Small brands loom large in Consumer Goods

Tiny powerhouses

Small consumer goods brands “live out loud,” selling niche propositions with purpose and personality. They don’t aim to appeal to a broad base. Instead, they woo consumers who share their values.

It’s working. In the United States alone, since 2013 more than US$17B in annual sales has shifted from large consumer goods companies to nimbler digital players.

This is not surprising when you look at the numbers: Sixty-three percent of consumers prefer buying from companies with a purpose they share, but two out of three consumer goods CMOs say their brand lacks clear purpose and values.

Act like a giant, think like a startup

Large consumer goods companies can get back to growth by creating, acquiring and developing small niche brands with a purpose. Success depends on providing these brands the advantages of a large company—namely scale and resources—while protecting them from the bureaucracy of big-company culture.

Niche, value-led brands are more than a defensive position against disruptors. They allow consumer goods giants to rethink their relationship with a changing consumer base, one in which trust and transparency are playing an increasing role.

Organizing for a winning portfolio

Creating a hybrid portfolio of large and small brands, with operating models that bias for agility, is essential to beating disruptors.

There’s an agility gap to close. Sixty-two percent of digital disruptors say their operating models can respond quickly to changing market conditions. Only 15 percent of today’s industry leaders think the same of their own operating models.

Companies that transform to address the new reality head-on will most likely look at multiple areas of their marketing operating models, infusing Applied Intelligence, reworking their agency ecosystem and becoming more agile across the board.

No small wonder

Moving forward, consumer goods companies will need a hybrid portfolio for growth—a mix of large and small purpose-filled brands with different consumer bases. They can help speed their journey by keeping a few things in mind:

1. Standardize agility. An organization can only handle so much complexity, so companies need to strip out the complexity that doesn’t contribute to their desired outcomes—namely, growth. Standardizing the back of the house allows for a set of flexible rules that can put some processes on autopilot.
2. Think small. Micro-trends and local differences are something small brands celebrate. Low-distribution, hyper-local brands can still be high-velocity. They don’t need to sell everywhere; they just need to sell really well in their target markets. AI and analytics are a major piece of figuring out what works in different local markets.
3. Get closer. Startups are fundamentally closer to the customer than large multinationals. Cultivate that closeness with real-time insight and feedback loops that provide qualitative feedback as well as quantitative.

Rethinking the business model is the first step toward success. But simply trying to mimic small brands won’t work. Large consumer goods companies need to find the raison d’être for each brand in their portfolio—and it should shine through in everything they do, from product to promotion.