Small brands are competing successfully and gaining market share in the CPG (Consumer Packaged Goods) category, according to new research by Booz & Company. Analysis of the food and beverage industry revealed that companies with sales under $1 billion (considered small in that industry) perform better than large companies in 18 of 25 top categories. From 2009 to 2012, small companies in packaged foods showed revenue growth that was three times faster than larger companies, according to Booz.
Just as important, small brands were able to command price premiums in numerous categories. In addition, small brands competed favorably with private-label products, despite their premium price.
Booz says there are several factors that are creating favorable conditions for small companies. For one thing, about 30 percent of consumers can be classified as "selectionists" -- people who want more variety in food and drink products. These same consumers sometimes focus on where a product originates and the distance it has been shipped. Other factors include the cost-efficiency of digital media, the ability of small companies to outsource back-office functions such as invoicing, and the fact that large retailers are not adverse to stocking small brands.
Booz says small companies do not have "a single or consistent approach" that makes them successful. However, says Booz, "Successful small players appear to have one important similarity: They possess a coherent system of capabilities that allows them to focus on a few critical areas where they can most effectively exploit the weaknesses of less-nimble large players. This coherence gives its owner the means to differentiate itself."
While the Booz analysis applies only to CPG brands, it isn't a stretch to project the small brand advantage onto other industries and product categories. If you manage a small brand, think about ways you can do "end runs" around larger competitors. When you offer superior product advantages backed by great service, customers probably won't care that you're brand is small.
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