What it takes to go mass-market

Just as parents should never admit to playing favorites with their children, I should never admit to playing favorites at Founder Secrets. However, what Proper Good CEO and co-founder Christopher Jane discussed in this episode immediately struck a chord with me.

One of the most sensitive topics among founders is differentiation. Everyone seems to care about how different you are from your competitors, and investors always want to be certain how unique and special your product is before writing a check.

Still, differentiation remains one of the most widely misunderstood concepts in startups. When it comes to the CPG industry, what often happens is that in an attempt to build a differentiated brand, many founders end up creating a niche product that will never scale.

This is not what Chris has in store for Proper Good. In this episode, we will discuss how you can build a differentiated brand while still going after the mass market.

Building a distinctive brand

Proper Good is a company that offers ready meals with "clean ingredients that you can pronounce." Chris co-founded the company with his sister three years ago and has since grown it into a national brand distributed throughout the United States. As he describes it, "We are essentially a modern version of a canned meal company, striving to make shelf-stable center store healthy and accessible.”

"There has been a lot of innovation around snacks and beverages," says Chris, "but the center store, controlled by the big canned companies, hasn't changed in decades.”

So, how do you innovate and build a brand that stands out?

"Innovation in a category can happen across multiple factors," explains Chris. "This includes pricing, products (ingredients and flavors), branding, and packaging. In a stagnant category like canned meals, you can innovate across almost all of them."

At the brand and packaging level, the playbook is simple. It all comes down to standing out and building a distinctive brand. When you look at Proper Good, that's clear as day—all other canned meal products use a can, but they use a pouch. While other brands are boring and stagnant, theirs is vibrant, fun, and colorful. As Chris puts it, "When everyone zigs, you zag."

Manuel’s notes
What about product differentiation?

Differentiation is usually a wise choice for branding and packaging. However, things can become more complex at the product level. Many startups fail miserably after trying to reinvent the wheel just for the sake of differentiation.

In most market categories, many companies offering similar products are all doing quite well. This is because once one company finds success in a new market, more players will capitalize on the opportunity. Unless there are concrete barriers, they will all try to build a better product and match any innovation. As a result, all products end up looking the same after decades of research and development. Trying to be different just for the sake of it means ignoring all that research.

To clarify, I am not recommending blindly copying other products. The devil is in the details, or in this case, the semantics. Instead of trying to build a different product, startups should strive to build a better product. If this means reinventing the wheel, go for it! If this means taking inspiration from others, do so without second thoughts, and then build a distinctive brand to stand out.

One caveat is that this might not apply to winner-takes-all markets, like social networks. In categories where the market leader has a strong network effect, you might have to build a different product for a chance to compete. If a company built a Facebook clone, its product would still be less valuable to users due to a lack of network effect. And that’s why all the other social networks had to build a different product instead.

To summarize, startups can succeed by building a better product and a distinctive brand. If building a better product is not possible, and the market is not yet saturated, build a similar product and a distinctive brand. If competing with Facebook, build a different product because a clone would still be less valuable due to a lack of network effect.

Which boat did you get in?

Should you enter an existing market where there is no room for building a better or innovative product? It may be worthwhile to do so in a growing market that is not saturated, as the demand for products or services is not yet fully met. This brings us to another important consideration.

As Warren Buffet famously said, "It doesn't matter how hard you row. It matters which boat you get in." And that's precisely what happened with Proper Good. Chris intentionally chose canned meals because it's "a stagnant category that you can innovate across almost all factors."

It should now be evident why Proper Good is so successful. Not only have they designed an incredibly distinctive brand, but they have also deliberately chosen a category with room for building a better (and only because of that, differentiated) product. As they describe it, “with clean ingredients that taste like mom made them."

Better or different doesn’t mean niche

"The vast majority of food in the natural category is distributed by local natural retailers,” observes Chris. “The problem lies in the margin structure and scale of those channels. What happens to these brands is that they end up making very good products that will never scale because they are too expensive for the mass market. They will quickly saturate natural channels, maybe grow to $10M in annual revenue, and then they are completely stuck because they have saturated the market that they can play in with their price and pack architecture.”

As mentioned in the introduction, this is not what Chris has in store for Proper Good. They knew from day one that they wanted to go after the mass market. To do that, they had to be very careful with:

1. Pricing: “I had no interest in building a bougie, expensive item for the premium natural channel,” notes Chris. “That was never the intent of the business. Our mission is to help the average person make better decisions every day. That’s why a Proper Good meal costs $5.”

2. Distribution: “To get to true scale, you have to go through mass retailers," explains Chris. "That's why we went with Walmart from day one. It's the world's largest retailer, and they have the distribution we need.”

According to Chris, it is crucial to know what you are aiming for from day one. He explains, "You need to decide from day one what you're trying to build. A profitable and small-scale natural brand has completely different capital and strategy requirements than if you're trying to build a $100M business in four years. There is nothing wrong with either of those. You just have to be very honest with yourself about what you are trying to build because you cannot reverse the engine. This will save you a lot of time and pain.”

Why startups win

Founders innovating in categories dominated by large corporations know the pressure of competing against companies with much deeper pockets. However, this should not discourage anyone from trying. While big companies do have more capital, they are also incredibly slow to innovate.

As Chris points out, "Just take a picture of the center store shelves—it looks the same as it did in 1970. The innovation pipeline for big companies is years. For us, it's weeks. Moreover, as retailers increasingly value certain health attributes and consumers are in the driving seat, it becomes even more difficult for large corporations to keep up with changing trends.”

Standing out…at Shark Tank

In a previous episode featuring Alex Bayer, we saw the incredible growth that CPG brands can experience after appearing on Shark Tank. Alex's company, Genius Juice, tripled its year-over-year revenue after the episode aired. For Proper Good, it was the same. After the episode aired in October 2021, they experienced unprecedented growth. "It exceeded our wildest projections," says Chris. "We did four months of average sales in one week."

However, getting onto Shark Tank is not easy. Hundreds of businesses apply, but only a small percentage of them get aired. According to Chris, the key is to keep in mind that Shark Tank is a mass-market family show as well as a business-orientated show. He explains, "While it might be considered a business show, there's also an entertainment component. A lot of people apply, so we decided to go all in. We watched every Shark Tank episode, wrote down what we liked from other pitches, and decided to gamify the whole thing. We designed the set, wore the outfits, and leaned into our British roots and accents."

Testing and iterating

If you have watched the episode, you may have noticed that, besides getting an investment from Mark Cuban, Chris presented Proper Good as a 12-meals-per-box offering, which they no longer offer. Chris believes that testing is the key to an optimal business model. "We tested everything," he says, "from a standard website to a 12-meal box to subscriptions. The current model is the result of 2-3 years of learning."

Continuously testing and iterating also enables founders to make data-driven decisions rather than relying on their own preferences. Chris explains, "Founders often become very polarized about what they want. When we launched our oatmeals, we had a massive internal struggle. We wanted to keep them no-added sugar like our soups. However, without any sweetness, oatmeal is disgusting. So we tested a low-sugar version with 7-8 grams for a very filling breakfast. We instantly received better reviews, better repeat rates, better everything.

We had this strange idea that there should be no added sugar, but we completely made that up in our minds. Consumers didn't care at all. If you're going after the mass market, you really need to focus on what consumers actually want and lean into it."

To conclude, Proper Good is an excellent example of how to build a mass-market company by having a better product, a distinctive brand, and reasonable pricing. As Chris puts it, "It's cheaper than DoorDash, more convenient than meal prep, and healthier than fast food.” So, if you are feeling hungry, take a look at Proper Good's delicious soups and oatmeals. Thanks to Chris's focus on building a mass-market product, they're also pretty affordable!