Small companies. Big disruptions: Insurgent brands are capturing an outsized share of growth from large consumer product companies

SMALL COMPANIES. BIG DISRUPTIONS: INSURGENT BRANDS ARE CAPTURING AN OUTSIZED SHARE OF GROWTH FROM LARGE CONSUMER PRODUCT COMPANIES

New Bain & Company research identifies three ways in which incumbent brands can fight back

New York – May 30, 2018 – No consumer product category is safe. Insurgent brands – those that have achieved more than $25 million in sales, outpacing their category growth rates by more than 10x over the past five years and have done so largely as independent brands – account for 2 percent market share across the 45 categories that they have disrupted. Yet they have captured more than 25 percent of the growth over the past five years. Meanwhile, many incumbent brands are struggling to keep pace.

To better understand insurgent brands and why they are thriving, Bain & Company analyzed U.S. brand sales data in over 90 fast-moving consumer goods (FMCG) categories, interviewed insurgent brand senior executives, surveyed nearly 5,000 consumers across ten categories and 57 brands, and drew on experience working with private equity funds and major brands that have acquired or manage small brands. The findings are included in new Bain & Company research, How Insurgent Brands Are Rewriting the Growth Playbook.

“Consumer needs are changing, and small, nimble brands are proving they are able to meet those needs with increasingly higher quality products and at faster pace,” said Brian McRoskey, a partner in Bain & Company’s Consumer Products practice. “Whether in the U.S. or in other developed markets, it is hard to imagine a future where insurgent brands will not continue gaining meaningful share.”

A number of well-known factors have paved the way for insurgents. Digital technology has lowered the barriers to entry. The rise of contract manufacturing and R&D eliminate the need for huge investments in those capabilities. Consumer expectations for tailored and specific offerings have increased, as has their willingness to try little-known brands and pay a premium for what they value. Meanwhile, the proliferation of channels, especially online, opens access to consumers outside the bounds of traditional retail. Finally, there is a ready pool of venture capital available for small brands looking to enter the market and grow.

Insurgent brands also differentiate themselves by having the traits of what Bain & Company calls a Founder’s Mentality® – an insurgent mission, front line obsession and owner’s mindset – and provide valuable lessons for large CPGs:

Offer a compelling consumer proposition backed by an authentic brand story. What sets insurgent brands apart is a compelling promise that addresses a real, unmet consumer need. Bain & Company’s research indicates that consumers rank insurgent brands higher than incumbent brands on many aspects of brand value, as defined by the Elements of Value, including emotional and life changing benefits: wellness, design aesthetics, and sense of belonging.

Activate brand assets in innovative ways to achieve focused and steady growth. Across categories and countries, increasing penetration is the primary way to build big brands. In Bain & Company’s view, the three key brand assets for increasing penetration are brand memorability, shopper visibility and range productivity – all of which are essential to the Bain Brand Accelerator®, an approach designed to help brands unlock growth. Insurgents must activate all three of these assets, just like incumbents, but their small size forces them to do so in very different ways.

Build nimble organizations with an owner’s mindset. Targeting unmet consumer needs and uniquely deploying key brand assets are important ingredients, but they are not enough fully to account for insurgents’ winning models. The agile ways in which they work, the talent that they bring on board, the ecosystems they build, and the insurgent mindset they instill throughout their organizations are the real contributors to their success. Bain & Company’s research has found that insurgent brands can launch new product ideas and get them on store shelves three times faster than their larger competitors.

Large consumer products companies can battle back against insurgents in three ways:

  1. Redefine the benefits of scale. Big brands still matter. However, as the landscape around them changes, they need to rethink how to create new advantages of scale.
  2. Regain an insurgent mindset…as a brand and as a company. Big brands can take a page out of the insurgent playbook - refocusing on what makes it unique to its consumers, embedding that purpose back into the front line, and reviving the sense of insurgency that once gave them their entrepreneurial drive.
  3. Become the acquirer of choice for insurgent brands. Large consumer goods companies do not have a strong record for launching new brands that can compete head-to-head against insurgents. In fact, big companies incubated less than one percent of the brands Bain & Company studied that had sales greater than $25 million and had outpaced their category growth rates by more than 10x over the past five years. Instead, incumbents have a higher chance of success by pursuing repeatable M&A, provided they are clear on their strategy and integrate thoughtfully.

“As insurgent brands continue to grow and take share, consumer product companies looking to reassert themselves are rethinking their brand growth playbook,” said John Blasberg, a partner in Bain & Company’s Consumer Products practice. “The priority is to reignite the entrepreneurial spirit that was once at the heart of their success, and acquiring strategically. That’s critical for capturing a greater share of future growth rather than continuing to cede share to insurgents.”

Editor's Note: To arrange an interview, contact Katie Ware at katie.ware@bain.com or +1 646-562-8107

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