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Bigger isn’t always better

Bigger isn’t always better

A clear trend is emerging. Newcomers and small players are rapidly gaining share from big multinational companies. In 2015 cpg sales in the U.S.A. alone grew to $670 billion but half of those sales were made by small to mid-sized companies(1). Also at a global level the 2010-2015 CAGR of big multinational food companies was nearly flat while the smallest players grew by 6.3% (2). In the U.S.A., but it is true also for other countries, there have been significant market share movements from bigger to small players: as an example between 2008 and 2013 a 19% share of the yogurt business, worth $7,9bn, moved from the larger brands to the emerging ones(3). From this data, we see a clear trend emerging: the big guys are lagging behind while the little guys are running full speed ahead.

All of this is linked to two major interrelated changes in the market place:
A) a remarkable shift in the consumer trust paradigm
B) a new media model.

More transparent, more authentic

A) if in the past trust was mainly associated to size and heritage (the bigger the company the higher the trust in its products) and tended to be passive in nature now it has become a much more proactive element where transparency and authenticity are playing a critical role. We could say that trust moved from being a stock into something much more fluid that has to be regained almost on a daily basis. This has radical implications on the way companies and brands communicate and interact with consumers.

Smarter is better than louder

This then connects to b) where the old model – where bulk media buying proved very efficient in maximizing the impact of communication – has been surpassed by an increasingly interactive, individualized media interaction with consumers. Share of voice is no longer a key discriminator. In a recent survey of more than 200 marketers of some of the biggest cpg multinationals only 2% of the respondents indicated ‘share of voice’ as a way of driving brand penetration today. This is a stark difference from 15 years ago when this was important for more than 20% of the respondents(4).

In this context small brands can take advantage of new approaches. Suja juices, a brand marketed for health and wellness, was able to reach a revenue of more than $60m in 3 years with little or no investment in traditional media(5). So we can say that in these days smarter is better than louder.

What future for big brands?

This trend, of smaller brands climbing higher and higher trajectories while larger brands lag behind has turned many heads and raised a number of vital questions. In his new book “small data”, Martin Lindstrom is posing a question about the survival of big brands: “it may seem counter-intuitive, but “transparency” is likely to spell the end of global brands as we know them.”(6). This view can be drastic but the question on how big brands can react or be proactive in managing the changing landscape is crucial.

We are all learning to speak a new language. It’s exciting and fresh, but at the same time we are missing some vocabulary. This isn’t simple or easy. We need more information, connection and experimentation. Only companies and brands willing and open to do it will be able to sustain or regain a competitive edge. Buying media in bulk and dedicating a residual percentage to new activities is not going to be enough any longer. It is about transferring the skills to a new model.

(1) IRI and Boston Consulting Group, 2016
(2) Nielsen, 2016
(3) Euromonitor International, 2014
(4) Sevendots, 2017
(5) Inc.com, 2016
(6) Martin Lindstrom, 2016