Large CPG companies continue to be whittled down by niche producers

15 March 2017 4 min. read

Large consumer packaged goods companies continue to see their market share eroded in the face of smaller players that are able to offer consumers local and natural wellbeing and health food propositions. Mid- and large-sized companies are continuing to profit from demand for indulgence products.

The consumer packaged goods (CPG) industry continues to be affected by changing trends in consumer behaviour, as more and more focus is directed towards small scale, wellbeing and health focused, products. One of the results of the trend is an increase in hipster and family companies springing up to deliver their own brand of goods and services – which large companies, rather than creating their own lines, have begun to acquire.

In a new report from The Boston Consulting Group and Information Resources, the researchers rank the fastest growing CPG companies in 2016, by size and category; and explore wider growth trends within the market.

Growth leaders ranking 2016

Reynolds American retains its spot at the top of the large companies list, followed by Johnson & Johnson – up from number eight last year. Tyson Foods and Grupo group take the number three and four spot, both were not within the top ten last year. Mars, rounds off the top five. In the mid-size companies category, Chobani comes in number one, followed by Hostess and Energizer. Constellation Brands and Starbucks come fourth and fifth. Unilever, number two last year, has fallen to number nine.

The small companies category has, like the mid-sized category, considerable numbers of new entrants to this years’ list. Its number one star, BodyArmor, number three, Bragg and numbers five to nine, are all new to the list. Idahoan Foods comes third (fifth in 2015) and Bai Brands retains its fourth spot. Quest Nutrition and Fairlife saw their growth prospects tumble, from number one and number three in 2015 respectively, to number thirteen and number ten respectively this year.

Small CPG companies continue to steal market share from larger players

The overall market has seen slight growth between 2015 and 2016, sales were up 1.4%, from $669 billion to $681 billion. The lacklustre growth, sales growth was up 3% between 2014 and 2015, was the result largely of a slowdown in price increases rather than a decrease in unit sales.

In terms of size category for sale growth, the ‘extra small’ category continues to lead the pact, jumping 5.4% on the year previous – the share of the total pie for the segment increased from 8.9% in 2011 to 10.3% in 2016. Small companies too managed to continue to grow their respective market position at a relatively fast rate – up an average 4.6% CAGR between 2011 and 2015, even if last year growth was a more mediocre 2.8%.

Mid-sized and large companies continue to lag behind the growth trends of smaller companies, growing at 1.5% and 0.8% respectively in 2016. Large companies’ market share has been steadily eroded by smaller companies since 2011, falling from 57.2% to 54.1%.

Leaders achieved growth via unit volume as well as pricing and product mix

In terms of how growth was derived in 2016, the top ten large companies tended to boost their growth through volume increases (0.9%) and pricing/product mix (1.5%), allowing them to star ahead of the game and well above the 0.8% growth for the entire segment. The top ten mid-sized companies, however, derived most of their growth through volume, while the wider segment tended to growth through pricing/product mix.

A number of factors continue to dominate growth trends. Wellbeing and health food products, as well as personal care products, with natural ingredients, saw strong growth in 2016. The segments are projected to continue to see strong growth, at CAGR 7% and 9% to 2020. Large companies too have been continuing a spree of M&A into the wellbeing and health food segment during 2016, as they seek to diversify their product and brand lines.