CPG Playbook   //   May 2, 2024

CPG brands see shelf-stable products as the ticket to better margins and bigger sales

Amid inflation, food and beverage brands are under more pressure to become profitable — or, at least prove they have a path to profitability.

In turn, more brands are thinking about how new product launches can help their businesses become more sustainable in the long run. One tactic that more brands are embracing — particularly those who sell products in the refrigerator or freezer aisles — is to launch more shelf-stable products.

According to executives at brands that have launched new shelf-stable product lines, like Malk and Haven’s Kitchen, the benefit of these products is that they don’t spoil as quickly as perishables, helping keep production costs low. Refrigerated products, meanwhile, are more expensive to transport to retailers than normal freight. Of course, releasing new shelf-stable product lines requires spending a big amount of money upfront, and potentially means investing in new production capabilities. But, the idea is that investing in shelf-stable products can improve margins over time — and, show investors that the brand is thinking pragmatically.

“It’s all about de-risking everything, for yourself, the consumers, and investors,” said Haven’s Kitchen founder Ali Cayne.

Investing in a simplified supply chain

Some startups, like canned coffee brand Taika, have shifted to non-perishable recipes after facing challenges expanding into retail through cold chain distribution.

Launching shelf-stable products also helps brands cater to different types of customers by diversifying formats. That was the thinking behind a new product launch from plant-based brand Malk, which launched two new shelf-stable SKUs in March. Malk, founded in 2015, sells oat, cashew and almond-based milks.

“The refrigerated plant-based milk category is four times the size of shelf-stable plant-based milk,” Malk CEO Jason Bronstad said. “We found an opportunity to supply that customer with a premium clean ingredient organic product.”

The shelf-stable formula hasn’t changed from earlier products, and there are no gums and fillers added to preserve the milks. Instead of Malk’s plastic bottles, the new products are packaged in Tetra Pak, thick aseptic cartons that keep light, oxygen and bacteria out. Bronstad added that customers can stock up on Malk without taking up fridge space.

The new Malk line also arrives at a time when the company is expanding rapidly. Malk more than doubled its distribution in the past year, most recently entering Albertson’s and Publix.

While the investment in the new shelf-stable line is to help diversify Malk’s grocery presence, the addition of a second supply chain line did cost the brand more upfront. In 2022, Malk raised $9 million to support this new launch, as well as an additional round earlier this year from existing investors. “It actually made logistics more complex in the short term, but we’re willing to take that on to meet the consumer’s needs,” Bronstad said.

The ability to be merchandised in different parts of the store is one of the big draws for brands going shelf-stable, and the move can change a brand’s overall growth trajectory.

Dionne Baker launched DeeBee’s Organics in 2013 as a frozen foods brand, selling organic freeze pops. For the first few years, Baker said scaling the British Columbia-based brand’s distribution was hard and environmentally unsustainable. In 2017, the brand pivoted to selling shelf-stable juice packets, which people can later pop in the freezer at home. Baker credits this pivot as a turning point for the brand’s growth and ultimately allowed it to expand in the U.S.. “It was a significant choice I had to make but it was pivotal for our growth,” she said. 

“The frozen novelty was also a more competitive space and no one was doing organic shelf-stable freezer pops at the time,” Baker said. At the time, this new direction was also encouraged by DeeBee’s’ retail buyers. Doing away with freezers also allowed the brand to enter new channels, like Amazon, where the brand is currently ranked No. 2 in popsicles and juice bars. In 2023, DeeBee’s launched in Costco and experienced 110% year-over-year revenue growth.

Baker said switching to shelf-stable treats that are frozen by customers does come with some challenges. For example, explaining to customers why the fresh fruit juice-based treats have to be shaken since the ingredients settle quicker than sugar-infused freezer pops. There has been also trial and error. DeeBee’s found that an Italian ice SKU didn’t lend itself well to the shelf-stable format initially, and some of them were fermenting on shelves. The company recently scrapped the product, at least for now, after a trial run that didn’t meet its sales threshold. 

Making products with better profit margins 

Haven’s Kitchen, which sells sauces in the refrigerated section, is currently rolling out a new line of shelf-stable aioli. For the first time, it allows the brand to have a presence in the condiments and dressing aisle. The new aioli addition allows the brand to be sold on Amazon, and soon to launch on Faire. 

Haven’s Kitchen’s Cayne said the brand, like many CPG startups, is doing everything it can to help margins and profitability long-term. The decision to invest in condiments also came after positive feedback from retailers like Whole Foods and Target, which were willing to carry the new products.

“Without cheap capital, experimenting isn’t easy right now, and we wouldn’t have done it without the retailers wanting it,” Cayne said. “We can now see a clear path to profitability with this new line.” 

However, Cayne noted that shelf-stable doesn’t necessarily solve all supply chain challenges for food and beverage startups. Haven’s Kitchen’s aiolis have a best-by date of one year, compared to the refrigerated line, which is six months. “So you’re producing less frequently and at bigger batches,” she said.

For brands that started out in store refrigerators, pivoting to or adding a secondary product line is a big upfront investment. But in the long run, these companies are betting on shelf-stable products to future-proof their product lines. “Shelf-stable is definitely a long-term play for us,” Malk’s CEO Bronstad said.