Sounds a bit drastic but a lack of real innovation is killing off traditional brands.
Many companies in the Consumer Packaged Goods (CPG) sector, amongst others, are actively shifting their innovation investment to working with external start-ups because their core business struggles to adapt their brand and marketing strategies to include breakthrough innovation.
In a recent interview with Inside FMCG, Gerrardo Mazzeo, Global Innovation Director at Nestlé, talks about the company’s open innovation initiative to work with start-ups to drive innovation growth. He shares his thoughts on the need to leverage external innovators who offer agility, speed, rapid prototyping and can accelerate the pace at which they explore customer trends, foster collaboration between stakeholders and engage in thought leadership, amongst other things.
Many of the big players in the CPG sector are following in Nestlé’s footsteps, by developing start-up accelerators and external partnerships, but I’m left wondering if that addresses the underlying issue.
‘If you don’t cannibalise yourself – someone else soon will’ one of the more famous quotes by Steve Jobs at Apple, highlights the underlying issue many large businesses face.
A recent article in Forbes magazine highlighted research conducted by IRI Market Advantage showed that since 2013, more than 17 billion in U.S. Consumer Packaged Goods sales have shifted from large players to smaller ones.
With the e-commerce boom, particularly in the food sector, brands who were previously fighting for shelf space with the ‘big boys’, have now found their loyal customer base online.
These brands often have a ‘more authentic story’ or a ‘healthier, fresher and more environmentally conscious offering’. They resonate well with the more aware new-age consumer and are managing to steal significant market share away from the established players.
Feeling slightly threatened by this shift in consumer behaviour Unilever, Campbell Soup, Nestlé and others, have been out on a shopping spree. In 2017, mergers and acquisitions between these big brands and the smaller boutique start-ups jumped to 45%, the highest in 15 years.
Apparently, the world’s biggest consumer goods companies are hungry for growth, but would prefer to buy innovative smaller companies rather than invest internally in changing the culture needed to grow organically.
Is it all just too difficult? Does size hinder growth and development? Is it a cop out for large businesses to outsource a key growth driver, particularly with a poor track record of acquisition success? Why is it that small and medium sized enterprises, with considerably less resources than the market leaders, are so capable of disrupting the market?
How willing is your business to follow the lead of Apple who cannibalised its iPod business virtually 100% over 12 years with the introduction of iPhone?
To know more about Gerrardo Mazzeo’s thoughts on the future of food, visit here.
To read about the rise of small CPG brands in the U.S. market, please visit here.
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