insights
Why We Back Purpose-Led Brands to Define the Future of the Consumer Space

5 September 2022

At Verlinvest, we are passionate about brands that are tackling fundamental problems of scale and driving positive societal shifts – be that towards more healthy, more ethical, or more sustainable consumption habits.

That could be through launching new categories (such as our portfolio companies Oatly or Vita Coco) or re-inventing supply-chains (like Tony’s Chocolonely), with a view to redistributing profits along the value-chain or driving value back into dusty, unloved categories. This is done by offering consumers greater choice and transparency in how they spend their money, and the opportunity to do good. We call these purpose-led brands.

Change requires bold action, and we partner with entrepreneurs who are passionate about standing-up for a better future, matching growth and purpose by building international scale.

Re-thinking supply-chains

Most fast-moving consumer goods (FMCG) supply chains were established after the Second World War on Fordist principles, prioritising price, consistency, and quality – typically without consideration for often unintended external implications. Today, the baseline of expectations has shifted, and consumers are taking these once differentiating factors as given, whilst becoming more conscious of and scrutinising where their money is going, and how it is being spent upstream – ultimately whether it’s having a positive or a negative impact on the world.

 

Millennials emerging as the most powerful consumer group

Millennials will soon emerge as the largest consumer demographic and are beginning to control the family-basket spend that’s so important to retailers and FMCG brands. Having lived through a breakdown of trust in traditional forms of authority – with political polarisation, internet misinformation, food scandals, health epidemics etc. – these consumers are looking to new sources of authority. Brands that are willing to be transparent, honest and communicate openly are winning their trust.

With higher baseline expectations for the brands they shop, and influential purchasing power appealing to retailers and investors alike, the millennial audience is critical for brands. Brands that can appeal most to the values of this generation and build trust are those that can scale.

Opportunities to drive a switching point in purchasing habits

We see the most successful purpose-led brands able to attract the best talent, deliver successful innovation effectively, and justify a premium price-positioning by doing good. Some are capable of shifting habits by shining-a-light on lesser-known issues and offering a solution for consumers.

For example in our portfolio, Tony’s Chocolonely aims to make chocolate 100% slave-free, working to remediate the 1.6m children working in the cocoa supply-chain, which until recently was largely unknown to consumers. Similarly, Who Gives a Crap offers a deforestation-free solution in the face of c.1.9m trees that are chopped down every day to serve the household paper industry, whilst donating 50% profits to help the 2.6bn people globally who currently don’t have access to a toilet and basic sanitation facilities.

Our Approach

At Verlinvest, we believe purpose-led brands are critical to ensuring the consumer sector changes for the better. We provide visionary entrepreneurs with the long-term capital and long-term time-horizon to drive meaningful shifts in consumer behaviour and subsequently the industry. We offer expertise in brand strategy, organisation structuring and international scaling that we’ve built up over decades of launching consumer brands in multiple countries, supporting entrepreneurs scale their brands into mainstream household names, whilst retaining the mission at their core.

In June 2022, Verlinvest hosted the first Brands For Good Forum in London, gathering a global community of pre-eminent purpose-led brands including the leadership of Oatly, Dove, innocent drinks, Vinted, Beyond Meat, Tony’s Chocolonely, Who Gives a Crap, Vita Coco, Unilever and many others, including earlier-stage companies. The aim was to identify common success factors in marrying commercial success with business ethics, to have a positive impact on the world.

You can read our key takeaways below:

1. BE MAINSTREAM – A purpose should be intrinsic to any company’s strategy, whether marketed externally or not. Consumers rarely purchase because of purpose alone – product, price and innovation remain paramount. You do it because it’s the right thing to do for every stakeholder – success or not – it’s about inspiring others and building a better ecosystem

2. BE TRANSPARENT – Radical transparency is critical to building consumer trust. There is a baseline acceptability and brands should be open with their teams and customers about the trade-offs being made in pursuing a primary purpose

3. SOLVE PROBLEMS – If you take a ten-year horizon, the risk to maintaining the status quo is huge. Massive externalities are being created by existing supply-chains. This leaves a huge and valuable opportunity to re-shape consumer industries that can unlock growth

4. BE MEASURABLE – We need to be more systematic and rigorous about our definitions of ‘purpose’ and ‘sustainability’. We need common reporting standards and labels to support action, enabling accountability

5. RE-BUILD CAPITALISM – Capital is not the enemy of purpose. It is a necessary enabler to growth, which in turn, builds impact at scale. This is critical to proving-out the model of Stakeholder Capitalism – a tiny business is unlikely to have big impact

6. BE COLLABORATIVE – It’s not us against them in terms of start-up challengers versus large incumbents and government/regulators. Collaboration, and mutual understanding is key to having a greater impact and building change of any scale that can access all stakeholders

7. BE BOLD – Building ‘issue-awareness’ is a critical enabler of some, but not all, purpose-led brands. A purpose flywheel can be unlocked to educate consumers on less-known issues, empowering them to spend money on brands solving issues (typically millennials), in-turn attracting retailers who are seeking access to this critical demographic, resulting in greater growth and investment flowing into the sector

8. BE INNOVATIVE – Purpose attracts young talent, which fosters innovation and disruptive thinking, unlocking new avenues for growth by reinventing the ‘status-quo’ – seeking solutions to externalities created by existing structures

9. BE BRAVE & SINGLE-MINDED – When you talk about purpose, mission & sustainability, you face increased scrutiny and will be held to high standards. Cancel culture will always exist – keep conviction in the face of adversity & religiously prioritise your mission

 

People in this post: Ben Black

Portfolio companies in this post: Oatly Tony’s Chocolonely Vita Coco Who Gives A Crap

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