Strong brows are out; glitter and colorful eyelashes are in. Keep that in mind as you sip your yuzu flavored cold brew, but take a hard pass on the quinoa chips (they’re so 2018).
Product marketing teams at consumer packaged goods (CPG) companies are experiencing consumer whim whiplash. Fear of missing out (or FOMO) isn’t just a consumer phenomenon; it applies to brands attempting to capture whatever revenue can be derived from the next hot trend. Maybe we should call it FOMORG – fear of missing out on revenue growth.
That fear has a solid basis, as long-held advantages for the biggest CPG manufacturers have been largely swept away in our omnichannel, digital era. In the 20th century, the confluence of mass media, mass production and retailing, and a growing middle class gave CPG firms the ideal environment to develop powerhouse brands.
The Digital Revolution and Other Societal Trends Alter the CPG Landscape
In a handful of years at the turn of the century, economic forces collided and signaled the end of the everlasting, unassailable brand. The digital revolution took hold, creating the dot com “bubble” that started inflating in 1993, setting imaginations and deep-pocketed investors alight with possibility. By 2007, the bubble popped. Investors licked their wounds as tech companies continued to push the envelope, determined to create sustainable business models.
Other trends accelerated change. In 1999, the first wave of millennial consumers entered the workforce. In the early 2000s, the American housing market boomed, adding new members of the middle class through aggressive marketing of mortgage-backed securities and other highly-complex financial instruments, many of which were poorly understood. The 2008 Great Recession sliced millions of jobs, doubled the unemployment rate, and drained $16 trillion of net worth from American pockets. Millennials were hit particularly hard.
Smaller CPGs Emerge
The compression of the middle class and the progression of the digital age rocked the world’s biggest CPG enterprises, leaving fissures in once solid customer bases and choking off paths to new markets. As the juggernauts struggled, those cracks in the firmament were enough for small brands to creep in and steal away market share and profits.
From 2012 to 2017, small brands have captured $15 billion in sales at the expense of big brands. According to IRI, 51% of the most successful product launches in 2017 came from companies with less than $1billion in sales.
Big CPG brands are missing out – and it’s time for fearless changes.
The structural models that made megabrands are the same models that have opened the floodgates for more nimble, omnichannel players. CPG stalwarts are typically organized with a centralized, hierarchical structure: brand managers work with global marketing and innovation teams, and the work gets passed down to regional, then national teams. Large brands get a bigger say in making investments and prioritizing decisions, making it harder for smaller brands in the corporation to innovate.
The decision making process in these companies is plodding by today’s standards. Speed to market is essential for companies hoping to leverage trends, and slow responses guarantee market share loss.
Large CPG Brands React and Pivot
Acquiring small brands has become a way for the biggest CPG enterprises to compete. To get the best value from their investments ($145 million from the biggest CPG players in 2017), companies need to find ways to keep the dynamism and growth potential of acquired brands going strong.
The willingness to learn from and leverage those practices that led to the smaller competitor’s growth is essential. Forcing incompatible corporate business practices on a blazing hot small brand will quickly snuff out that brand’s value.
As leading analyst Diana Sheehan puts it,
After over a decade of CPG companies acquiring and assimilating brands, they have realized that a lot of times, that doesn’t work. It’s actually the uniqueness of how those innovative small brands operate that make them so adaptive and so flexible.
Embracing that uniqueness and being open to compatibility means supporting digital-native processes and technologies. These technologies can accelerate response time to new microtrends, enabling companies to quickly get new products in front of consumers as trends reach a fever pitch, then pull them back the moment they become old news.
Large consumer goods companies also collect more data and use more content — and can use modern tools to find the most effective campaigns for redeployment and adaptation across multiple brands, regardless of whether they came from the largest brand or region under their umbrella or the smallest.
For big CPGs, fear of missing out on revenue growth from fast-moving trends can be a thing of the past. To learn more about keeping your revenue and market share on track in an era of unprecedented change, go to nuxeo.com/rethinkingCPG.