NEW: Sklar Wilton & Associates has launched a new Disruption Audit Solution to help companies assess how their business will fair in a world of disruption and identify where they need to lean in harder.
In 2016, major brands across 14 product categories lost market share. And, despite overall sales growth of 6%, the majority of these brands also lost revenue.
Given the saturation of most CPG categories, we know these losses went to either private label store brands, or smaller, more niche brands.
So where did these large players go wrong?
- They forgot to watch for changing consumer behaviours. Younger people are less likely to trust big companies. They opt for smaller, more niche brands that are more transparent about their processes and production, and that put at least some of their profits toward good causes. “Compared to any generation that has come before, they are less trusting of brands,” says Emerson Spartz, CEO of the digital media company Dose.
- They weren’t prepared for the recession to have residual effects on consumers’ bank accounts. While the economy has bounced back from the 2008 crisis, one thing has not returned – consumer’s shopping behaviours. We can see this when we look at retailer growth. According to Deloitte Insights ‘The Great Retail Bifurcation: Why the Retail Apocalypse is really a renaissance,’ retail growth is happening in two places. First, priced based retailers like Walmart and Dollarama (+7% one year revenue growth) deliver value by selling at the lowest possible prices. Second, premier retailers like Apple (+8% one year revenue growth) deliver value by offering premier or highly differentiated product or experience offerings. On the other hand, balanced retailers that deliver value through a combination of price and promotion saw declines (-2% one year revenue growth).
- They weren’t prepared for technology to evolve the way we reach consumers. Traditionally, large brands would have reached consumers through TV advertising. For decades, brands and marketers devoted huge chunks of their budgets to television advertising – researching how consumers use TV, how consumers understand TV commercials, how consumers react to TV commercials, and how to buy the best spot on TV. Only large brands had the funds to participate in this endeavor. But now the world is different. TV time has been drastically reduced and replaced by iPhone, iPad, and Android time. In fact, today, 75% of TV viewers multi-task. What kind of attention are those TV commercials getting if 75% of viewers are also doing something else – working, reading, Facebooking, tweeting, snapchatting, messaging, and more. Particularly since many of those distractions can incorporate vastly cheaper methods of advertising that even small players can participate in.
- They forgot to prepare for the entrance of Private Label Brands. Remember when President’s Choice was a private label brand in Canada? By creating top quality products (e.g., their famed chocolate chip cookies), they quickly evolved into a major, highly sought after brand. If only CPG companies had a way to foresee these changes and develop a plan to prepare for and protect their growth.
Disruption doesn’t have to be scary. It doesn’t have to evoke the flight or fight response. Forward looking companies can prepare for the evolution of business, and of business strategies by undertaking a disruption audit and planning for the future. We’ve facilitated many disruptive audits with small businesses and global companies, and can help you too. Please get in touch with me!