There is an ongoing David-and-Goliath story in the Consumer Packaged Goods (CPG) industry today — and the “Goliaths,” the largest CPG players, are beginning to realize they are losing the battle. According to a McKinsey CPG survey report, large CPGs’ average compound annual growth rate (CAGR) was flat over the past four years, showing only a 0.3 % uptick, while midmarket and small CPGs grew significantly in the same period, 3.8 % and 10.2 %, respectively. It’s part of the reason that smaller CPGs are being acquired at record numbers. Let’s break down what these disruptors are doing that’s different from the Goliaths of the CPG world.
What sets CPG disruptors apart from the others?
Unlike Goliath-like CPGs that have large departments of specialists in the fields of analytics, trade marketing, branding, etc., David-like CPGs have had to adapt to competing without the headcounts. They have benefited from leveraging new technologies that are designed to dismantle their largest competitors by exposing their key weaknesses. For instance, our SaaS platform helps disruptive CPGs unlock insights that are hidden in their massive syndicated data sets in about 0.8 seconds. They can compete head-to-head with any Fortune 500 company and they do it for pennies on the dollar.
Leaders from established CPGs tend to be from a generation when data was scarce, so they hoard it. One of the many downsides of this approach is the risk of falling behind the competition, said Ian Dudley of Nielsen. Disruptive leaders embrace the democratization of data because they know that insights can come from anywhere. They acknowledge the various ways in which analytics can help them stay ahead of the competition, particularly when it comes to assortment decisions, pricing, trade promotion optimization, distribution gaps and retailer-specific selling strategies.
Retail buyers are seeing that smaller companies can make their own actionable fact-based recommendations to successfully challenge the category captains in their respective categories. With Amazon.com pressuring traditional retailers’ market shares, buyers are more willing to listen to the nimbler brands that can help grow their entire product categories.
All CPGs have reports but few can get to repeatable insights
During the 2016 GMA Leadership Forum, a CMO of a Fortune 100 company advised other large CPGs to embrace change to remain on track. “Some legacy functions of large CPGs, might need to change in order to adapt to the speed of the emerging brands.” And instead of trying to defeat the winning companies, she recommended “partnering with smaller firms that are doing innovative things in the world of data, [so that] established CPGs can break down barriers and move faster.”
Decisions based on static reports can’t win against actionable & immediate insights, which emerging CPGs use to disrupt the industry.
Being agile starts with taking the first step
The process of taking on a new data analytics process can be intimidating for large CPG organizations. There are many factors that limit the success of a company’s analytics efforts, according to Haluk Demirkan and Bulent Dal, including the failure to unify the islands of analytics with “Excel culture.”The most successful companies realize the immediate value in seeing around corners faster than their competition and cut through the red tape in order to win today not next quarter. Many CPG disruptors have sought our expertise so they can effortlessly leverage actionable analytics to meet their demand for agility, speed, and category leadership. In most cases, we can deploy our services company-wide within 72 hours.