As a CPG founder you’ll encounter risk around every corner. This guide outlines the most common insurance risks faced by emerging CPG brands at key stages of your journey and provides practical strategies to mitigate them. Use it as a roadmap to anticipate potential challenges and proactively address them, ensuring that your brand is resilient and prepared for success at every stage of your journey.

1. Starting the Business

General Liability: As you launch your CPG brand, you’re exposed to potential risks such as customer injuries, property damage, or other third-party claims. Obtain a general liability policy to cover any bodily injury, property damage, or legal defense costs that may arise as you start your business.

Product Liability: Even with a well-tested product, there’s always the possibility of a defect that could cause harm, leading to costly legal battles. Ensure you have product liability insurance to protect against claims related to product defects or safety issues.

2. Hiring Employees

Workers’ Compensation: As you begin to hire employees, you’re responsible for their safety and well-being. Any workplace injury could lead to significant medical costs and lost wages. Workers’ compensation insurance is essential for covering these costs and is a legal requirement in most states.

Employment Practices Liability: Managing a growing team introduces risks related to wrongful termination, discrimination, or harassment claims. Obtain Employment Practices Liability Insurance (EPLI) to protect your business from these types of claims.

3. Entering Into Retail Stores

Retailer Insurance Requirements: Retailers often have stringent insurance requirements that must be met before your products can be stocked on their shelves. Work with an insurance broker to ensure your coverage meets the specific requirements of retailers, including higher liability limits and additional insured endorsements.

Product Recall: With increased distribution, the risk of product defects and recalls grows, which can be financially devastating. Invest in product recall insurance to cover the costs associated with withdrawing a defective product from the market, including logistics and public relations.

4. Selling E-Commerce

Cybersecurity Threats: Selling online introduces the risk of data breaches, cyberattacks, and other digital threats that could compromise customer data and your business operations. Secure cyber liability insurance to protect your business from the financial fallout of cyberattacks, including data breaches and cyber extortion.

Intellectual Property Infringement: The digital space is rife with risks of intellectual property theft, where competitors or counterfeiters could copy your product designs or brand. Ensure your trademarks and patents are protected across digital platforms, and consider monitoring services to detect and respond to potential infringements quickly.

5. Self-Manufacturing

Property Damage: If you own or lease manufacturing facilities, they are at risk from fires, floods, equipment breakdowns, and other disasters. Insure your manufacturing facilities and equipment against damage or loss with commercial property insurance.

Business Interruption: Disruptions in your production process, whether due to equipment failure or natural disasters, can halt your operations and impact revenue. Business interruption insurance can help replace lost income and cover ongoing expenses if your manufacturing is disrupted by a covered event.

6. Co-Manufacturing

Supply Chain Disruptions: Relying on a co-manufacturer introduces risks related to supply chain disruptions, which could affect your production and delivery timelines. Protect against these disruptions with supply chain insurance that covers losses due to delays, supplier failures, or other interruptions.

Liability for Co-Manufacturer Errors: If your co-manufacturer produces a defective product, your brand may still be held liable for any resulting harm. Ensure that your contracts with co-manufacturers clearly outline liability and include indemnification clauses to protect your brand from their errors.

7. Working with a Distributor

Transportation Risks: Once your products are in the hands of distributors, there’s a risk of damage, loss, or theft during transportation. Obtain cargo insurance to cover the risk of product loss or damage during transit, whether by land, air, or sea.

8. Raising a VC Investment

Directors and Officers Liability: As you raise venture capital, your business faces new risks related to decisions made by your leadership team, which could lead to lawsuits from investors or stakeholders. Directors and Officers (D&O) insurance protects your company’s executives and board members from personal losses if they are sued for decisions made on behalf of the company.

A Proactive Approach to Risk Management

Secure the appropriate insurance coverage at each milestone to protect your brand, your investment, and your future. Work with an experienced insurance broker like SecureCPG who understands the unique challenges of the CPG industry to help you navigate these risks and focus on what matters most – growing your business.

SPONSOR: I wrote this in partnership with SecureCPG, a modern insurance agency that works with emerging brands to get the best coverage at the most affordable price. They work with founders on general liability, workers comp, product recall, cyber liability, and more.