Small brands in the food sector are growing up to 4 times more than the top brands and private labels. Overall, growth is greatest among brands that are not among the Top 60. They are more adaptable, faster, more targeted, more communicative and more efficient. They use partnership ecosystems to do this. Our recommendation for the packaging industry is therefore: don’t just focus on the big players, but leverage the potential in the small ones.
In food retail, brands that are not in the Top 60 are the growth champions. Their growth (CAGR) exceeds that of the Top 10 by up to 4 times over the period of 2015-2019. In terms of market share, the small players are also ahead of the Top 10, the Top 11-30 and the Top 30-60. The reasons are many. The conclusion for the packaging industry is clear: a significant market is growing here that should (also) be focused on. It already represents a large share of the whole, has the strongest growth and, what’s more, usually pays better than the big buyers.
Global Data examined food retailing in Germany for the figures, including alcoholic and non-alcoholic beverages.
The reasons for the growth of small brands
- Consumers and retailers are focusing strongly on the aspects of “regionality” and “sustainability”. This is where many of the small companies can score.
- Smaller brands adapt more quickly to changing consumer needs. The global supply chains of the big players are designed to offer large volumes.
- To manufacture and move products. This makes them inflexible in comparison.
- Smaller brands do less advertising, but are much more targeted in their communications. Instead of relatively wide-spread TV advertising, they prefer pages on the Internet where their customers spend time.
- The R&D processes of the top brands are designed for mass demand. This makes them more complicated and slower in comparison. Small brands, on the other hand, get direct insights and concrete feedback from their niche buying group in real time. That’s a big advantage.
- Smaller businesses are using social media and local consumer engagement to great effect.
- Smaller brands have lean, cross-functional organizations.
- They are building an ecosystem of partnerships that can include co-manufacturers. This ecosystem gives them a lot of flexibility and great freedom to quickly adapt to the market.
Growing with small brands
There is a lot to be said for growing with the small players. They are growing the fastest, already have the largest market share apart from the private labels, and are prepared to pay more money for good service than the big players.