US CPG market grows to 670 billion, SMEs eating share from giants

28 April 2016 3 min. read

A new study finds that SME CPG companies continue to outperform the behemoths in terms of sales growth. The total CPG market grew by 3.1% to $670 billion, with SMEs eating a 2.7% market share from large companies over the past four years. The top performer in the large company segment for 2015 is Reynolds American, the midsize leader is GlaxoSmithKline, while the small size leader is Quest Nutrition.

The consumer packaged goods (CPG) market is transforming as smaller players develop health and wellness based products for an expanding market of consumers. A new report from BCG explores the CPG market in the US, with several trends highlighting that consumer sentiment is changing in favour of more health and wellness based options, although demand for indulgency remains. The research, performed in conjunction with Information Research, involved an analysis of the performance of 400 CPG companies with annual sales in excess of $100 million.

The research found that companies continue to grow across all segments, with total sales up 3.1% in 2015 to $670 billion. Small companies, those between $100 million and $1 billion in revenues, saw growth of 4.4%, allowing them to achieve a market share of around 14.8%, a 1% average market share increase between 2011 and 2015. Medium size companies, between $1 billion and $5 billion, too saw a modest growth rate in sales, up by 3.2%, as their average market share increase between 2011 and 2015 hit 0.6%. Large companies, those above $5 billion in sales, have shown a small amount of growth, at around 1.3%, their market share, however, has decreased by -2.7%.

A shift towards SMEs within the CPG is in part the result of changing consumer behaviour, according to the researchers. Healthy foods, such “mindful” snacks, as well as protein heavy foods, drove up sales in the segment. Another change is a move towards buying from convenience stores, which grew strongly in 2015, compared to outlets. Although convenience stores accounted for 18.7% of all measured channel sales, they contributed 39.6% percent of retail sales growth. Manufactures of categories of products that are top sellers in convenience stores delivered some of the strongest growth figures.

“Our research confirms that consumers’ desire for more healthful eating remains a powerful trend that packaged-foods companies can’t ignore,” says Jim Brennan, a BCG partner and co-author of the study. Peri Edelstein, a BCG principal and a co-author, adds “These findings underscore that the growth opportunities in consumer packaged goods remain diverse. The top performers are companies that best understand and capitalise on consumer trends and are able to stimulate fundamental demand.”

Top performers
The best performing CPG companies in 2015 are ranked by the research in terms of dollar sales growth, volume sales growth, and market share gains. The top performers in the large companies segment are Reynolds American, Unilever and Altria. In the midsize bracket GlaxoSmithKline takes the number one spot, followed by Hostess Brands and Starbucks. The top three in the small companies segment are Quest Nutrition, Teva Pharmaceuticals and Fairlife.

The research highlights that the trend among top performers relates, in many cases, to health and well-being. Small sized companies, such as Quest Nutrition and Fairlife for instance, market a range of protein, rather than carbohydrate, products; while Bai, Vita Coco and Ready Pac Foods grew on the back of health food bars and readymade salads, among others. Liquor companies and those marketing to the sweet tooth too managed to improve sales, although at a comparably lower rate than smaller players meeting a demand for healthier options.

“Strong sales at convenience stores, which were helped by lower gas prices and reduced unemployment in 2015, boosted growth of tobacco, beverage, snack, and liquor companies, such as Altria, PepsiCo, Red Bull, Mars, and Constellation Brands,” said Krishnakumar (KK) Davey, the president, of IRI Strategic Analytics. "The top categories in these channels benefited the most, and manufacturers that have an advantage in this channel delivered stronger growth."