In the highly competitive, $2 trillion packaged goods industry, how do you create space for your brand among heavyweights like Proctor & Gamble, Anheuser-Busch and Coca-Cola? The solution has never been simple, but as the market landscape shifts and holistic branding becomes more important, shelf space for smaller brands has opened up.
Large consumer packaged goods (CPG) brands have long been the dominant players in an industry characterized by slim margins and powerful retailers. These big name brands use their manufacturing, distribution, legacy and marketing clout to create significant barriers to entry for companies. Yet, as these giants battle it out, offering endless sales promotions and individualized branding for every product, they’ve fragmented their own brands.
Smaller CPG companies don’t pose a threat individually, but together they’ve been successful in carving out a sizeable $10 billion share of the industry. How did they do it? Their success can be separated into two factors: 1) digital media and distribution and 2) authentic branding.
Digital media and distribution channels’ growth has leveled the playing field. Traditionally, TV ads and brick-and-mortar shelf space were the keys to reaching consumers, but they were priced at a rate only large companies could afford. A smaller CPG brand could spend its entire marketing budget, only to have its product buried at the bottom of a shelf.
Additionally, e-commerce can account for a substantial 25% of sales for small companies. With websites like Amazon catering to consumer needs with digital store fronts and grocery delivery, virtual shelf space is unlimited and cost a fraction of the price.
Consider Bob’s Red Mill gluten-free rolled oats cereal. Bob’s Red Mill is Amazon’s top-selling cereal above globally recognized and supermarket leading Cheerios. In addition, small CPG brands can use social media to generate a strong return on investment (ROI) at a low cost, while big companies realize little to no ROI from social media.
The primary advantage smaller CPG companies have over heavyweights in the industry, is their holistic branding approach. Due to brand fragmentation, consumers are unable to discern what products come from which big company. This model has created ineffciency, resulting in multiple marketing budgets and diluted brand loyalty.
Consumers have been bombarded with branding that claim a specific attribute over competitors, when in reality they both adequately work and are interchangeable (i.e. Bounty paper towels versus Brawny). However, today’s consumer is much more knowledgeable, cautious and wise. They are less likely to connect with claims and instead connect with brands that show authenticity. A brand must stand for something beyond its product, and large CPG companies can’t afford to throw away decades of branding to realign with the array of values represented in the mass market.
The big brands in the CPG industry will continue to dominate the market with their big positioning muscle, but in their quest for mass appeal, they’ve given small CPG brands shelf space to grow. The market now offers cost-effective ways to reach consumers and rewards holistic branding over a fragmented promotional approach.
By building authentic brands and implementing effective integrated marketing solutions, we empower company culture from the inside out to realize greater value for businesses. Get a free consultation on developing an authentic brand foundation by contacting the United Creations team.