Dos and Don'ts of Starting a CPG Brand for a Future Private Equity Sale

Aspiring to build the next big consumer packaged goods (CPG) brand and eventually sell your company to a private equity (PE) firm?

Success requires balancing rapid growth with solid business fundamentals. Many founders who’ve only sold at farmers markets (or are still pre-revenue) dream of scaling up fast, but scaling smart is more important. Below we outline the key dos and don’ts – from proving product-market fit at small scale to hitting revenue milestones that investors and PE buyers look for. We’ll draw on lessons from breakout brands and cautionary tales to create a private equity CPG playbook. Use this guide as a roadmap for starting a CPG brand positioned for investment and an eventual sale.

Our position here at CPG Guy is that you should be building a CPG brand because of your passion for the product, the solution, and the customer. Building for an exit almost always results in failure. With that in mind, there are ways to guide your decision making process as you build your brand and live your story.

Do: Start Small, Prove Traction, and Nail Product-Market Fit

Walk before you run. Even if your end goal is a big sale, begin by validating your product on a small scale. While some people will tell you this can be done quickly, we firmly believe you need to build your sales over time and with a focus on learning from your consumer. Focus on the steps to getting your first $1M in revenue as proof of concept. Sell at local markets or online and collect feedback to ensure people come back for more. This early phase is about honing your recipe, branding basics, and packaging in a real-world setting. It’s far cheaper to fix issues or iterate on your product when you’re small than after you’ve poured money into a large launch.

A great example is Olipop, which started by selling in just 40 stores in Northern California and made about $850k in its first year. That modest start let them refine their product and messaging. By proving strong local demand and repeat purchases, they were able to rapidly scale to $73M in revenue by 2022 and $200M in 2023; an unheard-of trajectory without initial validation on a small scale. The lesson: investors notice when you achieve real traction (like hitting that ~$1M run-rate with loyal customers). It signals your brand has a foundation to build on. In the early days, obsess over product-market fit and CPG velocity benchmarks in your initial stores rather than chasing every store in the country. For instance, if you’re selling in 10 local stores, track your units per store per week and aim to consistently grow it – this is the metric that proves people actually want your product.

Build a fanbase, not just a distribution list. Private equity buyers want to see that you’ve cultivated a loyal customer following and real demand. Liquid Death’s team, for example, spent its early days handing out cans at local events, taking a small loss to get the product in people’s hands and build a cult following. That grassroots buzz turned into serious retail velocity when they expanded – people were seeking out the product, not just trying it once. As a founder, do the unscalable things first (demos, farmer’s market stalls, social media engagement) to learn what clicks with consumers. Those insights will guide your strategy as you grow.

Don’t: Rush into Mass Retail or Big Funding Without Data

It’s tempting to go “big” fast: national retail placement, large venture rounds; especially when you see hot brands raising huge sums. But chasing scale too soon can backfire. If you haven’t proven strong sales metrics on a small scale, expanding distribution will just multiply your problems. Major retailers and distributors like UNFI/KeHE will drop your product if it doesn’t sell steadily (velocity). As CPG insiders put it, “distributors are a logistics channel, not your sales channel” – they won’t magically create consumer demand. In fact, UNFI and KeHE often require that you already have retailer authorizations and a track record of turns before they take you on. A common checklist item is achieving at least ~3 turns per quarter per store (i.e. your product sells through about once a month) before going broad. If you can’t hit that in a few local stores, you’re not ready to “go national.”

Don’t raise more money than your traction justifies. One oft-cited cautionary example is Soylent. The meal-replacement drink had enormous buzz and raised around $50M by its Series B in 2017, yet it lacked meaningful retail presence or velocity at the time. The result? Years of struggle translating hype into sustained sales. Soylent only rolled out chainwide in Walmart in 2019 – a long lag after those VC dollars were spent. Insiders observed that Soylent’s growth stalled post-funding, forcing a turnaround. As Soylent’s CEO later admitted, by 2018 “sales were stagnant, we were not profitable, and we had to make dramatic changes or we would have run out of cash”.

The lesson: raising huge sums on a concept without proven shelf velocity sets you up for pain. You risk diluting yourself, getting overextended, and still ending up with a brand that isn’t investor-ready when it really matters.

Private equity investors value sustainable growth over hype. They will examine your same-store sales growth, sell-through rates, and gross margins closely. If those fundamentals aren’t there, having your product in 5,000 stores or raising a big round early won’t impress; it might actually scare them off. Don’t play the “grow distribution at all costs” game if you can’t support it with marketing and supply chain. A better strategy is to concentrate your efforts regionally (or in one channel) until you dominate it, then expand outward deliberately. Remember, every new store you add is a commitment. If the product collects dust on the shelf, you burn bridges with that retailer and bleed cash on unsold inventory. Grow deliberately, not frantically.

The $1M, $10M, $30M Landmarks – What Investors Want to See

As you scale up, certain revenue milestones tend to unlock new levels of investor interest. While every brand’s journey differs, here are three rough inflection points and how private equity or other investors typically view them:

  • $1M Annual Revenue: Hitting seven figures in sales is a proof-of-concept milestone. It shows you’ve moved beyond hobby status and found a real market niche. Investors at this stage (angels, seed funds) will look for signs of repeat business and a clear growth story. They know your valuation still leans heavily on potential (pre-revenue CPG startups often are valued around $3–7M, and ~$1M sales might support ~$6–10M valuation). To make the most of this stage, firm up your brand story and show that you’ve achieved this revenue efficiently (e.g. with reasonable marketing spend and decent margins).

  • $10M Annual Revenue: This is often the point where institutional investors and PE growth funds start to take serious notice. $10M+ indicates product-market fit at scale; you likely have regional distribution, a team in place, and systems to handle growth. Investors will scrutinize your unit economics and scalability. Are your gross margins healthy now (they never improve with scale)? Do you have strong velocities and expanding distribution footprints? For example, hitting ~$10M was pivotal for beverage brands like Poppi and Olipop – it coincided with raising Series B rounds and getting celebrity investors, fueling even bigger growth. Private equity firms love the $10–30M revenue range because the brand is de-risked enough to be viable, but still has huge upside with the right capital and expertise. Tip: around this stage, you might start getting inbound interest from investors. Make sure your financials are in order and you can tell a compelling growth story (e.g. “we grew 3X last year while maintaining X% margins and expanding from 500 to 1,500 stores”).

  • $30M+ Annual Revenue: At this scale, you’re on the radar for larger private equity deals or strategic acquisitions. Hitting ~$30M suggests you have national or multi-region presence and significant consumer awareness. Many brands that sell to Big Food or PE firms (for big multiples) hit this range a year or two before exit. Investors here will look for quality of earnings: is your growth still strong? Are you at or near profitability? Is your velocity holding as you expand distribution? A brand doing $30M with 8-10% EBITDA margins and double-digit growth is a prime PE target. They know they can inject capital to scale it from $30M to $100M+, which is where the real payoff comes. For context, Bai was around $120M revenue when Dr Pepper Snapple snapped it up for $1.7B, and BodyArmor was reportedly ~$250M revenue when Coca-Cola acquired it at $5.6B. In both cases, the companies had proven themselves in the market before a big exit. Even if your aim is to sell earlier, understanding this dynamic helps – the closer you get to that scale, the higher multiples your company can fetch.

Investor perspective: at <$10M, they’re betting largely on your potential and team; at ~$10–30M, they see a nascent success to accelerate; beyond $30M, your brand is a bona fide player that could become a category leader. Use these markers to plan your fundraising and growth strategy. For instance, don’t seek a PE buyout at $5M sales, you’re too small, but you might raise venture funding to help reach $10M. Conversely, if you’re at $20M and growing fast, you can already start talking to PE firms for a sizable growth investment or majority stake deal, because they know an exit (to an even larger firm or strategic) could be feasible in a few years once you’re much bigger.

Do: Craft a Disruptive Brand Story (Lessons from Liquid Death, Olipop & Poppi)

One thing the success stories have in common: a brand that resonates powerfully with consumers. In crowded CPG categories, a unique brand story can catapult a small startup into the mainstream. Liquid Death is a textbook example – they took a basic product (water) and gave it an edgy, viral persona that “hates corporate marketing as much as you do”. By marketing canned water like an extreme energy drink (tallboy cans, heavy metal vibes, tongue-in-cheek stunts like a heavy metal album of hate comments), they made drinking water cool. The result? Liquid Death may be the fastest-growing non-alcoholic beverage ever, hitting $130M in revenue just 3 years after launch. Private equity and VCs noticed – the brand’s latest valuation was $1.4B in 2022 after a $70M+ round. The takeaway for new founders: be different, but always be yourself. A compelling, authentic brand can create enormous value quickly. Ask yourself: what’s your brand’s unique POV, and does it spark an emotional response?

Similarly, Olipop and Poppi broke out in the sleepy soda category by tapping into health and wellness trends with a fun twist. Both brands sell prebiotic, low-sugar sodas with retro branding that appeals to Millennials and Gen Z. Olipop’s founders framed it as creating the “modern soda” – a better-for-you alternative – and executed with savvy product development (tasty nostalgic flavors) and marketing. In just five years, Olipop’s strategy landed it in ~50,000 stores and drove revenues to $400M in 2024; astonishing growth that led to a $1.85B valuation by early 2025. Poppi, a direct competitor, also leaned into Instagram-friendly branding (bright colors, playful voice) and got early celebrity investors. By 2023, Poppi captured about 19% of the functional soda market and became one of the fastest-growing beverage brands in the country. Forbes even reported that Poppi’s share in its niche is 1.5x larger than Coke’s share, showing how effective their branding + product fit has been. These brands succeeded not just because they had healthy soda, many have tried, but because they built cultural cachet (Poppi is all over social media and influencer circles, Olipop collaborates with icons like Camila Cabello).

Apply this to any CPG category: whether you’re in snacks, supplements, or household goods, find your angle. Maybe it’s a mission-driven story (sustainability, social cause), or a radical flavor/format innovation, or simply a hilarious brand voice that cuts through the marketing fluff. Investors are increasingly looking for brand strength and community as much as product quality. Why? Because a strong brand can extend into new products, command shelf space, and maintain pricing power. When evaluating brands, private equity firms will often ask: Does this brand have a “cult following” or just casual buyers? Your goal is to cultivate that cult-like loyalty. Do consumers wear your merch or advocate for you? Do they post about your product unprompted? Those are signs of brand heat that money can’t easily buy – and it excites acquirers.

Action item: document your brand strategy from the start. Clearly define your target audience and what your brand stands for. Then ensure everything (packaging, social media, events) consistently tells that story. For example, Liquid Death knew their target (millennials who enjoy irreverence) and every touchpoint, from their tongue-in-cheek “Death to Plastic” tagline to their partnership with punk celebrities, reinforced it. Consistency and authenticity build brand equity, which in turn builds valuation.

Don’t: Neglect Velocity – Investors Care About Repeat Sales

In the CPG playbook, one metric rules them all: sales velocity. Velocity measures how fast your product sells relative to distribution, typically in units per store per week. It essentially tells whether your product is just sitting on shelves or actively moving. You can have distribution in 5,000 stores, but if each store only sells 1 unit a week, your retail partners are unhappy (and you’re not making much money). On the flip side, if you’re selling 10+ units per store per week, even in 100 stores, you have a hit on your hands that retailers will clamor to stock. As one industry expert bluntly put it: “Velocity is the king – the number of units you are selling on a per-store-per-week basis is the most important metric in CPG”.

Private equity firms and other investors know this well. They examine your velocity to gauge brand health. Strong velocity means customers are rebuying (a sign of brand loyalty and product-market fit), and it also means you’re likely not over-distributed. Weak velocity often indicates that the brand’s growth is fueled by “stuffing the channel” (i.e. forcing product into more stores with discounts or slotting fees), rather than true consumer pull – a big red flag. In fact, BevNET’s editor-in-chief described the current market as a tale of “haves and have-nots”: there’s fierce competition and funding for brands that are growing and doing well (repeat sales, expanding channels, profitable unit economics), but brands that haven’t hit that sweet spot of repeat purchase and viable expansion are struggling.

What are good velocity benchmarks? It varies by category (beverages might need higher unit velocity than, say, expensive supplements). A rough guideline: >5 units per store/week for a single SKU is generally strong in many food/bev categories, ~3 is decent, and <1 is usually a warning sign (you may get delisted without improvement). Rather than chasing arbitrary store counts, focus on driving velocity through marketing, demos, and ensuring your product is in the right stores. For example, if you’re selling a premium organic snack, it might fly off shelves at Whole Foods (high velocity), but flop in a convenience store. Choose your retail partners wisely to keep velocity high. Use promotions tactically to boost trial and measure the lift – don’t just slash prices to push volume, or you’ll train consumers to only buy on sale (hurting long-term velocity and margins).

Don’t confuse vanity metrics with velocity. Two common traps: (1) Social media “hype” without conversion – a viral TikTok might spike awareness, but if it doesn’t translate to ongoing sales, it’s not real traction. And (2) Initial sell-in vs. sell-through – getting a big first PO from a retailer is exciting, but investors will ask how much sold-through to consumers versus sitting in the stockroom. Always be ready to talk about your sell-through rates and reorder rates. A PE firm would much rather hear “We’re selling 8 units per store/week in 500 stores” than “We just expanded to 5,000 stores but haven’t seen the velocities yet.” One shows a scalable model; the other shows you might have over-extended.

In practice, prioritize depth over breadth early on. Build velocity in each door and use those numbers to persuade the next retailer. High velocity not only impresses investors, it also strengthens your negotiation power with retailers (you can get better shelf placement, less pressure on slotting fees, etc., because you’ve proven you drive revenue). And importantly, high velocity leads to stronger cash flow. So never lose sight of the question “How well does my product really sell?” – it’s more important than how many stores you’re in, especially to smart money.

Do: Get Your Pricing Right (Full Cost-to-Serve, Not Just Markup)

Many new founders price their product by simply adding distributor and retail margins on top of their production cost. That’s a dangerous shortcut. It leaves out freight, fuel surcharges, distributor chargebacks, spoilage, promotional spend, and broker commissions—costs that add up fast once you're in retail. Your margin will vanish if you don’t account for them early.

Instead, use a full cost-to-serve model that includes all the hidden costs of moving product through the supply chain. Start with your bill of materials and then build in:

  • Shipping and warehouse costs

  • Distributor markups and fees

  • Trade promotion accruals

  • Marketing programs tied to distribution

  • Unused inventory and shrink

Getting pricing right early lets you scale without having to backtrack or explain margin erosion to future investors. PE firms want to see gross margins of 40% or better. If you're at 25% and can’t show a clear path to improvement, your valuation will suffer.

For help building your cost model, check out our page How Do I Price My CPG Item? and the interactive calculator that walks through this logic.

Don’t: Assume Scale Will Fix Your Margins

Scaling up feels like the solution to all your problems—buying ingredients in bulk, running longer production cycles, getting better freight rates. But many brands discover that scaling actually introduces more complexity and cost:

  • Switching from shared kitchens to co-mans often increases labor and overhead costs

  • Distributors take a bigger cut as your volumes grow and marketing expectations rise

  • Broker networks, promotional calendars, and marketing agencies all introduce spend before revenue follows

Margins don't improve automatically. In many cases, they shrink unless you're actively managing cost creep. Your cost per unit might go down, but your overhead often grows faster—especially if your systems and team aren’t ready.

This is why smart brands forecast out 12–24 months of operating cost at each stage of growth. They don’t assume economies of scale will save them. They build cushion into their pricing, they test every promotion for ROI, and they structure contracts to avoid getting locked into money-losing partnerships.

Do: Manage Cash Flow and Capital Efficiently

If pricing protects margins, cash flow protects survival.

Even if you’re hitting growth milestones, a few bad timing decisions, like overproducing inventory or extending credit to a retailer that pays slow, can sink your brand. Many brands fail not because demand disappears, but because cash dries up. Your cash conversion cycle matters: how long between spending on inventory and getting paid.

Founders often mismanage early cash by:

  • Producing too much inventory for a new retailer without clear sell-through

  • Investing in big marketing spends before they’ve proven which tactics convert

  • Accepting long payment terms without a line of credit in place

Private equity firms want to see discipline here. They’ll ask: Are you using working capital wisely? Do you track inventory turnover? Can you support larger purchase orders without burning your cash buffer?

Don’t: Chase Growth at All Costs

It’s tempting to say yes to every retailer, every distributor, and every celebrity co-investor. But chasing growth too early or too broadly can crush your economics.

Consider what happens when you expand into a new region before your core market is profitable: you dilute your attention, your marketing dollars, and your velocity. Then you have to manage new warehouses, new brokers, and new sales expectations—without the team to support it. More often than not, growth outpaces infrastructure, and the brand stumbles.

This is where a lot of promising startups lose investor confidence. They burn cash to buy revenue, but don’t build brand equity or long-term velocity. It looks impressive on the outside, but the financials tell a different story. Focus instead on mastering a few core markets or channels. Prove you can hold shelf space and maintain margins. Use wins in one region to justify expansion into the next.

Next Steps: Building Toward a Future Sale

A strong CPG brand isn’t built just on taste or branding. It’s built on financial discipline, product-market fit, and repeatable performance.

To move toward a private equity sale:

  • Hit key milestones: $1M for proof, $10M for national appeal, $30M for scalability

  • Focus on per-store velocity and cost-to-serve, not just doors and gross revenue

  • Raise capital based on real data, not just ambition

  • Build a system that can hold margin and cash flow as you grow

For more support, dig into our key resources:

You're not just building a product, make every decision with your customer at the top of your mind.