Simon Dunn’s Post

Woolworths spun off a $9 billion business after executing the perfect combination of investment strategies. They used two common strategies to quickly control the market and build a strong moat: - Horizontal investments to roll up market share - Vertical investment strategy to build the moat 🔄 Roll Up Market Share Dan Murphys was the first acquisition. They only had 5 stores but the goal was clear - gain market share through discount prices. Dans had huge growth but Woolworths realised that people would pay a premium to get their alcohol where they get their groceries. So they opened BWS stores right next door to Woolworths. As consumers became more interested in unique and high-quality wines, Woolworths looked to Cellarmasters. The involvement of experts in selecting the wines attracted wine enthusiasts that BWS and Dans couldn't. They now have the market covered, discount prices, convenience and quality customer service. 🏰 Build The Moat In an effort to provide an offering others couldn't, they acquired wine brands and on demand delivery providers. Paragon Wine Estates is a growing collection of premium wine brands that Endeavour has acquired and you can't get them anywhere else. As people increasingly used on-demand delivery apps, Endeavour saw the opportunity to control this distribution channel through JimmyBrings & Shorty's. They now have wines you can't get anywhere else with a distribution channel that's unmatched. In 2021 Woolworths spun off Endeavour Group, and it's easy to see why it's currently valued at $9b. ______ If you're interested in learning more about M&A strategies, join me for my FREE workshop next week, link in comments 👇

Very interesting article from Inc. Magazine, highlighting the difficulties for young CPG brands looking to scale into big retailers. Slotting fees and Inventory costs can be astronomical for smaller brands taking on large retail listings. Combined with the 60% reduction in VC funding for CPG brands since 2021, it's increasingly difficult for brands to have access to the kind of capital required to take on large retail listings. Interested to hear people's personal thoughts and experiences with this. #CPG #Wholesale #Retail #Funding #wayflyer

This is especially interesting to me considering how many conversations I've had with others (Sandy Hernandez I The Retail Muse, Neil Saunders, Whitney Jordan, Richard Hammond) in the last two weeks alone about how much more advanced the grocery space feels in the UK compared to the US. And though I've not been, I know Woolworths is also ahead of the curve in this arena as well. I'll be very curious to see what comes of this! #grocery #retailinnovation Tesco #retailstrategy

B.good is known for its fresh burgers made with local ingredients. In their first 8 years, they had 8 outlets in Boston, all company owned. By the next 7 years, they rapidly scaled to a fleet of 69 stores. They chose the franchise route while trying to preserve their ‘fresh and local’ core value. But the company struggled. The scale was a challenge to their ‘fresh and local’ core value. Neither could they preserve their value, nor could they deliver new value. Now they are down to 13 outlets. What should they have done? 𝐎𝐏𝐓𝐈𝐎𝐍 𝟏: Stick to the core value proposition and accepted the less aggressive slow growth? 𝗢𝗥 𝐎𝐏𝐓𝐈𝐎𝐍 𝟐: : Abandon core value proposition on realizing they hinder growth and chased growth? #growth #strategy #scale Gary Pisano

Foxtrot is closing down and GoodGood in Canada met the same fate last year. Is there no room for Strategic Renewal in grocery? Both concepts sought to combine a local neighbourhood retailer and eatery with fast delivery. Both took on substantial investment. Who doesn't want a local eatery with retail and fast delivery? How did they fail? Prior to Faculty of Change, I spent a decade as a VC, primarily focused on consumer brands. The only businesses that can scale rapidly are those that have strong sales and generate high profit margins. I can list 20 names you won't remember or haven't heard of that failed making the same mistakes. You don't want to find yourself reliant on external capital to fund your growth. When that capital runs out, so does your business. The truth of retail is it takes YEARS for a store to be fully productive. And that is assuming it has a clear value proposition that resonates with customers. Beyond the financing story, what can we learn about Strategic Renewal from this? Foxtrot, Doms and GoodGood were more akin to specialty coffee retailers than they were grocery stores. They tapped into the rising habit of "sweetie treaties." These are quick spending urges, usually satisfied by a snack or beverage. McDonalds is capitalizing on this growth with Cosmos. The writer Kyle Chayka described it as "Honestly, I’ll miss it. In a city that doesn’t have nearly enough corner stores, it was a place where you could spend $10-20 on a bag of little treats that felt tuned to your life." I miss many businesses that had unsustainable business models that subsidized my life with VC money. But there is more to learn here. These companies offered opportunities for self expression and self development through consumption. The packaging was important because you wanted to be seen with it. The treasure hunt and discovery was a part of the experience. You are putting into the work of growing and learning (and expressing your taste). Grocery, and food retail in particular, solves for a whole range of human needs - from sustenance to status and beyond. These millennial grocery chains just met a different need set than was traditional. It doesn't mean they were wrong in concept, they were wrong in execution. https://lnkd.in/gJhA3nK2

In June 2021 at the height of the COVID pandemic, Danny Milham raised $11 million in capital to launch his new fast grocery delivery business. By September 2021 the business, MilkRun had launched with the promise of delivery within 10 minutes. First launched in Sydney and soon expanding to Melbourne MilkRun received it’s second injection of capital in early 2022 to the tune of $75 million. Hiring hundreds of staff and setting up multiple logistic hubs the company was trying to scale up quickly. However, the increasing scale didn’t have the desired effect. By June 2022 the business was unravelling. Due to high operating costs they were making a significant loss with every order and were failing spectacularly on the 10 minute delivery promise. A third capital raising effort later in 2022 failed and by February 2023 they were laying off staff and soon shut the doors in April 2023. This spectacular failure made headlines in every financial paper and has been a case study in poor business planning. However, this did have one highly desirable upside. Brand awareness. You see Danny Milham is no slouch when it comes to business. As one of the brains behind the Koala mattress company Danny understands the power of marketing and the value of a brand. In June 2022 while his MilkRun business began to unravel, Woolworths launched a competitor brand Metro60, offering the same services. Never heard of it?  No one has. It was failing in a whole different way. Metro60 had the infrastructure that MilkRun did not, but Metro60 was competing with Uber, JimmyBrings, Doordash and many others for brand awareness. The solution? In May 2023 Woolworths purchased MilkRun for $10 million. At the time Woolworths Group CEO, Brad Banducci, said: “We've long admired Milkrun's innovative brand, dedication to customers and ambition to shake up the grocery delivery model. “The Milkrun story will continue to live on and thrive with Metro60 relaunching as Milkrun now powered by Metro.” How interesting that even a failed product can still produce a strong brand?

Guzman Y Gomez has opened about 1 store a month on average since their Surry Hills founding in 2005. The company needs to increase this to almost 1 new store a week to achieve their ambitious growth plans to rival McDonald's ~1,000 stores in 20 years (a feat that took Macca's over 50 years). And this at a time of exorbitant construction and operating costs. Nonetheless, the IPO two weeks ago saw plenty of hype, with the stock rallying 36% on the day, giving the sub-200 store fast-food chain an eyewatering $3 billion valuation. We don't get it. At an implied valuation of ~40 times 2025 EBITDA, management execution needs to be impeccable (and some), otherwise there presents material downside risk. On a risk-adjusted basis, we're comfortable waiting this opportunity out to see if management can prove themselves in the unforgiving listed equities environment. In the meantime, on a relative basis, we see a compelling opportunity in Domino’s Pizza Enterprises, which trades at less than half the valuation and has a proven track record across a number of markets. Listen to more on this in Alvia Portfolio Manager, Chris Scarpato, CFA's latest ausbiz interview. Josh Derrington, James Duffy, Daniel Martin, CFA https://lnkd.in/g98EBbV3

There's been some chatter about the lack of Sachili updates on my feed lately. Here's why. ✅ We've been super -focused on expanding(revamping) our business model. ✅ We've also been navigating the balance between celebratory posts and more valuable/real content. CPG is tough right now so balancing our feed has been important. ✅ Plus I have a new CPG/tech venture in the works so yes I am officially bootstrapping 2 start-ups (more on this in a future post:)). We are finally sharing some news worthy updates! ✅ New SKU Alert! "Everything Sesame" our most anticipated new SKU launches this month on Amazon and select Ontario retailers! ✅ Hospitality Expansion! We're excited to announce Bestwestern as the first hotel brand to feature Sachili products. Rollout will be gradual but if you stay at a BW property be sure to ask about our products! ✅ We're aggressively pitching to major US regional retailers to bring Sachili products into their private label line-up. This will be a major shift given our strong brand recognition but we see this as an opportunity to tap into the strong growth trajectory expected across retailer private label offerings. The CPG landscape is tougher than its every been, and I expect this year to be no exception. However, Sachili is more agile, focused and ready to adapt and thrive in this new industry dynamic. Btw if you are an "Everything but the bagel" seasoning fan, you will definitely want to try our version of this popular flavor! Keep a look out for some creative taste tests in retail demos next month!! Sobeys Bestwestern Metro Inc. Loblaw Companies Limited Fortinos Supermarket Ltd UNFI Canada National Cortina THE EAST INDIA COMPANY FINE FOODS LTD #Sachili #CPG #Foodservice #EverythingSesame #NewProducts #newchannels #womensupportingwomen #entrepreneurship

One of the most iconic British success stories is that of #Cadbury, the chocolate company. It all began in 1824 when John Cadbury opened a small grocer's shop in Birmingham, England. Initially, Cadbury's main focus was on selling tea and coffee. However, John Cadbury also started experimenting with cocoa and chocolate as alternatives to alcohol, which was prevalent at the time but also associated with social problems. The turning point came when John's son, Richard Cadbury, took over the business in 1861. Richard saw the potential in cocoa and chocolate products, especially as they were gaining popularity as beverages. He launched Cadbury's first cocoa product in 1866, which was an instant success. In 1879, Cadbury introduced their first chocolate bar. This marked the beginning of Cadbury's dominance in the chocolate market. The company was innovative in its production methods, introducing new techniques for refining cocoa and improving the quality of chocolate products. Cadbury's commitment to quality and innovation paid off, and by the late 19th century, it had become one of the largest chocolate manufacturers in the world. The company's growth continued into the 20th century, with iconic products like Dairy Milk chocolate bars becoming household staples in the UK and beyond. Cadbury's success was not only due to its delicious products but also its commitment to social responsibility. The company built model villages for its workers, providing them with decent housing and amenities, and implemented progressive employment practices. In 1969, Cadbury merged with drinks company Schweppes to form Cadbury Schweppes, further expanding its product portfolio. Eventually, Cadbury Schweppes split into two separate companies in 2008, with Cadbury being acquired by Kraft Foods (now Mondelez International) in a high-profile takeover. While the ownership of Cadbury has changed over the years, its legacy as a British business success story endures. From its humble beginnings as a small grocer's shop in Birmingham to becoming one of the world's leading chocolate brands, Cadbury's journey exemplifies the entrepreneurial spirit and innovation that have defined British business history. #BritishBusiness #SuccessStory #Entrepreneurship #Innovation #Chocolate #History #SocialResponsibility

West Pack Lifestyle: A Missed Opportunity? West Pack Lifestyle is currently facing a critical juncture, grappling with challenges. It seems their rapid expansion into new stores may have been overly ambitious, leading to mismatches with local market demands. As I reflect on this, it seems if they had taken the time to thoroughly analyze what customers in each location really wanted. By tailoring their product offerings to match local preferences more closely, they could have sidestepped inventory issues and operational hurdles, ensuring smooth operations and better cash flow. Considering the economic ups and downs in South Africa - which have been pretty flat since post the 2010 World Cup, perhaps a more cautious expansion strategy would have been prudent. That economic environment required a more careful approach, especially since Covid-19 pandemic drastically changed consumer behaviour, thus requiring a relook at previous assumptions. Instead of simply replicating their existing stores, another approach for West Pack Lifestyle could have focused more on innovation. Picture them introducing new and highly desirable products, or expanding their product lines to include complementary items. This approach not only attracts and retains customers but also fosters excitement and loyalty, paving the way for sustained growth and profitability. By deeply understanding their markets, innovating thoughtfully, and diversifying strategically, West Pack could have proactively tackled the challenges they are currently facing. Ultimately, successful growth hinges on a thorough grasp of customer needs, market dynamics, and astute strategic planning in order to strengthen their business. As this business rescue continues to unfold, it will be intriguing to observe the direction the company chooses moving forward. #westpacklifestyle #retail #marketing #customerservice https://lnkd.in/dYsDaaVw.