For decades, the consumer-goods industry has used the following business model to thrive: to build mass brand equity, to grow with grocers as they expand, and to drive operating efficiencies. However, that historic success model has been disrupted by several trends that have also now been accelerated by the Covid-19 pandemic.
Younger consumers, like millennials, tend to avoid purchasing products from large brands. Because of this, these big-name brands are struggling to generate customers in that age group. In fact, millennials are four times more likely to avoid buying products from large companies than their parents are. Furthermore, grocers are becoming more difficult trading partners due to the e-marketplace generating 65% of growth by the top 150 retailers. The industry’s economic-profit growth has plummeted, as a result. Also, companies of consumer-goods are facing an investor-expectation gap.
These companies are now threatened to implement a new model. They must get on the right side of these disruptive trends and need to help small brands scale up more quickly. To accomplish the shift of altering their strategy, they will have to learn to host a plethora of new capabilities.