Even as consumers stocking up on pantry items, cleaning products and other consumer goods have tilted the power pendulum back in favor of big familiar brands in many categories, it turns out these CPG giants’ smaller rivals still managed to one up on them when it comes to market share.
After Covid-19 changed stay-at-home consumers’ habits and increased U.S. CPG sales by 10.3% to $933 billion last year, large manufacturers combined lost 1.3 percentage points in market share, or $12.1 billion in sales, to smaller players, according to market research firm IRI. Large manufacturers, which IRI describes as those exceeding $5.5 billion in annual sales, have lost market share in each of the past five years to 46.7%.
As big giants failed to meet a surge in demand in the second quarter last year when U.S. consumers began to hunker down at home, that allowed smaller rivals and many “extra-small” upstarts to enter the market to fulfill the supply shortage in categories including soap, hand sanitizers and home health care kits, IRI said. Retailers’ own private label lines also filled the demand.
As a result, small manufacturers and stores’ own private labels to a smaller extent gained 1.3 percentage points in combined market share. Together, they took up more than half of the industry’s sales growth in 2020, the data shows.
Smaller manufacturers gained market share in nine out of 10 departments, except for the home care category, according to IRI, adding they picked up even more share in areas including frozen food and center-store shelf-stable food items.
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To be sure, big giants’ share loss has to be looked at in the context of a growing market. A big part of CPG giants’ share drop last year also came from reduced demand in convenience stores, which are “dominated by” large manufacturers, thanks to consumers hunkering down and traveling less, IRI study shows. It said convenience store demand is expected to bounce back as consumer travels pick up.
Big giants including industry leader Procter & Gamble have observed consumers’ willingness to shell out for established brands that they are familiar with. They have also updated their product lineup and been acquiring smaller labels over the years that consumers see as having a more authentic and natural pitch to bulk up their portfolio.
A case in point, P&G
As consumers spend more time at home, benefiting P&G’s categories like fabric and home care, it nevertheless dampens demand for others including grooming products, SK-II luxury skincare line, deodorants and adult incontinence, P&G said.
“We’ve seen dynamics play-out differently across different categories,” said Jon Moeller, P&G’s chief operating officer and chief financial officer, on the company’s earnings conference call last week. “There is potential for increased preference for established, reputable brands that solve newly framed problems better than alternatives, potentially less experimentation….Our experience to-date makes us believe we are generally well-positioned in this environment.”
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