orders, impeding the testing of new concepts and trapping cash into assets rather than freeing it for marketing and investment.
When it came to grocery retailers, the research highlighted that 62% of SMEs said they failed to be adaptable and supportive of their size and set-up. A further 56% felt less of a priority to retailers than established blue-chip companies.
Bucking the trend, Sainsbury’s Taste of the Future initiative was cited as a notable example of a retailer willing to invest time and resources into challenger brands.
Launched at the end of June across 68 stores, the project allows small challenger brands the chance to list their products over a 14-week period. When that time is up, they could potentially win a full listing with the retailer.
Meanwhile, a third of startups struggled to find a manufacturer willing to work with them and almost half felt “less of a priority” for manufacturers, compared with larger-volume clients.
The research showed that wholesalers were more “inclined to recognise the value of working with challenger brands”. However, more than half the respondents said wholesalers had not been adaptable and supportive.
This figure remained steady when considering supply chain and logistics providers, with 52% of startups not feeling supported due to their size.
Professional service providers fared better, with almost two-thirds of respondents stating they felt supported when accessing services from marketing to financial advice.
“The UK food and drink eco-system introduces 8,500 new products to supermarkets each year. Much of the innovation comes from disruptive younger brands,” said Young Foodies co-founder Theadora Alexander.
“It’s fair to say that all macro trends point toward a future food and drink market where challenger brands play a central role.
“But with their limited resources having to stretch to the same operational criteria as big brands, the odds are stacked against them.”
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