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In this episode of the Startup CPG Podcast, host Hannah Dittman sits down with Drew Fallon, Co-Founder and CEO of Iris Finance, an AI-powered financial planning and forecasting platform helping emerging consumer brands make smarter financial decisions, improve profitability, and prepare for long-term growth.
Before launching Iris Finance, Drew spent nearly a decade building and scaling consumer brands, including serving as CFO of Mad Rabbit during its rapid growth. Today, through Iris, he works alongside hundreds of CPG founders, giving him a unique perspective on fundraising, acquisitions, financial planning, profitability, and the market forces shaping the next generation of consumer brands.
Hannah and Drew take a step back to examine the broader CPG landscape, discussing the current acquisition environment, why headline acquisitions don't always reflect the overall health of the market, and how founders should think about building businesses that remain valuable regardless of shifting investment cycles. They also explore where strategic buyers are placing bets, how changing consumer behavior is reshaping billion-dollar portfolios, and why the strongest brands continue to focus on financial fundamentals instead of chasing short-term trends.
Listen in as they cover:
- Why today's acquisition headlines don't tell the full story of the CPG market
- The difference between mature categories and emerging white-space opportunities
- Why strategic buyers are restructuring portfolios and actively searching for new growth
- How founders can build companies with real exit potential
- The categories attracting the most acquisition and investment activity
- Why valuation multiples have changed over the past several years
- How profitability and contribution margins have become increasingly important
- Why scaling revenue without healthy fundamentals can actually reduce enterprise value
- How GLP-1 medications and changing consumer behavior are creating entirely new markets
- The biggest similarities among brands that consistently outperform competitors
- Where Drew believes the next wave of acquisitions will come from
- Practical advice for founders thinking about fundraising, growth, and long-term value creation
Whether you're fundraising, building your first consumer brand, preparing for an eventual exit, or simply trying to better understand where the CPG market is headed, this episode offers thoughtful, practical insights into what investors, operators, and strategic acquirers are looking for in today's environment.
Episode Links
Drew Fallon — LinkedIn
Iris Finance
Iris Finance — LinkedIn
Show Links
- Transcripts of each episode are available on the Transistor platform that hosts our podcast here (click on the episode and toggle to “Transcript” at the top)
- Join the Startup CPG Slack community (35K+ members and growing!)
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- Visit host Hannah's Linkedin
- Questions or comments about the episode? Email Daniel at podcast@startupcpg.com
- Episode music by Super Fantastics
Creators and Guests
What is The Startup CPG Podcast?
The top CPG podcast in the world, highlighting stories from founders, buyer spotlights, highly practical industry insights - all to give you a better chance at success.
Drew Fallon
Markets can be like one of two things. Basically. You can either be like a very big and like mature and competitive sort of low margin market, or it can be a very like small but emerging growth market. And so like to launch a brand into one of those like hyper competitive mature markets. Maybe like a good example is Dr. Squatch and Unilever, where Unilever they own Axe. Obviously Axe is like big like when I was a kid like in the 2000, then axe like never appealed anymore. And so there's this entire like new next generation of guys that were born from 2000 probably like on basically when they have no brand serving them. And so Dr. Squatch like filled that white space.
00:44
Drew Fallon
Then you never had to buy them because Axe revenues are declining and that's their exposure and so they have to pluck it. So I think identifying areas in emerging markets where big CPG conglomerates don't necessarily have exposure or they have too much exposure that's like been declining are probably like if your goal is to sell the business, of course, which is not everybody's goal, but if it is, then kind of identifying the gaps in the portfolios of the big companies I think is like an interesting strategy.
01:12
Hannah Dittman
Hey everyone, I'm Hannah Dittman, operations and finance host of the Startup CPG podcast and today I'm excited to be joined by Drew Fallon from Iris Finance for some CPG market insights. Drew is a strategic finance operator who works closely with consumer brands on everything from financial planning and forecasting to fundraising readiness and long term growth. Strateg. As the co founder and CEO of Iris Finance and former CFO of Mad Rabbit, he brings firsthand experience building and scaling consumer businesses from the inside. Through his work at Iris Finance, helps founders better understand their numbers, make smarter decisions, and build businesses that are positioned for sustainable growth.
01:55
Hannah Dittman
In this episode, we zoom out and look at the broader CPG landscape covering acquisition activity, valuation trends, investor behavior, and what those signals may mean for founders building Today we also discuss where capital is flowing, what categories are attracting attention, characteristics of companies that successfully create long term value, and how founders should think about exit potential. Along the way, Drew shares his perspective on the trends and market dynamics he's watching most closely and what they can mean for the future of consumer brands. If you're fundraising, scaling, or simply trying to better understand how investors and acquirers are viewing the market today, this conversation is packed with practical insight and valuable context. Enjoy. Hey everybody, welcome back to the Startup CPG podcast. This is Hannah and today I'm here talking CPG Market Dynamics with Drew Fallon, co founder of Iris. Drew, welcome to the show.
02:51
Drew Fallon
Thanks for having me, Hannah.
02:52
Hannah Dittman
Thank you for being here. I'm really eager to get your insights and talk all things CPG before we dive into the broader conversation. I'd love to kick off with a brief background and your path through consumer and what ultimately led you to Iris.
03:06
Drew Fallon
Yeah, so I've been in this industry for probably like 10 years or so now. So I started a bunch of brands like in college, mostly like beauty and health and wellness companies and none of them really ever went anywhere. But there was one company that I met the founders very early on. It was a brand called Mad Rabbit. It's a personal care brand, Mad Rabbit. So I helped them get going from the very beginning. We were all in college. We graduated in 2019. Mad Rabbit was very much a side project for a couple years. So I went on and I did investment banking for a few years after school. All the while, Mad Rabbit grew to a point where the three of us really wanted to go full time.
03:40
Drew Fallon
And so I think it was 21 maybe where I jumped into the full time operating seat at the beauty brands. Spent the better part of five years operating full time there and then eventually wanted to start my own thing, which was Iris. And so Iris as an AI, FP and a platform. So basically deploy agents into the finance and operations departments of these consumer brands. Food, bath, apparel, beauty, personal care, all the above, to help them make better predictions and run more efficient, more profitable businesses. So on a couple different sides of the house I guess now. But yeah, it's been fun.
04:11
Hannah Dittman
Yeah, you've seen the world from many different angles and I think that adds a lot of color and context to your perspective. I feel like get nothing like being in the operating seat of an emerging growth brand. I know Mad Rabbit well. Very exciting company and cool that you got to be part of that journey. And I'm sure you have a lot of founder empathy for the companies that you're working with as well.
04:31
Drew Fallon
Yeah, that's for sure. Yeah.
04:33
Hannah Dittman
Having taken a swing and been in that seat yourself, I'd love to dive into some acquisition market landscape dynamics. I know that you're seeing quite a lot through your company and through your observations of the market. Have you noticed anything in the CPG acquisition landscape right now? How has activity been or how does it compare to maybe past years that you've taken a look?
04:55
Drew Fallon
So it's been a few years of like what we sort of call like fireworks where like these deals that have been happening probably since like the beginning of 25. So like simple mills got bought I think was the first deal of 2025 and then spin drift and there was all these like very well known logos that were going for very large prices. And so it kind of has like been giving this illusion for the last 18 or 24 months that like M and A is like super hot. And like it is in like some regards, if you look at sort of like a total dollars deployed perspective, like there's more dollars than ever. But it's really concentrated in kind of these big fireworks, headline type deals. And so on a holistic basis, I think it's relatively muted, honestly.
05:34
Drew Fallon
But people kind of see like the poppies of the world or whatever else and they get really excited and they think that everything's going to be hunky dory and it's all going to be great. And so Broadly speaking, after 2021 when the rate environment really changed, like private equity, I don't want to say stepped out of the marketplace, but it's harder to deploy capital if you're a sponsor with higher rates. And so that trickles down through the rest of the capital stack. And so the only brands that have been really getting bought for a couple of years now are like trul, exceptional companies that have reached critical mass in really important categories. And so I don't mean to say that pessimistically. I think that the future is exciting, but it tends to like feel a little bit more active than it really has been.
06:12
Drew Fallon
If you dig into the numbers.
06:14
Hannah Dittman
Yeah, no, I think that makes a ton of sense and I'm glad for the headlines because I feel like it has drummed up a little bit more activity and interest. Like obviously we hit the like peak of the bottom of the trough, I guess.
06:25
Drew Fallon
Yeah, right.
06:26
Hannah Dittman
Kind of around 2023 or maybe even a little bit before then. And that was rough times. Think coming from a seller's market into then a buyer's market, obviously the buyers have their choice of the litter and that goes everything from strategics all the way down to the most early stage investors and trickles through.
06:44
Drew Fallon
Yeah, you're right. It's a cycle, right?
06:45
Hannah Dittman
Yeah. So riding that wave, I'm glad to see SB picked up a little bit onto the upswing and hopefully that continues. And I think there was also the confluence of things. It's hard to ignore obviously all of the factors that Covid was playing and retail environments and everything that was going on with such a weird instance, the EBITDA add back instances of COVID and everything that was happening there. So yeah, crazy times and hopefully we're on the beginning phase of normalizing once again.
07:17
Drew Fallon
I think so. I mean I think the Groons deal was like a very interesting one. I think that one is going to be looked back on as like the first one of like sort of the hypercycle because like I think I've written a little bit about this but I think there's such a massive shift going on in the consumer right now. Mostly related around like GLPs and wellness and protein and fiber and all that good stuff. Like there hasn't been a ton of like VMs style acquisitions like basically ever. Like Haya got sold a couple years ago but that was like kind of it. It's like a kids vitamins company but then groons going for like over a billion dollars is like I think gonna be looked back on.
07:52
Drew Fallon
It's like wow, like we're in for like a five or ten year cycle of like all these companies that are growing really rapidly and we see a lot of them at iris. These are numbers that like are unfathomable honestly like ever. And so I think there's going to be a big cohort of brands that end up getting acquired. I guess the other comment really quickly is if you consider all the big CPG cos. So like Keurig, Dr. Pepper, Kraft, Heinz, Unilever, PNG, you can name it. Like they're all divesting. Like everything like KDP is splitting up, Unilever splitting up. Nestle has a portfolio review. They all have some sort of portfolio review going on. And so there's this trend where it's like the consumer is changing so rapidly and these big companies aren't moving quickly enough to meet those needs.
08:31
Drew Fallon
And so there's a huge cohort of emerging brands that are gobbling that share that are going to end up becoming the next incumbents, so to say. So I think it's a really exciting time.
08:39
Hannah Dittman
Yeah, no, I think great perspective and even when you benchmark like an Ollie versus a Groons and you think about just time to scale and what exit potential was like between the two of them, the groom story is exceptional and hopefully an indicator not just of an outlier situation but maybe where markets are trending once again and the portfolio shifts, like you're talking about diving into categories a little bit more fulsomely. Like obviously we're talking bms. Are there any categories or sectors that you are seeing the most activity? And I think obviously from my seat it seems Like Food and Bev has gotten quite a lot of the love and attention but curious your thoughts.
09:18
Drew Fallon
So Food and Bev is always, I mean it's the biggest markets with the most brands with the most shares. Like Food and Bev is always the biggest. Like it's like when I look at my like category charts it's like Food and Bev is like up here and like the next one is like apparel or something and apparel is like a bunch of like dog, like bottom feeder, like 3x EBITDA brands because like it's been a rough stretch for those guys but it's by the size of the markets is usually like the whole deal activity. So Food and bed is always the most, apparel is probably the second and then shifts all the way down to VMS and VMS is usually the lowest.
09:48
Drew Fallon
And that's why it's interesting that like some of these VMS companies are growing so quickly is because the markets are going to get big enough that like the strategics are actually going to start acquiring the assets. So food above is yeah, is always the biggest on a sheer like count perspective. I think beauty had a little bit of a lull between 22 and 24 since the Aesop deal. That was like the big splash and then K18 as well and it went quiet for a little bit but there's been a little bit more kind of in that category. So I think people are really excited about Korean Beauty specifically.
10:19
Drew Fallon
There's going to be a couple splashes there probably in the next 12 months and then broadly wellness this I don't want to keep talking about supplements, but supplements you're going to see some splashes there like electrolytes. Like there's been such an insane rise in electrolytes. Like there's going to be some tippers in that category like element, like what are those guys doing? They're like a trillion dollar company. It's like you got to go public or something at some point. There's like signs of life everywhere. I'm particularly excited about the VMS and the beauty space and then Food and bed is always going to be the most active.
10:47
Hannah Dittman
Yeah. When you're thinking from their perspective. An earlier or emerging stage brand founder, what takeaways or things can I extrapolate from this later market information that might be informative for an earlier stage business?
11:02
Drew Fallon
I think it's like all about white space honestly. And so like these markets that are like emerging and like being created. So markets can be like one of two things basically. You can either be like a Very big and like mature and competitive sort of low margin market. Or it can be a very like small but emerging growth market. And so like to launch a brand into one of those like hyper competitive mature markets. So think of things like packaging. There's a reason that nobody launches like water bottle. Well, I guess sometimes they do. But like going into like the water category is like the craziest move ever because it's like been commoditized forever. And so it's a really big market. But like you're competing on price and you don't have the scale. And it's kind of an uphill battle.
11:39
Drew Fallon
And so the question becomes where are like the actual opportunities? It's where people like aren't paying as much attention and it's in sort of those higher growth like everyone's been talking about fiber this whole time. It seems so obvious that it's like not going to be true. But you kind of have to just like look for these different categories. And so I think maybe like a good example is Dr. Squatch and Unilever, where Unilever, they own Axe, obviously, but then Axe like never appeal. Axe was like big like when I was a kid like in the 2000s. Then Axe like never appealed anymore. And so there's this entire like new next generation of guys that were born from 2000 probably like on basically when they have no brand serving them. And so Dr. Squatch like filled that white space.
12:17
Drew Fallon
Then you never had to buy them because Axe revenues are declining and that's their exposure and so they have to plug it. So I think identifying areas in emerging markets where big CPG conglomerates don't necessarily have exposure or they have too much exposure that's like been declining are probably like if your goal is to sell the business, of course, which is not everybody's goal, but if it is, then kind of identifying the gaps in the portfolios of the big companies I think is like an interesting strategy.
12:42
Hannah Dittman
Yeah, great point. And I think to dovetail off that point a little bit too. There's also like the competitive nature within the strategic portfolios as well. There's like the portfolios on their own of the big conglomerates, but then there's also the competitive edge like P and G. Looking at Unilever and comparing and contrasting against where they might be getting the edge amongst their competitive side that can drive a little bit of deal activity or interest as well.
13:09
Drew Fallon
Yeah. And just paying attention to like where the puck is going to. So like Unilever for example, which is like maybe the Most active, like buyer, like they've like completely shed everything that like isn't basically like beauty and wellness. Like they divested a 10 billion ice cream division. I forget what he calls it. He calls it like the action plan of 2030 or something. The CEO and it's like they're focused on all of those types of things and so Groons happens to align very nicely with that transformation, with that thesis. And so like literally if you listen to some of the earnings calls of these companies, like they'll tell you point blank exactly what they're looking for, like what they want.
13:41
Hannah Dittman
Yeah. And I feel like they always have their strategic plans, like their five year plan essentially of where they're trying to drive their business and retailers too for that matter. It kind of all syncs up and aligned. It's like the mafia behind the closed doors.
13:52
Drew Fallon
Yeah.
13:52
Hannah Dittman
Honestly, plotting the future, going into a little bit more maybe of the numerical side, how have valuations trended and maybe the stage of company at exit trended? I think those two things can inform what goes on in earlier stage deals a little bit obviously because holding periods are being taken into consideration by investors and also future fundraising evaluation marks are also being taken into consideration at the earlier stages.
14:19
Drew Fallon
Yes. On a multiple perspective. So like my mind goes back to Ghost, which was acquired by KDP in October of 23 and it was like a $1.6 billion valuation or whatever. It was a three point change sort of sales multiple after like 22, 23 and that was the end of 23. Like that was kind of like the first like big splash, like the we're back moment almost. And then like Pabi and Alani Nu went for premiums after that, so they traded at higher exit multiples. And so I think you've seen a little bit of expansion on an exit multiple basis since then, but not too much. It's highly category dependent, highly asset dependent. Like not your mother's was like a 12x EBITDA for like a 70 million EBITDA business that was growing like right back.
15:00
Drew Fallon
So they ended up exiting for like a multiple that would appear probably low, but it's hard to triangulate all these things. But I would say in general like multiples are a little bit higher off the top of two years ago. And then on the question of sort of like where are they at when they exit, I think the bar has just gone up so much from a scale perspective and like especially in food and beverage, I mean it feels like you have to be doing 500 million in revenue to get like a real multiple from a real buyer, which is like asinine number.
15:29
Hannah Dittman
Isn't that crazy? I know the scale expectations at exit just vary so much by category. And the like high turn low MSRP food and bev expectations, when you think the volumes that those companies have to be doing, the unit volumes, it's staggering.
15:49
Drew Fallon
It's crazy. Yeah, yeah, good point.
15:51
Hannah Dittman
Yeah, the units, because it's like they have some of the lowest MSRP and the highest exit like watermark scale expectations. And I'm just like, it's like a beyond proof of concept to be able to get acquired in some of those categories.
16:07
Drew Fallon
Seriously, it's crazy. I think like pretty much the minimum. I think like people used to say like at 50 million you are like getting interesting to strategics. But like back when were running mad Rabbit, they were like, yeah, like get to 50 and like then people are probably gonna start poking around at you. I feel like that number is like at least a hundred at this point or it's not like a hundred of trailing at least like in the next 12 months. Like you have to be drawing the line to that hundred.
16:30
Hannah Dittman
Yeah. And I think that makes a lot of sense because earlier days people were building out their portfolio. I think especially in beauty and personal care. That was like a lot of quick grabs to fill out portfolios. There was like so many emerging brands popping up at once. It was like a big cohort wave that happened all at the same time. And I think as portfolios get a little bit more saturated and maybe some of the exit potential of some of those didn't work out exactly the way that they thought. I think appetite might move downstream, but I think it's so category dependent also. Yeah, like, I think maybe there still is interest in the beauty personal care space a little earlier if all the other fundamentals are looking really attractive.
17:10
Drew Fallon
Yeah. Beauty maybe a little bit earlier.
17:11
Hannah Dittman
Yeah, yeah. I think it's a signal of scale. I'm actually so surprised about VMs. That's the one that surprises me the most because the margin profiles of those businesses are the sexiest and the recurring revenue is typically very high. Like the fundamentals of those brands is normally very attractive. And I think the gap there might have just been there wasn't a lot of branded plays. And I do think that acquirers are typically looking for branded, like lifestyle, if you will, businesses and a lot less commoditized goods, even if the business profiles make a lot of sense from a financial perspective. So I do think that probably comes into play A little bit. And at what scale do you need to say that you've attracted enough of a customer base to qualify for that? I think it's also hard.
18:01
Hannah Dittman
Like, there's the inverse problem where you don't want to get too big. And I think a lot of people fall into that bucket sometimes too, that have been very successful. And it's almost like, what's the path forward? There's like a very sweet spot window where you can fill the need.
18:15
Drew Fallon
And that's like some of the work that we do with Iris because, like, we have such a good vantage. I mean, we have 200 brands at this point and we're running like all their models. And so we kind of like know where the sweet spot is. And like, there's people that come to us and they're like, I did 30 million last year and I'm going to do 100 million this year. And I'm like, why? Like, can you explain to me what the benefit is? And they go, oh, well, I'm going to sell for 5x sales and so I'll be worth 500 million. And I'm like, well, your unit economics have been degrading for 12 months in a row and so nobody's going to buy you actually, by the way, if you continue just to chad scale that way.
18:47
Drew Fallon
And so like, I think the founders in this industry, they're not like finance people generally speaking. They're like very like creative or like product oriented people. And this is like why I got into like content creation is because I think finance people generally, they try to make things like more complicated than they probably need to be just to like confuse you into like paying them basically.
19:06
Hannah Dittman
Seem important?
19:07
Drew Fallon
Yeah, yeah. It's not like really that complicated. And like, when you break it down, it's very easy to understand in many cases. But I think there is like bad information out there and like, I'm like a little bit of a perpetrator of this where it's like when people are talking about sales multiples specifically, like a sales multiple is just like a proxy for any bit of multiple. Like, that's all it really is. But people like don't tend to think that and so they think that only sales matters. And so I'm just going to scale my sales and I don't care about the integrity of my business at a fundamental level. So I think there's still some work to do for the industry.
19:38
Drew Fallon
But I think the other sort of thing at play here is that after the quiddity, supernova, whatever of 21 people got a lot more disciplined in how they ran their businesses. And this is the kind of shift that's going to take 10 years. When I first started, it was like nobody knew what a contribution margin was. Like there are still people who like don't even know what a contribution margin is and it's like the only thing that matters.
20:00
Hannah Dittman
Yeah, I think you definitely hear investors beating that drum on profitability quite a bit. I don't think it's just the founders that fell into that trap. I think a lot of investors fell into the trap of profitability not mattering as well. And I think if you looked back at like earlier exits, especially in certain categories, the profitability didn't matter as much all the time to acquirers because their North Star was on different competencies. That they were trying to get the get of a younger customer base was more important than the operational excellence. Especially if you really think a big conglomerate is a purchasing something like a small emerging revenue, Maybe it's like 30 million in revenue and not profitable or break even. But they're acquiring a huge customer base. They're not so worried about the profitability hit of that at that time.
20:49
Hannah Dittman
If it's just like the one in their portfolio and they're getting all the benefits and they're getting like some D2C knowledge that they didn't have at the time or something like that. But then enough of those either don't fully pan out or they already fulfilled the need in their portfolio and now their directive changes and that's no longer good enough to get an acquisition. And now investors that thought maybe that was going to be the path that they needed to direct companies towards, it's no longer coming to fruition and now they're pivoting strategy too. It's like a domino effect that has a bit of a lag depending on what's going on at the end of the stream sometimes.
21:24
Hannah Dittman
And I think where you never go wrong is have a healthy business fundamentals business because you insulate yourself from trend changes in acquisition cycles which you don't want to be fully reliant only one path going right or you're not worth anything. So I definitely think it was a hard lesson learned for a lot of people in the industry. And now I think it's definitely become a different tabletop conversation where you definitely need to be tighter on business fundamentals to even be getting the looks that you maybe once would have a long time ago.
21:57
Drew Fallon
Yeah, I had a nice conversation with Michelle Miyakawa From Nolis probably five or six years ago. The way that she said it was like the pendulum is always swinging. And so it's just hard to design your business around wherever the cool thing is today. And I think especially when you consider like the Internet. The Internet's like not that old honestly in the grand scheme of things. And so like everyone got all excited about D2C and then like D2C was dead and then like it was like you have to be in retail and like the pendulum, like at some point it stops swinging and it lands in the middle. And so like not sort of over rotating on like any cool hot thing or whatever you said, just staying focused on the fundamentals.
22:32
Drew Fallon
And if things emerge like TikTok shop, like there's no reason you shouldn't be chasing TikTok shop like a little bit. It's a very intriguing new channel but you don't want to go all in tomorrow on TikTok shop because eventually it's going to change. But yeah, so I think like there's a balance between like being nimble enough to like try out new things and like move your business in a way that like wherever the puck is going, I guess, but without just uprooting everything every time the next like hot trend comes around.
22:57
Hannah Dittman
Totally. Yeah. Consumer's so cyclical. I mean look at our jeans trends and you will see the perfect example of how cyclical consumer behavior and trends can be. But yeah, I definitely think chasing trends is oftentimes a losing game. And it's like you can't really gamify consumer. You really need to just focus on the relationship and meeting the demand of your consumer. Speaking of this pendulum cycle or where we've been, I'd love to ask where you see CPG activity headed in the next six months or if you have any expectations for things that you think might come to fruition or what your expectations are.
23:32
Drew Fallon
Okay, so there was a lot of money that was deployed in 20 to 2022. A lot of those funds are coming up on their lives, their five or seven year lives. And so people are getting really excited about the secondaries market. I know several people who are literally raising funds dedicated and I think like collab fund might have just done this but like they're raising funds because they know that these investors are like going to be seeking liquidity and they're going to be willing to do so at a discount. And so there's going to be an acceleration in the secondary market for sure if it's not already happening in the next, like 12 months or so. And it's going to be interesting to see who kind of is going to be doing a lot of exiting.
24:06
Drew Fallon
And then there's going to be a bunch of VMS stuff. Like I said, I think Groons is the first one. Like obviously Elkat's trying to sell off Thorn and like if they succeed in doing that for 4 billion doll, like that's going to be an insane sort of comp.
24:18
Hannah Dittman
Crazy.
24:19
Drew Fallon
Yeah, there's some of these like new age food and beverage companies, like the poppies of the world, like that cohort, like Olipop's got to do something at some point. I've been saying that for like a year now. I feel like there's going to be a few of these like pretty big names. I think that like fireworks trend is still going on. But then I do expect there to also be some secondary market pickup and then VMs, I think. I mean, I know of a lot of VMS deals that are like ongoing right now that may or may not close or may not get announced, but that category is going to be pretty wicked.
24:48
Hannah Dittman
Yeah, I feel like it's that beginning of the functional food tide and.
24:52
Drew Fallon
Yeah.
24:53
Hannah Dittman
That whole era coming to fruition.
24:56
Drew Fallon
And I will say, like, I did a cycle of reticentide like the glp and so Iris, we have all these companies that sell protein bars and electrolytes and all this shit. And I'm. They're all growing crazy and I'm like, who's buying all these freaking electrolytes and protein bars? And then I did the reta cycle and I was like, because you're not hungry at all. And I was like, yeah, all I was consuming was protein bars and electrolytes. And I was like, oh my God. Like, I actually. I was like, it's me.
25:20
Hannah Dittman
You're like, it's me, Jessica.
25:22
Drew Fallon
Yeah. I'm like looking in the mirror and I'm like, oh my God. But yeah, I think that GLP thing, because of what it's like 8% of Americans are trying it or on it right now. And like that number is going to be huge. Half of Americans are like obese or something. I made that up. I don't actually know if that's true.
25:35
Hannah Dittman
I'm going with you. I'm like, sounds about right.
25:37
Drew Fallon
Right? Yeah, but that's going to be crazy, crazy stuff. Like you're talking about like monumental market shifts that are going to be driving the literal economy for the next however many years. It's honestly insane.
25:49
Hannah Dittman
Yeah, there's so much going on in our consumption of food and nutrition right now, which is obviously you've seen so much of the brand launches and emerging brands happening and growth obviously that eventually trickles out down the road to the kind of exits and everything else. And I think what will be the next wave? Who knows. But it's really interesting to have all these factors coming together all at one time and what the consumer is going through right now and the consumption cycle of information in general is just so sped up, especially now was already sped up with TikTok and social media and everything and now with AI chats it's even more so. So yeah, it's really interesting how all of these things tie together in the consumer ecosystem.
26:34
Drew Fallon
Do you have a perspective, like what do you think categorically is like trending or what do you expect to see?
26:39
Hannah Dittman
Yeah, I would say like I'm thinking pet.
26:41
Drew Fallon
Oh, okay.
26:42
Hannah Dittman
Well, it depends if we're talking exits or if we're talking brand emerging then and kind of down the road. But I would say yeah, I think pet follows human food cycles. I've always seen that. And obviously there's been the humanification of pets and all of these trends going on in the background. I think obviously pet adoption and ownership exploded during the COVID years and then I think we've seen a lot of like food traction happening sneakily in the background. But I feel like when you think about a consumer right now, we're so conscious of our own health, of our own protein intake, all these things that we're now becoming aware of for ourselves. I think the natural extension, if you look historically has been that eventually goes on to pet.
27:23
Hannah Dittman
So what happens in pet food, pet nutrition, pet supplements, that might be a next wave. There are also some pretty large incumbents and acquisitive strategics in that space as well. I just don't think it's as colorful and blaring as human food is right now. But I could see the shift happening down there and yeah, and then I think on the functional food side it'll be really interesting to see, like you mentioned earlier, what plays out with fiber. That's been on my mind for a very long time as well. And I think what happens with some of the functional food exits and how much appetite there is for a lot of that stuff. I think we've seen it in some aspects of supplements, like Wonder Belly Grooms. Does that extend into the actual like snacking categories where we've seen a lot of disruption?
28:10
Hannah Dittman
I think that will be the next phase Obviously, we saw a little bit in beverage with poppy and things like that, but how far that extends will be interesting to see. And if there's any, again, pendulum shifting, appetite changes, if some of those don't pan out accordingly as well.
28:25
Drew Fallon
Yeah. And I think the other thing to consider is like, so you used to work at main posts. I think private equity has been so quiet for such a long time too. So advent buying salt and stone, like, that's like, a really good example of, like, those were the types of deals that, like, weren't happening for a while.
28:39
Hannah Dittman
Yeah, totally.
28:40
Drew Fallon
I think there's gonna be a lot of that. These are, like, premium PE deals that are, like, fantastic outcomes for founders. Like, that's like, what you should be, like, pursuing realistically. So I think that might start to show up a little bit more too, which is just gonna, like, basically broaden maybe the outcome set across categories. You have a good point about pet. Pet's always just, like, a little bit behind people.
28:59
Hannah Dittman
Yeah.
29:00
Drew Fallon
Which is, like, so funny.
29:01
Hannah Dittman
There's always this, like, logic you can follow in a consumer's mind of how they're thinking, though.
29:06
Drew Fallon
It's so funny. Yeah.
29:07
Hannah Dittman
First they change their life and they're like, wait, what about Jiggy?
29:11
Drew Fallon
Yeah, yeah. Like, my dog needs to be hydrated now.
29:14
Hannah Dittman
Yeah. When I was at supply side. I mean, they're even looking at cognitive supplements and pet treats that help your, like, dogs learn tricks faster.
29:22
Drew Fallon
Oh.
29:23
Hannah Dittman
And things like that. Like the supplementation concept extending to, like, pet supplements as well is interesting. And where that goes, we've got a.
29:31
Drew Fallon
Brand that does pet fragrance on Iris.
29:34
Hannah Dittman
Interesting.
29:35
Drew Fallon
Yeah.
29:35
Hannah Dittman
Get a little mood boost going in your house.
29:37
Drew Fallon
I like humans wear cologne, I guess.
29:39
Hannah Dittman
Yeah. Well, no one likes wet dogs, so that makes sense.
29:43
Drew Fallon
Fair enough. Yeah.
29:44
Hannah Dittman
Have there been any patterns or similarities that you've noticed in successful companies you've tracked that you believe maybe have enabled some of their market success? Obviously we talked about business fundamentals earlier, but any profile similarities or retail expansion rollouts or anything in common that you think has been a trend happening or a way or a path or a playbook that brands have been utilizing?
30:09
Drew Fallon
Yeah, I think, like, a financial perspective, gross margin is like the foundation of this entire business model. And that's, like, why some of these, like, premium companies are doing, like, ima. It's like a publicly traded company, for example. They're like, the price is, like, absurd. It's like a 200 pack of, like, powders or something. Especially when you're just getting started, it gets very tempting to be like, oh, I'll get scale later and I'll. My margins will come when I'm bigger, after I grow. And so you start scaling into these weaker gross margins and it just like sets you up for failure.
30:38
Drew Fallon
So I think the founders that I see that are doing things right from the beginning are like finding that white space like we said, and then doing it in a way where like they can create a product that is new and it has a good enough like sort of buy low, sell high type profile to be able to support actually building a business around the product. And so they get going and they nail pricing, they nail supply chain. It's something that they can actually like make money off of. They do really well at like one online channel, whether that's Amazon, TikTok or direct to consumer. And then they roll out into retail thoughtfully. It can be aggressively but thoughtfully.
31:15
Drew Fallon
And so like they nail their velocities, like they understand that they're actually moving product in these doors before they tell Sprouts and H E B and Costco that they'll do it all. So they take it one at a time. They are very thoughtful and they prove their concepts and then they double down when it's working and back to the pendulum idea. Like they're never as distracted as they could be and they say no to a lot of opportunities, which I have to imagine is pretty hard, painful and scary.
31:39
Drew Fallon
Yeah, I'm really impressed with a lot of these companies that we work with where the founder just like had a very good idea, they stayed extremely disciplined about how they were going to approach it and they're focused and they know where they fit and where their brand extends to and where their brand doesn't extend to and how to stay in their lane and how to execute and how to compete. And if your category is good enough, then that's all there is to it. I mean, easier said than done, of course, but I think it can be that simple.
32:02
Hannah Dittman
Yeah, I think a great distillation of a lot of things that need to go. Right.
32:06
Drew Fallon
Yeah.
32:07
Hannah Dittman
And huge kudos to those that get there because as you're saying, yeah, easy to say, hard to do.
32:12
Drew Fallon
It's so hard. So people always ask me, like, which one do you like better, like tech or CPG? And the answer is tech by a mile. Here's why. When things go wrong in tech, you can fix it. The question is, like, how long is it going to take you to fix it? And like, how much do you want to work to fix it when things go Wrong. In CPG, it's like almost always outside of your control. For example, like, I tell the story sometimes where like mad rabbit, like I think we had like a truck that just like flipped over at one point, but I think it like caught on fire or something. And so like the inventory is just like gone. And so it's like, well, what are you supposed to do about that?
32:44
Drew Fallon
Or like Amazon delists you or Target kicks you out. It's like these are the things where it's like when stuff goes wrong in a consumer, it's like you're just getting punched in the mouth over and over again. It's brutal. It's so brutal.
32:56
Hannah Dittman
Yeah, I said it on the podcast before, but I've always had this thought of being a CPG founder. Different athletes for different jobs. Being a CPG founder is being a boxer. And it's like how many hits can you take and how long can you like string up on those ropes and be willing to fight back still? Because it's just so many punches that you're fighting against on this stuff all the time. And it really paints a picture of, yeah, how discipline and almost a little bit of luck that has to go into things too for nothing totally derail you.
33:25
Hannah Dittman
I'd love to pivot into a slack case study question, but before we do so, if you could tell founders or operators one piece of advice based on either work with your clients or what you've been analyzing in the market or your prior experiences, what would it be and why?
33:40
Drew Fallon
You have to pick something that you are like legitimately passionate about. Because it's very easy to like give up if you don't like actually like burn like with passion for like what you're doing every day. Especially in consumer, there's going to be a time where like one of those punches in the mouth and you're just like, I give up. So I think whether you're like extremely passionate about fiber based sodas or like whatever it is, I think founder market fit is like important. And like I invested in a skincare company that was started by a customer of ours who experienced both skin conditions. And so the Tim and his, I think partner, maybe wife, I don't know if they're married actually, but they were very passionate about the problem that they're solving.
34:20
Drew Fallon
And it's the kind of thing that I think they can do for 12 or 15 years and they'll never get tired of it because it's something that they really care about. Like that's how you just get like time in the game and if you like do something that you like think is like a good business idea, odds are it's not. And then when it's not, you're going to give up pretty quickly because you don't actually care about it.
34:37
Hannah Dittman
Yeah.
34:37
Drew Fallon
And so I think you have to choose something that like actually gets you going and then everything else is kind of downstream of that.
34:43
Hannah Dittman
Yeah, great point and great anecdote and a reminder to make sure you know your why and that you're chasing after it. As you know, startup CPG has the largest slack community in the industry with now over 35,000 members. I'd love to pull a question directly from our channel and have you answer it as a case study for any founders that might have a similar question. Today's question is how do you know if your company has quote unquote exit potential or not?
35:08
Drew Fallon
I would say if you're making $2 million of profit, you have exit potential. That's like the most like basic way to say it. I think 1 million is probably not enough. You could probably sell a business with $1 million of profit. I think $2 million of profit. You're opening up like the lowest middle market of private equity sponsors that'll come in by the business. And so like to reduce it down to something like quantitative. I think $2 million profit business will 90% of the time get sold. Unless it's like some black hat stuff that like is against the law or something more anecdotally or qualitatively.
35:35
Drew Fallon
I think like if you are experiencing growth in emerging category, that's like the biggest indicator because like we said sort of at the beginning of the program, it's like those are the types of markets that like they're small, then they grow a lot and all of a sudden they're very interesting to a lot of people. And so if you like get ahead of the trend, honestly I think like Ashwagandha or like this like calming, like call like Recess Velo's big company like Tripp, like there's always like calming companies and like 5 years ago I don't know the numbers, but I bet you that category was a zero. But now it's like there's a bunch of these big brands that are all building really great businesses.
36:08
Drew Fallon
And so I think if you can get ahead of that curve, that's probably the real thing is like, yeah, just like gaining market share like in an emerging growing space is probably the most important thing ever. But then it also has to make money, probably. And so that's the hard part.
36:23
Hannah Dittman
Yeah, great points. And I think makes a lot of sense and help create the distinction between lifestyle business and acquirable business. I definitely think the category being attractive and being emerging or taking share in some way can always get the attention of people versus just being siloed on your own. Might take quite a bit longer for you to become relevant enough to be on anyone's radar in that way. I spoke with someone who was a very successful CPG founder at one point and they told me, if you're not at risk of getting sued by the big guys, you're not at risk of getting acquired by the big guy.
36:58
Drew Fallon
That's a good one. That's a good. That's probably true. One of my friends, Jason Fiedler, who's an investor, and he said something similar to me, I'll mess it up. But it was like you get bought when they're scared. Like they have to be scared of you.
37:09
Hannah Dittman
Yeah, you gotta take a bite of that lunch sandwich.
37:11
Drew Fallon
Yeah.
37:12
Hannah Dittman
Well, Drew, this has been such a fun chat. I feel like I could go across talking CPG with you all day for any founders that might want to reach out to you, continue the conversation or learn more about what you're working on at Iris. What would be the best way for them to get in touch with you? And second question, do you have any advice or opportunities for any that might be interested in joining your team or your industry?
37:34
Drew Fallon
So I do Twitter or I guess, X. Drew Fallon, 12. I have a substack. I write a newsletter. Drew Fallon, substack.com I'm on LinkedIn. I think my name's like Drew F on LinkedIn or something. And then my email is Drew IrisFinance co. So if you want to reach out, you can even just shoot me an email. As far as roles, we do have quite a few open roles right now, mostly on kind of like the sales and account management side. So I think, like, we're looking for folks who have worked at brands before that want to hop the fence to the other side and kind of work on supporting them from a financial and operational perspective.
38:08
Drew Fallon
And it's pretty cool because I think you get to see a lot of different companies and you get on the inside of the kimono across a bunch of different brands. It's kind of an interesting vantage point to be in. So we're looking for sellers, we're looking for account managers. We're always looking for engineers. So if anybody's interested in any of those roles. Yeah, just shoot me an email.
38:22
Hannah Dittman
Well, thank you so much for being so generous with your time and insights today. Highly recommend checking out Drew's content. He's got a lot of interesting takes that he's always sharing with the Internet and a lot of interesting perspectives on things going on in CPG. Thanks again, Drew. So lovely chatting with you and really appreciate it.
38:40
Drew Fallon
Yeah, thanks so much, Hannah.
38:43
Hannah Dittman
Well, friends, we've now arrived together at the end of another episode of the Startup CPG podcast, the top globally ranked podcast in CPG. And if you love this podcast, you'll love our Slack community even more. Here at Startup CPG, we're a community of brands and experts and you should join. Sign up @startupcpg.com you'll then get an invite to our online Slack community of over 35,000 All Star CPG members, hear about amazing events near you and all our special activities opportunities to get you in front of buyers, investors, brands and more. It's a free community. So what are you waiting for? I'll catch you on the next episode and I'll see you on the Slack.