The events of the last 18 months and particularly Brexit, have rocked most industries to some degree. The uncertainty has led to many bigger FMCG brands playing it safe, reducing range sizes and taking less risks. This has allowed many smaller brands to start pushing innovative and niche products and to really stand out in a market that can be dominated by the FMCG giants.
So what opportunities are there for entrepreneurs within the FMCG sector?
How can they compete?
Is there a way for them to nestle alongside the consumer giants in the industry?
Without doubt the smaller, entrepreneurial brands can be agile enough to spot niche gaps in the market and fill them quickly. They can also make full use of the digital age and be creative across Social Media to quickly build authentic followers.
The smaller brands can also gain trust very quickly. In recent years the food industry, as a whole, has been rocked by numerous scandals and consumers are more aware of where their food is coming from. Challenger brands like Corkers Crisps make a big play of the fact that all potatoes used in manufacture are grown on their family farm, and the British-ness of the product is celebrated across their branding.
It is also much easier for these smaller brands to show a real passion and back story to their products, which means consumers quickly buy into the brand not just the product itself. Small entrepreneurs also have the ability to walk away from even a successful product or idea, if they feel it is not staying true to their business model. This recent article from the BBC News website, tells of a highly successful bakery in Glasgow that have decided to close their doors despite being a commercial success. They say they never meant to become a “business” and that their success had taken away from their founding principles. I cannot imagine many of the large corporations following this line and shows one of the key differences between the entrepreneurial sector and large FMCG brands.
But of course, in an industry full of opportunity there will be big risks too.
A sobering fact from a recent article in The Grocer on challenger brands is that 9 out of 10 fail in the first year! Creativity in the industry needs to be balanced with sound business skills and there may not be the same support for Food and FMCG start-ups as there is in, say, the tech industry, where there are incubators and mentoring services readily available.
It appears that if a small, entrepreneurial brand is to survive in the FMCG arena they should be prepared to scale up quite quickly and therefore being prepared to invest or find investment is key. Crowdfunding still seems to be a successful way to do this but will appetite for this lessen?
At present one of the big growth areas within Challenger brands is Gourmet Snacking. If we look at brands such as Jealous Sweets and Candy Kittens we will see quite strong differentiations. Jealous Sweets have targeted adults powerfully, after identifying the success that premium brand chocolate has with this demographic. They also worked hard on defining their brand and making bold choices in packaging and look. Candy Kittens, another gourmet confectionery brand, grew through an interesting crowdfunding campaign (read more about this here). This saw them get rid of most of the individuals that pledged and concentrated on the 7 people that were investing 80 per cent of the money. They ensured the other supporters felt valued by giving them sweets and their money back and keeping them on as brand ambassadors. This move showed good business sense but also great customer relationship building skills that all challenger brands need if they are to be sustainable.
Another huge growth area has been Healthy Snacking appealing to various food and diet preferences. Popcorn has really taken the FMCG sector by storm over the last few years and brands like Popcorn Shed and Joe & Seph’s have led the way by offering gluten free popcorn, portions under 140 calories (Popcorn Shed) and popcorn cooked in hot air rather than oil (Joe & Seph). Joe & Seph have also used innovative flavours such as Gin & Tonic and Tequila, using real alcohol, to totally liven up the popcorn market.
Many of the above brands are now a common sight on some major food retailers’ shelves, but also in cinemas, delis and farm shops across the UK. One way that larger brands can remain at the cutting edge of the FMCG sector is by supporting these challenger brands with mentoring and business development services. Some of the big brands are already investing in this including Pepsi and the Nutrition Greenhouse, Unilever’s Foundry and Bread & Jam. However, although many retailers look to support entrepreneurial brands, in practice it is difficult for them to justify the shelf space and obviously the impact on their profitability will play top of mind.
The future for Challenger Brands in the FMCG sector?
For any challenger brand in the market, it is a question of developing and communicating strong values, passion and showing innovation, if they are to stand out and catch the eye of both investors and buyers. A strong sense of where your business could fit in the marketplace and business acumen will be the key to surviving and thriving in the coming years.