In Mid-September 2017 Michael Movitz was interviewed on the Cornucopia podcast about how CPG companies are responding to the current consumer demand for better for you products, and why it matters. The podcast will be released soon, and in the meantime, below is an excerpt from the interview....
The speed of change as well as the number of changes that are happening creates a very fluid and new dynamic that literally is rewriting the playbook for the path to consumer as we speak. Traditional CPG companies were built on a business model of scale for efficiency, and that really hindered their ability to adapt, respond, react and move with speed. We started to see a number of years ago the natural, organic and specialty products industry had been growing very well for a long time but suddenly it was becoming much more front and center, and it was where all the growth was. More than $20 billion dollars in market share has been lost by traditional CPG over the last five or so years and it's all moved to these smaller start up and natural organic specialty premium product companies.
As traditional CPG has started to get a grasp on what has been changing, they've
had to adapt to return to growth and remain profitable. These companies are starting to change - as they like to say, they're “modernizing their portfolio”, which has a lot of components to it. But in addition to that modernization of their portfolio they're also focusing on e-commerce, digital marketing strategies, looking to improve their portfolio through mergers and acquisitions - buying companies like these natural organic brands - really almost as a way of replacing research and development. Efforts have shifted more to investment and acquisition of companies because it gets them to that point faster.
As a quick side note, there's almost a billion dollars in venture capital funds that are now available from about 10 or so traditional CPG companies: General Mills, Campbell's, Pepsi, Kellogg's, Tyson, Coke, Purina, Unilever, Mars... They all have venture funds now, generally $100 million or more, with the intent and purpose of investing in these smaller upstart brands to try to get a jump on trends. In the process they get access to a consumer base, know-how in the marketplace, and a supply chain that is already where the traditional CPG wants to go.
But again because of their size and scale they can't just turn on a dime. They have billions of dollars in existing sales for their traditional products, so even though growth is coming from healthier fresher more transparent companies and products, it's not where all the business is right now and they can’t convert their entire portfolio overnight. It does take time. And as they transform themselves internally, acquiring these companies, introducing some new products and making incremental changes to existing products, all helps them move towards that goal.
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About The Author...
Michael Movitz has more than 25 years natural/organic products industry experience across retail, manufacturer, broker and market research organizations...