BrainTrust Query: What Retail Chains Need to Know About Small Brands
In my over 30 years in the retail consumer goods
business, I’ve played a part in launching numerous “small brands” that
later became mainstays in the CPG arena. I’ve worked with some pretty big brands
at large companies, such as GSK, Gillette and P&G. But I’ve also specialized
in assisting small CPG companies in their launch of specialty brands such as
ZarBee’s, SmartMouth, AloeSense, Robi-Comb, Australian Dream, Softcup and UltiBrush.
These
small brands encompass a variety of categories ranging from oral care and cough/cold/allergy
to feminine hygiene, OTC and analgesics. However, I see common criteria necessary
for all to be successful:
Point of differentiation: Every item I touch needs to serve a new purpose.
I work only with category expanders.
Productivity: The true performers manifest the right blend of higher
price points, margins, penny profits and GMROI. I like delivering the most
units and highest dollars per point of distribution.
Energy: Brands I work with are nationally advertised, enjoy huge publicity
campaigns and deploy a highly-skilled intelligent use of the social media.
Destination: Simply put, these brands deliver your most coveted consumer
with the most desirable shopping basket results.
Innovation: The big brands will eventually buy out the innovations
of the small brands but rarely do the big companies invest in the initial groundbreaking.
My
associates and I have taken on the advent of SKU rationalization and its impact
on small brands directly with retail executives. In the beginning, and then
after the economy weakened, many retailers were approaching SKU rationalization
with a sledge hammer instead of a scalpel. Too many retailers were limiting
product assortment to the same “big brands” to a point where every
chain store looked the same. Discounts were the only points of differentiation.
But then we made progress and retailers started to weed out slow-moving line
extensions of the big brands, replacing them with highly productive and innovative
small brands.
(I see this as an exhilarating trend — brilliant for retailers,
small manufacturers and consumers! Bring on the profits!)
But let’s be clear:
not all small brands are right for retail distribution. You must pick the right
entrepreneurs with the right products and personalities for success. I work
only with small business people that have the proper funding in place, the
right business plan and the right attitude to listen, learn and grow. And I’m
not afraid to turn away from the ones that don’t meet my criteria.
Discussion Questions
Discussion Questions: What do you see as the key qualities for a successful small brand? Which retail channels and formats would benefit most from more small brands? Given current retail market dynamics, do you expect it to be easier or harder for small brands to get shelf space in the next few years?
Whenever we’ve done SKU rationalization studies, the first step our clients always seem to take is, “let’s drop the lowest selling X percent of SKUs.” We always question this strategy and David makes the point well that it should be questioned. We completely abandoned the idea of niche marketing in the 1990s and I think we missed a lot of opportunities.
Any good retailer can make money off smaller brands that give them a wider variety of real choice (as opposed to me-too choice) and better margins than mainstream products.
Small niche brand items, can do well, if quality is priority #1. Another cheap bean, or mustard won’t cut it, and if priced right, can contribute to the long life on the shelf. There are thousands of so-called new products introduced into our arena every year, but very few strike a chord with the consumer, and those that do will make money. Phil Lempert has 5 great new items of the week videos on his website (SupermarketGuru.com), and scores the products fairly. If only I can create the next great item??? What would it be!! Who knows, but I wish all the food creators well…
A tangible, discernible, relevant point of difference for a substantive (but not necessarily huge) contingent of consumers. Everything else David cites is certainly important — but without this one the new product or brand is dead in the water.
I really liked your article because I think small brands give vitality to a retailer that can look pretty much like everyone else in terms of what’s on the shelves.
I especially like your point about “Destination”. I call that getting to your “Platinum Customer” and focus on that with my small clients. The retailer has what you call a “coveted customer” and so should the small manufacturer. If the entrepreneur says they want to sell to everyone, that’s someone to avoid. Targeting matters.
Here’s to your success!
In this ever-evolving age of multi-channel retailing, small brands may actually prosper more than simply being relegated to a single location on the physical shelf. Connected consumers, small brands that efffectively serve a consumer need, and ubiquitous messaging are shedding new light on once under-valued niche products. I agree with David, this is an exhilarating and transformative time.
Much of the discussion around SKU rationalization has been black and white and way too simplistic. At the same time that Walmart was eliminating brands under Project Impact, it was also introducing completely new small-to-mid-sized (depending on how you define this) brands such as Seventh Generation and Mrs. Meyers in household cleaning and hard candy and Sophyto (Sam’s Club) in cosmetics. Walgreens continued to bring in European boutique personal care brands and new food brands even as it eliminated duplicative national brands through its CCR (Customer Centric Retailing) initiative.
I see small brands surging as localization converges with small format proliferation in the next one to five years. Smaller, local brands play a big role in every retailers’ strategy.
When you’re talking CPG, the driver for the most part is volume. Space availability is relatively fixed, so the question is what the sales volume for that space is.
“Big” brands are big because they do big volume. So the challenge for a smaller brand is to command a (new) niche large enough to generate volume for the retailer, yet small enough that the bigger brands leave it alone. In many categories, this is a pretty small hole to thread.
The coming age of personal media gives small brands an opportunity to find their customers, start their businesses and make a name for themselves without ever coming to a retail shelf. They don’t need massive spending, just smart marketing to become successful. Once they have a successful story, they can go ahead and justify to a retailer why they should be carried.
Small brands represent alternatives that consumers are looking for that will never be explored by the CPG companies. Now more than ever, those small brands (and good ideas) have vehicles to connect with consumers and establish a sustainable business with or without the support of mass retailers.
New brands can go online first to build volume and brand awareness before going to the shelf. Amazon.com, drugstore.com, tradavo.com (b2b to small format retailers) and selling off the brand website are all quicker and less expensive routes to the consumer. These should be played by new brands before trying to get into traditional distribution.
Building brand awareness and sales online is not simple, but it can be done a lot more quickly than trying to get shelf presence. It also gives the prospective retailer or distributor product movement data that would otherwise be hard to attain.
Appreciate the feedback! We have had responses direct from several senior level retail executives and it’s very encouraging to hear minds opening to a different perspective about SKU rationalization as it relates to small niche and specialty brands.
Internet capability and marketing makes it easier for new / smaller brands to break in to the marketplace. This is the place to build brand popularity before going in to the retail store environment. If successful online, the cusomer base will follow to the brick and mortar sites. Build it and they will come.
Good list, but may I suggest an additional item? That would be the paying, selling, and cajoling just to get small brands on the shelf. From a supermarket perspective, that’s space that could be devoted to PL. Slotting fees are usurious and brokers have bigger fish to fry, their premium established brand clients. And while we’re talking about money, the cost of the national advertising and huge publicity campaigns mentioned by David for ZarBee’s, SmartMouth, AloeSense, Robi-Comb, Australian Dream, Softcup, and UltiBrush must have been enormous. And in spite of that, my wife and I remain unaware of these products. Perhaps we are not part of the target demographic. Not belittling these brands, but they and other small brands must be supported by deep pockets.
Relatively simple question. Small brands must add something to a category. Small brands must be more profitable for the retailer (penny profit). Anything beyond that is just icing on the cake.
I’ve suggested to many small, independent brands to think like a big brand with a nationwide/global presence, but only with a small budget.
Another great trick is to make a public announcement that you will not offer your product for sale in a chain supermarket. Then email 200 of your closest friends and schedule 10 per day to call the chain headquarters and complain that the product isn’t available in their stores.