Consumer shift towards smaller brands deny big food companies sales worth US$12B in 2020 – IRI

GLOBAL – Small consumer brands are the new thorn in the flesh of big food companies, causing them to lose US$12.1 billion in sales in 2020, a new research by IRI has revealed.

According to the research, the pandemic accelerated the consumer shift toward smaller manufacturers, as big companies struggled to meet demand and shoppers tried smaller or niche brands.

This allowed smaller CPGs and private label to gain 1.3 points in share, or US$12.1 billion in sales, marking the fifth consecutive year that large manufacturers have lost market share. 

The research further noted that smaller brands accounted for about one-third of the 10.3% in growth the CPG industry saw last year while Private-label products represented about 18% of growth.

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Combined, these two emerging forces in the consumer packaged goods sector captured more than 34% of total CPG growth in 2020.

Smaller manufacturers did especially well in the alcohol, frozen food and center-store food categories, according to IRI.

With consumers spending more time at home, small CPGs with offerings in breakfast, frozen fruit, snacks and shelf-stable products also saw growth.

Covid-19 – an unlikely ally

Small manufacturers, which IRI defined as companies with annual sales of less than US$1 billion, had already been gaining share from larger ones for years

But a golden opportunity appeared at the onset of the pandemic, when large CPGs were unable to keep up with the surge in demand, especially in the second quarter.

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Smaller players seized this opportunity to fill the gap, and brought in new customers especially as buying habits changed, according to IRI.

Smaller brands also benefited as the pandemic dragged on and buyers were looking to change up their at-home menu.

They further picked up sales as consumers took more time to eat breakfast, giving them the opportunity to discover niche brands.

Private-label products also became more attractive to consumers who were looking to save money or needed an alternative when brand names were out of stock.  

Large manufacturers to gain post-Covid 19

As the pandemic eases and consumer mobility increases, IRI expects larger manufacturers to gain back share thanks to retail channel shifts.

The convenience store channel, which is dominated by large manufacturers, has lagged others in growth over the past year as automotive travel slowed. But IRI expects this channel to recover in 2021.

Also, large food manufacturers are expected to gain from on premise consumption that is expected to rebound as consumers gradually return to their earlier shopping behaviours.

Even so, IRI expects to see small players continue to chip away at larger brands’ market share. That could be particularly true for the private-label category,

The US$90 billion-plus category gained a real foothold in 2020 and IRI projects the segment to grow between US$10 billion and US$12 billion in 2021.

That said, growth rates across the entire CPG industry will most likely slow in 2021, unable to beat the explosive sales that were experienced during the onset of the pandemic.

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