The big brands are being nibbled to death. Who is coming after our business?
Life used to be so much simpler. TV viewing was limited to four channels. Ordering a coffee didn’t necessitate a fluency in a couple of languages and when you left for the night, work stayed in the office.
Within our FMCG world, consumer choice was significantly more limited too. Life might not have been as convenient, but it was always simpler.
The comparative lack of brand choice meant that manufacturers were very clear on who their competitors were. They could more easily predict where any threat was emanating from and could plan accordingly against an opposition operating in plain sight. Battle lines would be drawn up and Boardrooms would echo with strategies aimed at stealing share and striking at the heart of their competitors, who themselves sat in similar Boardrooms and equally obsessed about their competitor. Think of the Cola Wars between Coke and Pepsi. Think Persil versus Ariel. Think Fosters versus Stella Artois.
How things have changed. Move forward a couple of decades or so and new technologies have either revolutionised markets and been the cause of the death (or terminal decline) of certain categories (think media streaming’s impact on CD or DVD sales), or they have created new services (think Uber or the rise of food delivery services). For an example of the O2O emerging trend – an online business moving into an off-line environment, think Harry’s.
Within FMCG, some old battle lines are still clearly in place. Brand Coke will always compete with brand Pepsi. However, the FMCG battle grounds and the rules of engagement have changed significantly, as tastes and preferences have developed and then the technologies available to satisfy them have become more readily available. In the drinks example, the Coca Cola Company now battles PepsiCo not just in Colas but rather across the full landscape of a new soft drink market stretching from juices to smoothies, from waters to seltzers and from coffee to energy drinks and beyond.
The old superpowers now face additional and very different threats – challenger brands whose guerrilla tactics leverage new technologies and new routes to markets. Most critically, they often provide products and services more attuned to a younger demographic with different mindsets and attitudes. Challenger brands typically move at a real pace to deliver against the new demands for authenticity and provenance and they often bring appealing quirky stories to add character and support to their fledgling brands.
Traditional FMCG models are challenged. What were once the superpower advantages of scale and process have increasingly become millstones, as the major players struggle to keep up with their more fleet-of-foot competition, which seemingly has come in under the radar screen from apparently nowhere. For many, their competitors are no longer operating in plain sight. Markets are being disrupted. Think Cold Brew or Nitro coffee – the big players may be cashing in right now, but they are playing catch-up. The little guys got there first and established the trend.
The facts are stark. In the USA, Nielsen data shows the share of the top manufacturers in Food and Drink dropping from 33% to 31% since 2013. The lost 2% of value has been shared out across a staggering 16,000 new players to the market. PWC research demonstrates that in 18 out of 25 CPG categories, smaller brands are growing ahead of bigger, long-established brands.
The big brands are increasingly being nibbled to death.
Little wonder then that the major players are fighting back. They simply have to. In a race for scale, many of the ‘super winners’ as McKinsey refer to them, are on the M&A path. Studies by OC&C shows that M&A activity amongst the world’s top 50 FMCG companies jumped 45% to a 15 year high of 60 deals in 2018. But it’s not just scale for scale’s sake – many acquisitions or new activities are taking the big players down different routes. Think Unilever and the Dollar Shave Club. Think Procter and Gamble and its online shopping site ‘e Store’ and the more recent DTC subscription service on its Tide tablets.
At Quantic, our approach will help stretch your current thinking. You will out-think, outsell and outperform your competition. When it comes to defining your category, you will be encouraged to think beyond typical current manufacturing-led definitions to ones based on the products and services delivering the same primary needs. Players and future competitors are squarely placed onto radar screens based on their potential to satisfy the same consumer needs. They come back into plain sight.
