Small CPG companies around the world are translating what they understand about changing consumer tastes into exciting new products. Their size does not ensure competitive success. It is their ability to connect emotionally with consumers and meet unmet needs, even in flat to declining categories, that is paying off. Big.
This has left big CPG struggling for relevancy and looking to reclaim growth with a competitive playbook that no longer applies. It is time to evolve from business models that compete on scale, cost efficiency and massive brand clout to models that balance scale and flexibility. Pivoting while keeping the core business humming is a difficult dance. A critical step is to reignite the passion for consumers that took these big companies so far for so long.
Follow the consumer’s lead
To gain back consumer trust and relevancy, CPG giants must center the business around a deep understanding of individual consumer tastes. Purpose is a major influence. Today’s consumers are not just buying from companies, they are buying into them. Beyond cost and quality, 52 percent of consumers are attracted to brands that stand for something bigger and align with their values. And 62 percent want companies to take a stand on issues like sustainability, transparency or fair employment practices.
Big CPG can use data to strengthen consumer relationships and engage with consumers one-to-one. These players have always analyzed consumer data to keep mega-brands profitable. Now they need to harness data to curate messages, pricing and promotions to engage people around a shared sense of purpose.
The new brand choreography
The teams behind billion-dollar brands have long been the heroes in big CPG. But the heyday of driving growth through mega-brands and scale efficiency is ending, even in emerging markets. Mega-brands still have a role, but as part of a house of brands. This is a hybrid portfolio of large, small and niche brands that meet many consumer tastes.
Managing a house of brands blows up the traditional brand lifecycle. It is a huge ask for companies with brands that have gone unchanged for years to proactively discontinue, cannibalize, milk and divest brands. But to complement mega-brands, CPG giants need small, targeted brands that are tested, tweaked, launched and retired quickly. This rhythm of launching products requires new skills and a different pace of innovation.
Bend don’t break
Operationalizing change requires a fundamental realignment of the operating model. This entails running two parallel organizations that each have specific governance, talent and success metrics. One is grounded in scale, and keeps the mega-brands running. The other is grounded in flexibility, and launches, scales and retires the new, smaller brands.
Big CPG will have to fight against the muscle memory to make this work. They can tap into their unique advantages such as: access to data sources, established analytics capabilities, broad distribution networks, and deep pockets to drive innovation and buy smaller brands.
There is a significant incentive to get this balance right. The Accenture Strategy Competitive Agility Index scores more than 7,000 companies across interdependent dimensions of competitiveness: growth, profitability, and sustainability and trust. On average, a one-point increase in the Competitive Agility Index score for a consumer goods and services company drives a 1.5 percent increase in revenue growth and a 5.9 percent increase in EBIDTA growth.
Get your groove on
To compete with small, consumer-savvy brands, the giants need a strategic approach to accelerate top-line growth. Here are some no-regrets moves for getting started: