The First Drop: Not New, Not Normal

It’s Tuesday, March 17. St. Patrick’s Day. We’re long past parade cancellations, of course. In Ireland, the pubs are closed. The slowdown has begun.

For us, yesterday, Monday, was the confusing start to this new, disrupted period. While reporting is often a solitary process, not being together in the office with the broader team was unsettling, and we’re all trying to find a new work pattern, to know when to check in, to figure out when to try things on-the-fly and when to settle back into normal storytelling methods.

These changes come while we’ve simultaneously been working to finish this issue of the magazine (I’d originally written “closing” which is the term of art, but it’s a loaded word right now) and to keep reporting on the painful challenges that are hitting the CPG business in this, the time of the spread of COVID-19.

The air of uncertainty is scented with despair, and it keeps reminding me of 2008, when I was still fairly new at covering this business. What had seemed like an early boom powered by Red Bull and Vitaminwater was muted by the stock market crash and heavy layoffs that caused spending levels to drop. Overleveraged banks and other financial institutions involved in the real estate crisis dragged other industries into the pit with them. Startup funding was hard to come by — banks weren’t lending, large companies weren’t spending and a big group of brands was going out of business. Job cuts ran rampant, individual incomes dropped and entrepreneurs had their knees cut out from under them.

Enough with the history lesson. The hardest part at that time was just the day-to-day bleakness; the energy flow that had powered many of the early beverage and food and beer pioneers was turned off. It was as if the moving sidewalk. Just. Stopped.

So what brought things back then? I’ve always believed it was a combination of important trends: the growth of interest in better-tasting or better-for-you foods — driven by the spread of Whole Foods and Trader Joe’s — and the increased availability of new recipes or manufacturing ideas on the internet. A class of intelligent, global professionals whose career paths were suddenly dead ends, driving them to create drinks and food that stirred their passions rather than their paychecks.

Also, they started grinding: covering the industry for a while became an exercise in speaking with brands that were fighting for traction. Small companies found tribal gatherings: think Mark Rampolla dragging bottles of coconut water to marathons and yoga studios and GT Dave pulling wagons of kombucha to natural food stores in L.A.

But there was also the ultimate necessity that food and drink are staples: big CPG employers took a hit, but as we’re seeing now, the basic act of eating and drinking actually moves higher in the ranking of pursuits during times of crisis. In the years following 2008, at least, from their fulfillment of basic necessities, consumers started to move toward affordable luxuries like craft beer, bottled water, a new wave of energy drinks and protein-filled snacks, as well as new taste adventures like kombucha and chia that they heard about from friends. The decentralization of manufacturing, the emergence of new lifestyles and nimble audience construction and the abundance of talent to build purposeful companies provided a storm of new businesses that were eventually supported by a growing group of venture investors and an established set of strategics that needed to satisfy their changing consumers.

But that’s the past. I don’t know what will pull us out now, and it’s that bleak uncertainty that evoked the feeling of 2008 when I was out earlier. In 2022, I may be writing about the great initiatives that were unleashed as a result of the industry that was disrupted in 2020 by COVID-19. Right now, however, it’s assess and triage.

In the past few days I’ve spoken with consultants, investors and brands about some of the things that are going to help small brands survive: making sure that if you’re a small producer, you’ve got the cash on hand to foot your next production run, because having product in store is the key – and maybe you’re making painful staff cuts to do it. It’s making sure you’ve got your online fulfillment process in place and that you’re able to ship to the Amazon warehouse. It’s making sure that your sales guys are in touch with your ops teams because if there’s a chance to get a pallet into a void, you need to be able to do it, and fast.

It means, if you’re a bigger brand, you’re constantly assessing your supply chain capacity because that will put you in a position to reliably fulfill demand in the face of runs on product. That’s because part of the assessment is that, for some parts of CPG, at least part of the storyline remains the same: consumers are buying out oat milk and water as much as they are toilet paper and hand sanitizer. Route-to-market is widening for throughput of grocery items; as I write this today, for example, Amazon has reprioritized its warehouses to allow for more grocery delivery and fewer other product types.

But I’m not going to be a Pollyanna here. The uncertainty worldwide about the length and depth of the COVID-19 crisis means there’s going to be a lot of pain within the entrepreneurial ranks. Brands that are heavily weighted toward on-premise consumption are in the firing line. Higher unemployment may mean less experimentation and a retreat from some premium items; a construction slowdown hits energy drinks and isotonics; offices closing cuts into emerging coffee and snacking spaces. More concerning than that, however, is a tightening of the lines of credit and decline in the value of the retirement accounts that have served to launch or sustain many budding entrepreneurs. I don’t know if this challenge will lead to more risk acceptance, or less.

There’s risk in the air: that’s not just for startup brands, but for new consumers as well. After all, how many new beverages or foods have you been turned on to when someone offered you a swig or a bite?

That’s going to have to change. We’re going to have to come together in new ways, and start up together in new places. We’re further apart now, but it’s clear: we can’t lose contact. Ideas are going to come from communication: we need to find new methods.

It’s Tuesday, March 17. St. Patrick’s Day. Last night, I got an invite to a virtual happy hour. When it comes to booze, I thought I was stocked for the long haul, but I think I’ll go buy some Jameson.