Why haven’t CPG giants figured out what makes small brands so popular?

Titans of the consumer packaged goods industry may be in trouble as they continue to face significant competition from smaller counterparts. In fact, small CPGs are now leading the industry’s growth if not outright market share.

Since 2013, $17 billion in sales have shifted from major CPG players to small ones, according to Forbes. And the fastest growing CPG segment this year was "extra small" brands, defined as making less than $100 million per year, with growth of 4.9 percent. Large players, defined as making more than $5.5 billion per year, lagged behind with only 0.6 percent growth. There is a confluence of factors responsible for the spike in small CPG success and the waning market domination of conglomerates that once had only each other to worry about.

Direct-to-consumer e-commerce has allowed customers to discover and begin buying from brands they're interested in without needing to visit grocers where big name brands may be more prominent. And with some direct-to-consumer brands, like "active" drink company Dirty Lemon Beverages, offering direct-to-consumer subscription services, the convenience creates an element of brand lock-in that may keep potential customers from trying competitors in the category. 

Large CPGs may also be suffering from an inability to move quickly enough to address market trends. It took a while for big CPG companies to move into areas like coconut water and whey protein bars, which were long dominated by independents.

The widespread use of Amazon.com's marketplace by customers is also playing a role, as Forbes notes, with small brands becoming top sellers on the platform.

But bigger CPGs have been making moves to get in on these markets, often by acquisition rather than innovation.

For instance, in 2016 Unilever acquired the subscription-based direct-to-consumer pioneer, Dollar Shave Club, for $1 billion.

And last December saw a spate of acquisitions of smaller "better for you" brands by major CPGs. Hershey acquired Amplify Snack Brands, maker of brands like Oatmega whey protein bars and SkinnyPop popcorn, after earlier acquisitions of Krave Jerky, Brookside Foods and BarkThins. Campbell Soup acquired Snyder's-Lance, owner of Snyder's of Hannover pretzels, Kettle Chips and other snack brands.

• Small CPG Brands Are Gaining Upper Hand On Giants -- And Now The Big Want To Get Even Bigger –Forbes
• New-gen D2C brands get more personal with consumers – RetailWire
• Hershey and Campbell splurge big on better for you acquisitions – RetailWire
• What does Unilever's acquisition of Dollar Shave Club mean? – RetailWire