Expert Column: CPGs Must Think Small to Grow Big
By Ken Harris, managing partner/owner, Cadent Consulting Group and former chairman of Enjoy Life Foods
Ask any Big CPG company what their greatest challenge is today, and each one would likely give the same answer: Growth.
In the slow-growth environment in which we live, one or two points of topline increase is hard won. As a follow-on question, if you ask the companies what they lack the most in terms of achieving growth, they will answer: Focus.
It’s not a coincidence that the companies that are growing today in the CPG world have intense focus on their goal. Often, focus is borne out of the ability (and necessity) to do a few things well. Those companies that achieve the level of focus required to grow have started small and then sustained their growth by staying focused.
Looking at some of the major CPG acquisitions in the past 24 months bears this out. Purchases include Annie’s by General Mills; Evol by Boulder Brands; Big Heart Pet, Sahale and Enray Foods (Tru Roots) by J.M. Smucker, and Enjoy Life Foods by Mondelez. All of these companies were reasonably small, focused on a specific customer and retailer base that enabled them to grow in double and even triple digits. Why is that?
The reason small, focused companies can grow so rapidly is due to the democratization of media, the willingness of nontraditional retailers to cooperate, and the ability to reach customers through new channels including online. Add to this sophistication practiced marketers who are focusing their attention on these smaller organizations, and it creates a winning combination.
Enjoy Life Foods is a great example. The company grew 40 percent year-over-year for the past three years. It’s focused on the free-from, allergy friendly space and it has curated a singular purpose: to address the unmet needs of those families who have multiple food intolerances. As important as the mission is the execution. Enjoy Life Foods’ go-to market strategy is a finely woven web of narrowcast media, online advocacy and close alignment with organizations who are supporters of the Enjoy Life cause. These organizations include FARE (Food Allergy Research Education), University Of Chicago Comer Children’s Hospital Coeliac foundation, and others. The daily tracking systems Enjoy Life has in place include dashboards on operational performance, social media and online interaction. The dashboards are distributed to everyone in the company to provide complete transparency and focus on business performance. It’s this type of socialization of internal communication that makes performance monitoring transparent to the point where it’s everyone’s business.
Another example is Enray foods, which was purchased by the JM Smucker Co. Enray started cultivating quinoa before anyone knew what quinoa was in the broad marketplace. The founder, Esha Ray, was able to forge a relationship with retailers like Costco who supported the introduction and cultivated the brand. While some big CPG companies look at Costco as a difficult cost of doing business customer, smaller companies like Enray flourish with Costco support. This support enabled Enray to grow rapidly at Costco so it could eventually move into new channels including supermarkets and mass retailers.
So is it possible for large CPG companies to adopt this small-company thinking? The answer is yes, but it must be done as though a brand or series of brands are managed like there is no large organization to support them. Companies have tried in the past to give brands autonomy only to pull back once performance didn’t meet short-term targets. In order to be effective, brands must realize that small-company thinking is borne out of necessity. It includes daily monitoring of performance that is socialized within an entire brand team and daily reviews of performance to make sure that operations, marketing and sales are in sync. It also includes frugal and creative spending of marketing dollars, which are used to develop channels of media including online, social and nontraditional. It requires full understanding of segmented channels and a highly honed strategic plan that demonstrates focus of purpose and message across various venues whether they are online or brick-and-mortar retailers. “Small company” new product development embraces fast failure with an emphasis on in-market testing versus long protracted research. The goal is to understand the consumer “why” but then quickly move to the commercial “what” and “how” in order to make this happen.
Are there examples? The answer is also yes. Bulleit Rye from Diageo is a phenomenon that began in nightclubs and bars in New York City. Through a high degree of word-of-mouth, social and digital media and the ability to co-opt the legendary Old Fashioned and Manhattan drinks as the rye of choice, Bulleit created a buzz that has launched it into prominence. In the spirits business, trying to figure out how to “do a Bulleit” is on everyone’s mind. The key to it all was thinking small- having patience and the ability to stick with a plan so that over time the business can grow.
The examples in CPG are few and far between. One lesson learned the hard way was Kellogg’s journey with Kashi. When Kellogg’s purchased Kashi in the early 2000’s it followed the path of letting the company operate on its own in La Jolla, Calif., instead of moving the business to Battle Creek. The brand continued to be successful. As the Kashi business started to slow five years ago, Kellogg’s made the decision to bring Kashi in-house in Michigan. The business declined even faster. To Kellogg’s credit, it moved Kashi back out to California last year. It’s still to be determined if a re-boot will work, but a small company must be allowed to operate like one, or at least think like one.
Big CPG companies can be successful thinking small if they follow simple guidelines:
- Keep the small company (brand) physically independent in proximity or in location of the large corporate office
- Develop and stick to a minimum three-year plan
- Monitor daily business performance transparently
- Allow the smaller company (brand) to innovate, fail fast and retrench
- Do research that goes beyond the “what” to the “why” and “how”
- Concentrate efforts on specific channels to grow the business before leaping to the broad market
Thinking small to grow big takes patience and time, but can pay huge dividends. With much of the recent purchase movement in CPG, it may be the wave of the future.
Read More at: Progressive Grocer