The biggest trend is how much small companies are now impacting new product development in the CPG industry. It used to be that large companies were doing all the innovating and then it seemed like that morphed into simply launching a series of line extensions, which helped to save on costs but didn’t keep up with the changing preferences of consumers. So small companies have stepped in and now represent more of the innovation than ever before. Consumers want meaningful value from their products. They want to purchase from brands that share their values and enhance their personal lifestyle. Digital marketing has opened up tremendous opportunities for small CPG companies with great ideas to reach consumers and build a following before they invest in growing and scaling their company. Where historically, large CPG companies dominated the retail channel making competition for brand awareness and shelf space indomitable for small players. The digital transformation of retail has changed all that. Ecommerce enables innovative entrants to reach consumers and test their concept – it has broken down traditional barriers to entry.
The second development has been the development of omnichannel distribution via large companies. Grocery stores, for example, used to all be local. Now, most groceries are sold through large chains. In the same way, new channels have emerged, and you see Walmart, Target and even Walgreens and CVS trying to get a share of the market alongside clubs and the newest comer … online merchants like Amazon.
Both trends create challenges and opportunities for entrepreneurs as they look to how they can build a business and decisions on the best way to engage consumers with these new to market brands.