Why 8 out of 10 New CPG Food Brands Fail (and How to Avoid It)

Launching a CPG food startup is exciting, but the odds of success are daunting. In the U.S., the CPG (consumer packaged goods) food industry is brutally competitive – roughly 8 out of 10 new CPG food brands fail within a few yearsfastcompany.com. This high CPG food startup failure rate means founders must navigate numerous CPG brand challenges to survive. Below, we dive into data-driven reasons why so many new food brands flame out, and provide practical food brand success tips to avoid common pitfalls. Whether you’re an early-stage founder, operator, or marketer, this report-style guide offers real-world insights – from verified failure statistics and root causes to mini case studies and tactical strategies – all in a U.S. industry context (2023–2025).

The Odds: CPG Food Startup Failure Rates in the U.S.

Starting a food brand is not for the faint of heart. Various analyses put failure rates for new CPG products and brands between 70% and 90%. For instance, Nielsen data shows that only about 15% of consumer packaged goods launched in the U.S. are still around after two years, implying an ~85% failure ratefoodnavigator-usa.com. Similarly, Informa Markets estimates nearly 80% of CPG startups failfastcompany.com – essentially 8 in 10. These figures are sobering: out of tens of thousands of new food and beverage products introduced annually, only a small fraction achieve sustained success.

 

Why is the failure rate so high? Partly because even big CPG companies, with all their resources, struggle to create lasting hits. A Nielsen analysis noted that CPG giants have a “lousy track record” of building long-term sustainable growth with new productsfoodnavigator-usa.com. In fact, Harvard research famously found that approximately 95% of new consumer products failmarginvelocity.com. In short, the deck is stacked against newcomers and incumbents alike – the food market is crowded, consumers are fickle, and retail shelf space (or online attention) is limited.

 

 

 

 

 

 

 

 

Compounding these inherent challenges, recent economic conditions have made things even tougher for emerging brands. High interest rates, a dry funding environment, inflation, and intense competition have increased the cost of doing business and choked off capital for startupsmodernretail.co. Many young food ventures that saw a pandemic-era boom have quietly shut down in 2023–2024 as the environment turned harshermodernretail.co. In this “Darwinian moment” for CPG, only the fittest – those who can operate efficiently and adapt – are survivingmodernretail.co.

Key Reasons Why New CPG Food Brands Fail

While each failed brand has its unique story, there are common themes behind most failures. Here we break down the key reasons – from pricing woes to distribution pitfalls – that cause CPG food startups to fail. Understanding these will help you avoid becoming another statistic.

 

 

 

 

 

 

1. Weak Product-Market Fit and Differentiation

A top reason for failure is launching a product that doesn’t truly resonate with consumers or stand out in the market. In the rush to capitalize on trends, many brands create “me-too” products or gimmicky innovations that lack a real value proposition. As one industry expert put it, “imitation without innovation is a recipe for failure.” Consumers are wary of copycat brands, and simply being first or different isn’t enough if it doesn’t fulfill a needlinkedin.comlinkedin.com.

 

Chasing the latest diet or superfood craze can backfire if the product doesn’t deliver better taste, nutrition, or convenience than alternatives. A Fast Company piece by a food CEO observed that founders often focus so much on being unique or “trendy” that they forget to be excellent: “some CEOs are so focused on being different, they don’t spend enough energy figuring out how to be... truly better.”fastcompany.com. In other words, not different for the sake of different, but meaningfully better for the customer.

 

Lack of product-market fit shows up in poor sales velocity – the product doesn’t move off shelves fast enough. Nielsen’s BASES research found that new CPG innovations launched before they were fully ready had an 80% failure rate in market, whereas products with strong performance (meaning consumers loved them) were 15× more likely to succeed long-termmarginvelocity.com. If early repeat purchase is weak, no amount of marketing spend will save it. Many failed food startups create a product that sounds exciting but doesn’t earn loyal, repeat customers.

 

 

 

 

 

 

 

 

Real example: OffLimits Cereal launched in 2020 with edgy branding and artful design, aiming to disrupt breakfast. But by late 2023, this quirky cereal startup had gone radio silent – social media activity stopped and products stopped being restocked online and in storesmodernretail.co. Despite hype, OffLimits struggled to find a broad enough audience beyond the novelty factor. Meanwhile, a competitor like Magic Spoon found product-market fit by addressing a clear need (low-carb, high-protein cereal for health-conscious adults) and grew a cult following. Magic Spoon’s focus on reformulating a beloved product (cereal) in a healthier way gave it staying power, enabling it to raise ~$100 million and expand from DTC into Target stores nationwideclay.com. The lesson: validate that your product truly satisfies a market gap before pouring resources into scale.

 

Avoiding this pitfall: Do your homework on consumer needs. Test your concept on a small scale – farmers’ markets, local stores, or online – to see if you get repeat purchases and genuine enthusiasm. Incorporate feedback and make sure your product is not just novel, but necessary. Build a unique brand story but ensure the product itself delivers real value (better flavor, health, convenience, or price). Remember that “how ‘different’ a product looks is a poor predictor of success”foodnavigator-usa.com – what matters is if consumers find extraordinary relevance in itfoodnavigator-usa.com. Don’t simply chase trends; aim to become a solution or an experience consumers can’t get elsewhere.

2. Pricing and Margin Missteps

Pricing can make or break a food startup. A common reason 8/10 brands fail is that their unit economics just don’t work – they price too low, cost of goods is too high, or they fail to reach volume efficiencies. You might gain initial sales with a premium, organic ingredient list or fancy packaging, but if your gross margins are slim, your business will bleed cash. As one CPG investor explains, “no matter how much buzz you generate... if the unit economics don’t work, the company won’t work.”linkedin.com

 

 

 

 

 

 

 

Many hot new brands have flamed out despite revenue growth because margins were untenable. For example, say a startup offers a super high-quality product at a price only slightly above its cost – customers love the value, but the company isn’t making money. If your gross margin is under ~20%, breaking even is nearly impossible; most packaged food brands need 35–50% gross margins to have a viable, scalable modellinkedin.com. While you might hope to cut costs with scale or raise prices later, in practice you can’t magically turn a low-margin product into a profitable one without alienating customerslinkedin.com.

 

On the flip side, pricing too high can also kill a brand if consumers won’t pay or if it limits distribution. Striking the right price-value equation is tricky – you must cover costs and convey premium quality (if that’s your positioning) yet remain competitive on shelf. Operational inefficiencies (discussed later) can further erode margin – e.g., high freight costs, wastage, or expensive co-packing fees.

 

Real example: Juicero, the infamous $400 juice machine startup, is a classic case of a mispriced offering. The company raised $120M on the promise of high-tech fresh juice at home, but consumers and media balked at the exorbitant price – especially when it was revealed you could squeeze the juice packs by hand without the machinetheguardian.comtheguardian.com. Juicero couldn’t sell enough units at $400 (even after cutting the price) to build a sustainable business, and it shut down after just 16 months, acknowledging it couldn’t achieve the scale needed to lower costs and turn profitabletheguardian.comtheguardian.com. The product was simply too expensive relative to the convenience it provided, illustrating how failing to align price with value led to collapse.

 

 

 

 

 

 

 

 

Avoiding this pitfall: Know your numbers cold. Before scaling up, calculate your true cost of goods, including packaging, logistics, distributor margins, and promotional allowances. Aim for healthy gross margins early on – if you’re under 25%, revisit your pricing or sourcing strategy immediately. Use small-scale production runs or test regions to gauge elasticity: will enough people buy at your desired price? It’s often wiser to launch at a sustainable price and offer promos/coupons than to launch unsustainably cheap and try to hike prices later (which can upset customers). Also, manage your product mix – for instance, focus on your highest-margin SKU and control costly complexity. In short, design for profitability from the start: as one expert says, even the most buzzworthy brand can fail by not managing gross marginlinkedin.com.

3. Distribution and Retail Challenges

Getting onto store shelves is a huge hurdle – but staying there is even harder. Many new food brands crave distribution in major retailers (Whole Foods, Target, Kroger, etc.) as a sign of success. However, expanding into retail too quickly can be a fatal mistake. It’s common to see a young brand land a big retail account only to be overwhelmed by supply chain demands and underwhelmed by sales, leading to a quick delisting.

 

As VC Sophie Bakalar notes, “getting into Safeway or Walmart seems like the ultimate achievement... not necessarily.” She warns that jumping into mass retail too early has been “the downfall for many CPG brands,” especially natural food startupslinkedin.com. Why? Suddenly you have to produce at scale, often front billions of dollars in inventory, and compete against established brands on a crowded shelf. If you don’t have strong brand awareness, your product might just sit there. Shelf placement fees, resets, and high velocity expectations mean if you don’t perform in a few months, you’re out – and once out, it’s nearly impossible to get back inlinkedin.com.

 

Another killer: slotting fees and trade spend. Big retailers often charge hefty fees for shelf space – “to place just one SKU on a shelf at a major retailer can cost as much as $100,000”, which is crippling for a startuplinkedin.com. Additionally, stores expect you to fund promotions, discounts, and retail marketing. If you “spend all your capital on a huge purchase order” to stock shelves but have nothing left for marketing, as Bakalar says, your product might just sit on the shelflinkedin.com. This scenario is common: founders celebrate a big distribution win, then watch in dismay as inventory collects dust because consumers aren’t aware of the brand. The result is often costly chargebacks, unsold stock, and being dropped by the retailer.

 

 

 

 

 

 

 

 

We saw this pattern during the pandemic e-commerce boom: many DTC-friendly brands expanded into brick-and-mortar in 2022–2023, only to face “the overlooked cost of doing brick-and-mortar wholesale” in 2024modernretail.co. An investor noted that some brands took a “big swing” on a national retail rollout thinking it would solve their problems, but “that strategy backfired” when they couldn’t support it with marketing dollarsmodernretail.co. Retailers, feeling economic pressures themselves, have also hiked deductions and fees, squeezing young brands even moremodernretail.co. Brands that didn’t meticulously track and dispute these charges “got really penalized on the back end,” essentially losing money on each salemodernretail.co.

 

Real example: Field + Farmer, a maker of plant-based dips and dressings, had a regional Whole Foods presence and a 2019 rebrand. They tried to scale, but by 2024 they shut down completelymodernretail.co. While details vary, it highlights how even a promising brand can wither if it can’t profitably manage broad distribution. Conversely, Liquid Death (the canned water company) provides a playbook for doing it right – after proven demand online, they gradually expanded retail presence (from 200 stores in 2020 to over 133,000 stores by 2023!), pacing growth with supply and marketing supporthighshealthyhabits.com. Liquid Death also embraced unconventional marketing (even a Super Bowl ad) to drive store sales, helping it avoid the off-shelf stagnation that plagues quieter brands. Their revenues reflect this careful scaling: $3M in 2019 shot up to $263M in 2023 as distribution grewhighshealthyhabits.com. The brand’s wild success underscores the importance of both timing and supporting retail expansion properly.

 

 

 

 

 

 

 

 

Avoiding this pitfall: Earn your way into retail rather than rushing. Start with targeted channels – local independent grocers, specialty stores, or online marketplaces – where you can build a track record of sales (velocity) and gather learnings. As you approach larger retailers, negotiate smartly: whenever possible, avoid or minimize slotting fees (prove your product will draw in a unique customer). Don’t overload on too many stores at once; it’s better to be successful in 100 stores than mediocre in 1,000. Ensure you have a marketing budget (demos, coupons, social media, retail media ads) aligned with any expansion – if people don’t know your product is there, it won’t move. Also, be prepared for the nitty-gritty: set up systems to track retailer deductions, and contest anything unfair (one expert noted that simply showing distributors you’re watching can reduce bogus chargebacksnewhope.com). In short, grow deliberately: secure a few retail wins, drive strong sales in those doors, then leverage that data to open more doors. As one advisor put it, “blinding ambition” to grow distribution without supporting it is a recipe for “premature scaling”marginvelocity.commarginvelocity.com. Instead, land and expand methodically.

4. Insufficient Marketing and Brand Awareness

In the crowded food marketplace, even a great product at a good price will fail if people don’t know about it or aren’t motivated to try it. Marketing is not optional – it’s essential, yet many early-stage CPG brands under-invest here or spend ineffectively, leading to failure.

 

 

 

 

 

 

 

 

 

One scenario is the “if we build it, they will come” fallacy: founders assume that getting on shelf or launching a slick website is enough, underestimating the effort (and money) required to educate and persuade consumers. But as noted earlier, there’s no benefit to being in a store if your product just sits on the shelflinkedin.com. New brands must overcome trust barriers – shoppers often stick to known brands unless given a reason to switch. That reason is created through branding, packaging, and promotions that grab attention and communicate value quickly.

 

Many CPG startups also struggle with targeting – they try to be everything to everyone, or they haven’t clearly defined their core audience and brand message. Without a clear brand positioning, marketing spend gets wasted. We’ve seen brands blow through cash on broad influencer campaigns or flashy trade show booths that don’t translate to sustained sales. On the flip side, being too frugal (the “always bootstrap” mentality) can mean you never reach enough customers to get traction. It’s a fine balance.

 

Expert operators stress knowing your customer deeply and building a community, not just chasing trends. Brad Charron (CEO of ALOHA Foods) emphasizes that sustaining a brand “hinges on trust” and consistent delivery, not constant buzzfastcompany.com. In practice, this means investing in customer service, soliciting feedback, and cultivating loyal fans who will advocate for you. If a brand cuts corners on product quality or messaging in favor of short-term hype, it erodes that trust and can lead to poor retention.

 

 

 

 

 

 

 

 

Real example: Kombucha and jerky were booming categories a few years ago, and many copycat brands launched to ride the wave. Those that failed often did so because they couldn’t articulate why they were better or different. Sophie Bakalar calls this “me-tooism”, noting that imitation without innovation leads to weak consumer pulllinkedin.com. A company that simply marketed “another kombucha” with pretty packaging but no distinct story likely saw mediocre sales and high customer acquisition costs, eventually burning out. In contrast, a brand like Humm Kombucha (a success story) succeeded by focusing on approachability and broad flavor appeal, investing in in-store demos and branding kombucha as a fun soda alternative – a clear message that won mainstream consumers. The winners allocate budget to educate the consumer (why this product matters) and to build brand equity through storytelling, packaging design, and consistent engagement.

 

Avoiding this pitfall: Budget for marketing as a core part of your business plan (whether that’s digital ads, content marketing, field marketing, or broker/distributor support). A rule of thumb: expect to spend significant dollars to drive trial when entering new markets – don’t assume product will sell itself. Utilize cost-effective tactics if money is tight: social media engagement, scrappy PR, local events, and sampling can create buzz without six-figure budgets. Critically, identify your target consumer and tailor your message to them – it’s better to strongly convert a niche audience than weakly appeal to everyone. Also, track your marketing ROI and focus on channels that yield loyal customers (for example, some food brands find that once a customer subscribes online or joins an email list, their lifetime value justifies higher upfront marketing spend). Finally, deliver on your brand promises: nothing kills word-of-mouth faster than disappointing customers. Happy customers are your cheapest marketers. In summary, treat marketing as essential fuel for your brand engine – without it, you may stall out even if everything else is on point.

 

 

 

 

 

 

 

5. Operational Inefficiencies and Cash Flow Crunches

Running a food brand is an operationally complex endeavor – production, logistics, inventory, and finances all have to sync. Many startups fail not because the product was bad, but because of operational mismanagement or scaling issues that cripple the business. Two big culprits here are premature scaling and poor cash flow management.

 

Premature scaling is when a startup tries to grow too fast – launching in too many stores, or producing too much volume – before the fundamentals are steady. We discussed the distribution aspect of this, but operationally it also means the company stretches its supply chain beyond its limits. Overproduction is a classic mistake: a brand scores a big order or optimistic forecast and produces a massive run of product (often to get a lower unit cost). If that product then sells slowly, you have cash tied up in inventory that might expire. Dead inventory is deadly to cash flow – it’s money sitting in a warehouse. Industry insiders note that many brands die from “inventory addiction”: chasing big revenue numbers by stuffing the channel, without realizing they’re losing money on unsold goods and storage costs. One CPG consultant observed startups “overbuying slow-moving products” and “ignoring storage costs,” which quickly erodes cash reserves (tweet by Austin Gardner-Smith).

 

 

 

 

 

 

 

Poor cash flow management in general is a common startup killer. You need cash to pay for production months before you get paid by retailers (who often have 30-60+ day payment terms). If you don’t forecast this gap, you can literally grow yourself into bankruptcy – more sales, but not enough cash on hand to fulfill them. A finance advisor, Lorne Noble, points out that “if you don’t have the cash to pay for things, then you don’t have much of a business… cash flow management is paramount.”newhope.com Many founders are product gurus but not finance wizards, and they underestimate things like burn rate or the need to raise capital well before running out of money. Some cling to a “bootstrap forever” mentality that limits them from bringing in needed expertise or funding at critical growth pointsnewhope.comnewhope.com. On the flip side, others raise a lot but spend it recklessly, not keeping an eye on ROI – also a path to insolvency.

 

Real example: Marco Sweets & Spices, an artisanal ice cream startup (founded 2020), ran into a nightmare operational scenario: their co-packer (manufacturer) had a safety recall on all their products, forcing Marco to pull everything from shelvesmodernretail.co. The financial hit was so large they “were unable to financially recover,” and the company shut down in November 2024modernretail.co. This shows how a single operational crisis – in this case, a quality issue in the supply chain – can sink a startup that lacks deep pockets. Another example is the wave of craft breweries that expanded distribution rapidly during the craft beer boom, only to have to pull out of markets and dump expired inventory when velocities didn’t meet expectationsmarginvelocity.commarginvelocity.com. Many ended up closing down due to the operational strain and inventory write-offs. In contrast, brands that paced themselves and kept operations lean survived. The craft brewery Dogfish Head famously pulled back from four states at one point to avoid overextending, focusing resources on core markets they could supply and promote properlymarginvelocity.commarginvelocity.com – a strategic retreat that preserved their business for the long term.

 

 

 

 

 

 

 

Avoiding this pitfall: First, be realistic and data-driven in scaling operations. Grow stepwise – ensure one region or channel is cash-flow positive before adding another. Resist the temptation to produce huge batches purely for a lower cost per unit unless you have proven demand; it’s better to pay a bit more per unit than to end up with pallets of unsold stock. Use inventory management tools to track sell-through and adjust production quickly if something isn’t moving. Second, manage cash flow actively: maintain a rolling forecast of cash needs at least 6-12 months out. Identify when you’ll need to raise money or secure a line of credit well before you hit empty. A best practice is breaking cash flow into “technical” (day-to-day: are we collecting from customers fast enough and paying vendors carefully?) and “strategic” (big picture: at our burn rate, when will we run out, and how much cushion do we need)newhope.comnewhope.com. Answering these questions can literally save your company. Also, don’t skimp on talent when it comes to operations and finance – if you’re not strong in these areas, get advisors or hire help (bookkeepers, fractional CFOs, operations consultants). As the saying goes, you don’t know what you don’t know, and in CPG, what you don’t know can kill you. Efficiency isn’t just a nice-to-have; it’s survival.

6. Manufacturing and Co-Packer Problems

Most emerging food brands rely on third-party manufacturers or co-packers to produce their product. It’s a smart approach to avoid huge capital costs – until it goes wrong. Co-packing issues are a significant factor in many food startup failures, whether it’s quality mishaps, delays, or cost overruns.

 

One risk is quality control. Your brand’s reputation hinges on consistent product quality, but if your co-packer has lapses (contamination, incorrect ingredients, packaging errors), you could face recalls or bad customer reviews that permanently damage trust. We saw this with Marco Ice Cream in the example above – a co-packer’s mistake forced a recall that a small company just couldn’t financially withstandmodernretail.co. Even large companies struggle here (remember when a Blue Bell ice cream listeria outbreak shut down their operations for months), but big companies have resources to weather the storm; startups often do not.

 

 

 

 

 

 

 

 

 

Another issue is capacity and reliability. A new brand is likely a small fish in a co-packer’s client list. If the co-packer becomes unreliable – missing deadlines, prioritizing bigger clients, or even going out of business – it can leave a young brand stranded with no product to sell. Switching manufacturers is time-consuming and costly (new testing, new contracts, possibly new ingredient sourcing). This interruption can mean lost shelf space or stockouts that drive customers to competitors. We’ve heard horror stories of startups that had great sales velocity, but their co-packer couldn’t scale output or maintain standards, effectively capping the brand’s growth or causing a collapse in retailer confidence.

 

There’s also a strategic decision many brands face: when (or if) to move to self-manufacturing. Done right, owning production can improve margins and control. Done wrong or too early, it can drain cash and distract from core business. Some startups rush into building their own facility for a perceived margin boost, only to find they’ve sunk millions into a plant they can’t fully utilize. As Noble cautions, “building your own plant... often not worth the distraction to the company’s growth” if done prematurelynewhope.comnewhope.com. It’s a fine line – you must ensure a stable manufacturing base, but be careful about large capital projects that could backfire.

 

 

 

 

 

 

 

 

Real example: The rise and fall of Juicero can partly be attributed to manufacturing overreach – they created a complex hardware product that was costly to produce, and they couldn’t scale the “infrastructure” needed to supply a nationwide markettheguardian.com. Juicero’s CEO admitted they couldn’t achieve an effective manufacturing and distribution system on their owntheguardian.com. On a simpler level, many food entrepreneurs have faced issues like recipe scale-up problems (the product tasted great in the kitchen, but the mass-produced version was inconsistent or less tasty, hurting repeat purchase). If the co-packer doesn’t get the formula or process right, the end product can suffer.

 

Avoiding this pitfall: Choose your co-packer carefully – do thorough due diligence. Talk to other brands they produce for, investigate their certifications and track record, and start with small production runs to ensure they can meet your specs. Always have a quality assurance process: visit the facility during production runs, test each batch, and have contingency plans for recalls (e.g. insurance, lot tracking, and a crisis communication plan). It’s also wise to have a backup manufacturer identified in case things go south – dual sourcing can be life-saving if one plant has an issue. Yes, it might cost a bit more or take effort to qualify a second co-packer, but it provides resilience.

 

 

 

 

 

 

 

If you consider moving to in-house manufacturing, run the numbers and risk scenarios. Ensure you have enough demand (and capital) to justify it, and perhaps start with partial in-house production (or just pilot runs) before going all-in. Some brands choose a hybrid approach – co-pack some products and make a few key items in-house – to balance cost and control. The key is not being caught completely off-guard by your production partner. Maintain a close relationship and frequent communication with them. Treat them as a critical extension of your team, because they are. And remember, product quality is everything in food – one serious slip-up can mean game over.

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Having explored why new CPG brands fail, let’s look at some real-world examples of failures and successes, and then dive into actionable strategies to improve your odds.

Lessons from Failed and Successful CPG Food Brands

Nothing drives home these points like actual brand stories. Here are a few mini case studies from the U.S. market:

• OffLimits vs. Magic Spoon (Cereal Startups): Both launched around 2019–2020 targeting the cereal aisle with new approaches. OffLimits created buzz with its rebellious branding and mascots. However, it struggled with product-market fit (fun marketing, but no clear nutritional benefit) and possibly operational scale – by 2023 it had effectively vanishedmodernretail.co. In contrast, Magic Spoon focused on a clear need (high-protein, low-sugar cereal for adults) and built a loyal online following. After proving demand via DTC subscriptions, Magic Spoon secured ~$85M in funding to expand carefully into retail, starting with Targetclay.com. They continue to innovate (e.g. cereal bars) and manage growth challenges, but their strategic foundation – a differentiated product and strong customer loyalty – positioned them for success while OffLimits faded.

• Marco Sweets & Spices (Ice Cream): This gourmet ice cream startup gained traction with unique flavors, but a critical blow came when its co-packer had a widespread recallmodernretail.co. For a small company, recalling all products was devastating; Marco couldn’t recover financially and shut down in 2024modernretail.co. The cautionary tale underscores the importance of supply chain reliability (and perhaps the need for recall insurance or diversified production). On the flip side, consider Jeni’s Splendid Ice Creams, an artisanal brand that also faced listeria contamination in 2015. Jeni’s had to recall products and temporarily close, but they survived due to strong brand equity, swift action (investing heavily in sanitation and communicating transparently), and sufficient capital to restart production. It shows that crises can be managed if the fundamentals are solid and the company acts decisively – but for very young brands, a major operational crisis can be terminal.

 

 

 

 

 

• Liquid Death (Water) – Unorthodox Success: We mentioned Liquid Death earlier, but it’s worth highlighting as a success case. Who would have thought selling canned water with a heavy-metal aesthetic would become a $1.4B valuation company? Liquid Death succeeded by turning a commodity (water) into a lifestyle brand through brilliant marketing and timing. They started online with viral videos and merchandise that resonated with a subculture, then leveraged that brand heat to secure shelf space in convenience and grocery stores. They also benefited from changing consumer sentiment (less plastic bottles, more interest in fun, healthier drinks). By 2023, Liquid Death’s revenues skyrocketed to $263Mhighshealthyhabits.com, proving that with the right branding, marketing investment, and flawless execution, a newcomer can thrive even in a saturated category. The takeaway: a strong brand story coupled with operational excellence (they kept product simple and logistics manageable) can defy the odds.

• Krave Jerky (Premium Snack) – Exit and Rebound: Krave Jerky launched in 2009 focusing on natural, gourmet jerky when “gas station” jerky was the norm. They hit on a consumer trend (high-protein snacks) early, managed to get into Whole Foods and other outlets, and crucially, they marketed the brand as a lifestyle (appealing to health-conscious millennials). Krave grew rapidly and sold to Hershey for ~$220M in 2015 – a success by any startup measure. Interestingly, Hershey struggled to integrate Krave and the brand stagnated, eventually being sold off again. The founder even reacquired it later. The lesson here is twofold: For the startup, focus and branding led to a big success, but post-acquisition challenges show that even “successful” brands can falter if the new owners don’t maintain the vision. For current founders, Krave’s initial journey underscores the importance of timing (they rode the protein wave), getting into the right stores with the right partners, and being open to an exit when the opportunity arises.

These stories illustrate that success is achievable – but it usually comes to those who strategize smartly and learn from past failures. So how can you tilt the odds in your favor? In the final section, we’ll outline actionable recommendations to help your food startup not just avoid failure, but thrive.

How to Avoid Common Pitfalls: Strategies for CPG Success

While the landscape is challenging, failure is not inevitable. By studying the minefields that have trapped others, you can make informed moves to dramatically improve your brand’s survival and growth prospects. Here are practical, tactical tips for early-stage CPG food brand founders and teams:

• Start Small and Nail Product-Market Fit: Rather than “go big or go home,” take the opposite approach – go small to go big later. Focus on your core product in a focused market and prove that consumers love it (high repeat purchase, strong word-of-mouth). James Richardson of Hartman Group notes that the real success stories “nearly always start small, building momentum gradually.”foodnavigator-usa.com By fine-tuning your product and brand with a smaller audience, you can work out kinks and build a loyal base. This organic momentum will make expansion much smoother (and signal to investors that you’re a smart bet).

• Differentiate with Purpose: Ensure your brand stands for something uniquely valuable. Whether it’s a functional benefit (e.g. A Dozen Cousins offering convenient, authentic cultural recipes in ready-to-eat pouches) or a brand mission (e.g. Beyond Meat with its sustainability ethos), have a clear value proposition. Don’t be a copycat – if you’re entering a crowded category, bring an innovation or a niche focus that incumbents aren’t serving. And remember to communicate that differentiation clearly in your packaging and marketing. As Nielsen’s Taddy Hall found, breakthrough winners added incremental value to their categories by attracting new consumers or usage occasionsfoodnavigator-usa.com. Ask yourself: what new value or experience is my product bringing?

 

 

 

 

 

 

 

• Stress-Test Your Unit Economics: Before accelerating, play out your costs and pricing in a realistic scenario. What happens to your margin when you go from selling at the farmer’s market to selling through a distributor (who takes 20-30%) and a retailer (who marks it up 40%)? Can you still make money? If not, adjust now – through price increases, cost engineering, or a different channel strategy – rather than hoping to “make it up on volume.” Aim for strong margins early, as discussed, to buffer against unforeseen expenses. Additionally, keep fixed costs low until you have consistent revenue. It’s easier to add expenses later than to cut back if sales don’t ramp as fast.

• Build a Lean, Resilient Supply Chain: Work closely with your co-packers and ingredient suppliers to ensure quality and consistency. Have backup suppliers identified for key ingredients in case of shortages. Don’t overcommit to huge production runs until you have data to justify them; it’s okay to sell out occasionally if it means not overproducing (just communicate transparently with customers). Also, invest in quality control – test your product at various points (on receipt from co-packer, after a month on shelf, etc.) to catch issues early. Essentially, be vigilant about operations even as you focus on sales. A well-managed supply chain can be a competitive advantage (fewer stockouts, ability to scale production quickly when needed).

• Be Prudent with Distribution Expansion: Map out a distribution strategy that aligns with your brand’s development. Early on, prioritize channels where your target customer shops and where you can tell your story (specialty stores, online, regional chains known for incubating new brands). As your velocities and brand awareness grow, then tackle bigger retailers with proof points in hand. When you do expand, do it region by region if possible, so you can support each new market with some marketing and sales effort. And don’t be afraid to say “no” if a retailer opportunity isn’t right (e.g., a chain that demands costly fees or nationwide rollout before you’re ready). It’s better to delay and succeed than to rush and get kicked out for low performance. As one case showed, Dogfish Head brewery pulled back from some markets to avoid overextension, then later grew even strongermarginvelocity.com – sometimes a strategic retreat sets you up for a better advance later.

• Invest in Brand and Community Building: People buy from brands they feel connected to, especially in food where trust and emotional connection matter. So, cultivate a community around your brand. Use social media not just for ads, but for genuine engagement – share your story, highlight customers, respond to comments. Consider a loyalty or subscription program if applicable, to lock in your best customers. Collect reviews and testimonials to build credibility. And leverage inexpensive guerrilla marketing: send free samples to micro-influencers or local fitness instructors, partner with complementary brands for co-promotions, etc. The goal is to create brand evangelists who will promote you to others. Strong brands with a devoted following can better weather distribution challenges or pricing adjustments because customers actively seek them out (think of how Siete Foods built a fanbase for grain-free tortillas through social media and events, which translated into strong turns on shelf when they expanded distribution).

 

 

 

 

 

 

• Mind Your Finances – Both the Books and the Bank: Ensure someone on the team (or a trusted advisor) is actively managing the financial side. This includes bookkeeping, budgeting, and cash flow projections. Use software or even a simple spreadsheet to project your cash monthly – identify when payables (like that big production run invoice) will hit versus when receivables from sales will come in. Plan for worst-case scenarios (sales 30% lower, or a major customer pays late) so you know your minimum cash needs. Raise capital or secure credit lines before you desperately need them. It’s much easier to raise money when things are going well; if you wait until you’re almost broke, you’ll have little leverage and a lot of stress. Also, don’t mix personal and business finances – pay yourself a reasonable salary when you can and keep finances clean; it will make you more investable and prevent mistakes. As an expert advised, it’s fine to be scrappy, but “don’t always push for bottom of the barrel on costs” to the extent that you miss opportunities to invest in growthnewhope.com. Spend wisely on what drives the business (product quality, key hires, marketing) and cut the vanity expenses.

• Embrace Expert Advice and Mentorship: The CPG industry has a robust community of experienced professionals – many of whom are willing to mentor or advise startups. Seek out those who have built or sold food brands, or experts in areas you lack (be it supply chain, retail buyer relationships, or e-commerce). Joining industry networks (like Naturally Network, incubator programs, or even LinkedIn groups) can connect you to people who’ve “seen the movie before.” They can help you avoid rookie mistakes and introduce you to key contacts (buyers, investors, brokers). For example, getting a savvy CFO advisor could help you navigate tricky funding terms (e.g. the New Hope article warned about over-relying on convertible notes without understanding dilutionnewhope.comnewhope.com). Don’t operate in a silo – as the challenges pile up, outside perspective is invaluable.

 

 

 

 

 

 

• Stay Adaptive and Resilient: Finally, cultivate a mindset of flexibility. No startup goes exactly to plan. The founders that succeed are the ones who, as veteran Brad Barnhorn says, can think through multiple scenarios and pivot when neededfoodnavigator-usa.com. Expect that things will go wrong – a key supplier might raise prices, a pandemic might upend consumer behavior (as we saw in 2020), or a new competitor might encroach. Have contingency plans and be ready to adjust your strategy. This could mean reformulating a product, changing your marketing messaging, or even switching business models (for instance, some brands shifted from D2C to retail or vice versa when economics dictated). Passion is vital, but pragmatism is equally importantfoodnavigator-usa.com. Keep a close eye on the data – sales numbers, customer feedback, retail reports – and use it to learn and adapt continuously. Brands that can iterate quickly (while holding true to their core mission) have a much higher chance of long-term success.

In summary, avoiding failure in the CPG food space comes down to balancing bold vision with disciplined execution. You need to innovate and capture consumers’ imagination, and you need to run a tight ship operationally and financially. By pricing smartly, scaling distribution carefully, investing in marketing, streamlining operations, and learning from others, you can join the 20% that survive and thrive. It’s never easy – but with the right strategies, your food startup can beat the odds and maybe even become the next big success story on supermarket shelves.

 

 

 

 

 

 

 

Conclusion

The statistic that 8 out of 10 new CPG food brands fail is daunting, but it’s not a death sentence. It’s a call to action for founders to be smarter and more prepared. We’ve seen why so many startups fail – from mispricing and underfunded marketing to operational slip-ups and lack of product fit. By proactively addressing these challenges, you can set your brand up to be one of the successes rather than a cautionary tale.

 

Building a CPG food brand in the U.S. in 2025 requires grit and data-driven strategy. Use the failure rate as motivation to pressure-test your plan. Learn from the failed brands so you don’t repeat their mistakes. And emulate the successful ones – those that focused on product excellence, built gradually, managed their finances, and connected deeply with consumers. As the industry evolves (with e-commerce, changing retail dynamics, and shifting consumer preferences), stay agile and informed. The road to success may be narrow, but it absolutely exists for those who navigate deliberately.

 

In this high-stakes journey, execution makes all the difference. As Michael Dell famously said, “Ideas are commodity. Execution of them is not.” The CPG graveyard is full of great ideas poorly executed. By executing well – pricing right, distributing smart, marketing effectively, running lean, and adapting fast – you can avoid joining that graveyard. Instead, your brand can grow, scale, and perhaps one day be held up as an example of how to do it right in the world of food entrepreneurship.

 

Sources:

• Nielsen data on new product failuresfoodnavigator-usa.com; Informa Markets statistic on 80% startup failurefastcompany.com; industry research via MarginVelocitymarginvelocity.commarginvelocity.com.

• Sophie Bakalar, “Five common mistakes of CPG startups” – on retail expansion, slotting fees, unit economicslinkedin.comlinkedin.comlinkedin.comlinkedin.comlinkedin.com.

• Modern Retail, 2024 – on recent CPG shutdowns, distribution pitfalls, and feesmodernretail.comodernretail.co.

• Fast Company (Charron, 2024) – on focusing on being better, not just differentfastcompany.com.

• New Hope Network – on financial mistakes (cash flow, manufacturing)newhope.comnewhope.com.

• Margin Velocity (Planner) – on premature scaling and product-market fitmarginvelocity.commarginvelocity.com.

• FoodNavigator-USA (Watson, 2014/2024) – on building sustainable growth, starting smallfoodnavigator-usa.com and Barnhorn quotes on business model vs brandfoodnavigator-usa.com.

• Modern Retail (2024) – case examples: OffLimits and Marco Ice Cream failuresmodernretail.comodernretail.co.

• High’s Healthy Habits (2023) – Liquid Death revenue and store count successhighshealthyhabits.com.

• Clay.com (2025) – Magic Spoon funding and Target expansionclay.com.

• The Guardian (2017) – Juicero shutdown storytheguardian.comtheguardian.com.

fastcompany.comfoodnavigator-usa.com