Look! A squirrel.
99.3% of products sold in-store are ignored by the typical shopper over an entire year.
Never before have consumers had so many buying options. This panoply of item availability on digital or physical buying channels has created a challenge for brands looking to maintain, share, and accelerate growth. For most brands, the resulting category growth is negative or in the single digits.
The challenges facing established CPG brands and businesses are nothing new, but significant changes in consumer behaviors and an onslaught of nimble competitors who can keep up with shifting demand put increased pressure on brand growth. Catalina’s real-time view of shopper behavior across over 500 million shopper ID’s illuminates the contributing factors to brand growth:
- Ingredients Drive the Sale: Natural, organic, and other ingredient-based purchase motivations are driving shares away from legacy brands that are less transparent about what goes into their products. In the past, larger brands playing in these formerly “niche” areas were able to capture consumers by converting them to the category, but now, consumers have a choice. Natural and Organic now have sub-niches, and even established “alternative” brands are fighting to remain relevant with increasingly educated consumers. Over the past 3 years, the largest increases in the natural and organic markets have come in the juice drink, toddler food, and lunch kit categories.
- Millennials Seek Adventure: Millennials are loyal brand buyers once they love a brand, but there is social currency involved in the discovery of new items and solutions. They will become brand evangelists once won over, but in the meantime, they are continually on the hunt for new products with better ingredients or different attributes. Sixty-nine percent of millennials say they crave adventure, and this extends beyond just travel. Melanie Felgate, a Senior Consumer Analyst for GlobalData, says “Millennials are more open to new and innovative concepts, indicative of wider exposure to foreign cultures and products from an early age compared to their senior peers. Millennials are … more easily swayed by influences such as the media or recommendations by friends.”
- Brands are Born Online: With upwards of 80% of Millennials reporting that social media is the most effective way to reach them, brands can be born and thrive online without ever even touching retail. These startups can scale their consumer base, stealing precious share from traditional brick and mortar brands without the substantial cost structure required to do business in traditional retailers.
- Social Drives Purpose: As consumers bring ethical and social motivations into their purchasing, upstart challengers are claiming consumers with both their products and their missions. Purpose-driven Millennial consumers tend to focus on the values of the brand rather than the traditional trust in the size and ubiquity of the brand. The promoted brand’s social values now act as a proxy for the quality and trust prior generations put into larger brands. And Millennials are willing to pay more for these values – nearly three-quarters of them, versus two-thirds of the total population, are willing to pay extra for products and services that come from companies committed to positive social and environmental impact. That’s not to say their decisions aren’t influenced by price. They are the most likely to buy the lowest price item while grocery shopping (70%, as compared to 59% of adults overall), per an IRI Survey report.
- Small Scales On-Shelf: Upon building a brand via social media and other digital platforms, the next step is to scale in-store. Impactful brands achieve significant volume gains through strong retail partnerships. Following its acquisition by Coca-Cola, Honest Tea increased their retail footprint from 15K to 100k stores. This benefits retailers, too, as millennials seek new brands on the shelf. Half of the top 200 new items of 2017 came from companies with less than $1 billion—a huge increase from just a couple of years ago, according to IRI. Additionally, the lunch kit, ready-to-drink coffee, and bath additive categories have shown the greatest increase in the number of brands overall, while the toddler food, ready-to-drink coffee, and chewing gum categories have shown the largest decreases in loyalty overall (brand switching).
- The New Old Competition: Traditionally, private label products were known as the inexpensive, lower quality alternative to brand-name products, but no more. Retailers have invested in better branding and higher levels of sophistication in their marketing, attracting consumers who see the relevant value in retailer branded products without the stigma past generations placed on private label products. According to a recent report, just over half of Millennials, 51%, have no real preference between private label and national brands, according to a study by Cadent Consulting Group. As long as products “work,” millennials are indifferent to the enduring brands of their parents’ generation. In the frozen Mexican appetizer, ready-to-drink coffee, and refrigerated single-serve juice categories, private labels have grown the most in share of category requirements over the past 3 years, by 444%, 398%, and 298%, respectively (assumes PL penetration greater than 1%).
Despite the challenges presented by a slate of agile new competitors paired with product options and buying choices in the market, existing brands can still win. Blending emotional social consciousness with direct, efficient methods is a winning formula for retaining consumers and driving volume. Brands have always needed to build consumer connections beyond prices and deals. Today, it is more critical than ever to identify your target buyers and maintain an ongoing personalized dialog with them in order to remain relevant and grow your brand.