The way consumers think, behave and shop has changed dramatically, especially over the past year. However, the new business models of many big, global brands have remained largely unchanged over the past decade.

In contrast, small CPGs are meeting consumer needs by moving beyond traditional business models. The highest growth CPG brands are those that deliver new forms of convenience, discovery, purpose and personalization.

To further understand, we looked to venture capital (VC) investments. Our analysis shows 85% of VC funding in CPG went to direct or platform-enabled business models. A small minority went to core products.

Investors see the growth potential of adjacent and breakthrough areas. In contrast, 80%+ of revenue for the large, global CPGs still comes from the core. Breakthrough areas are still often relegated to “passion projects” and small pilots.

Small CPGs are capturing growth. Of total global CPG growth between 2010-2019...

Most big CPGs know they need to invest in new business models to accelerate growth. However, it represents a big departure from the way they built their billion-dollar brands.

What’s needed now is a growth framework that includes new business models: a business model portfolio. We show the consumer goods industry business portfolio below.

A business model portfolio is critical for large, global CPGs to protect the core business while moving into adjacent and breakthrough areas. The key is to meet emerging consumer needs by adopting a risk-adjusted, opportunity-focused approach to allocate resources toward areas with the most growth potential.

Key questions to ask about your path to growth:

• Where will your future growth come from across core, adjacent and breakthrough models?
• How does your investment footprint compare to this?
• Where do you see your “must-win” battlegrounds over the next five years—and what is your target business model portfolio?

Some large, global consumer goods companies have experimented with new business models. Yet too often, their efforts at building a business model portfolio have ended as just that—experiments. To avoid this fate, watch out for these common pitfalls: Define value narrowly, think of this as merely a new channel, or only acquire growth through M&A. Instead…

Create a growth portfolio matrix for your company. It will reveal gaps and opportunities, spur an entirely different conversation about growth in the business, and ground future resource allocation and risk adjustment decisions.