Who’s Got the Mo?

IRI, BCG release ‘Momentum Report,’ showing what companies are winning and why

Having the stars align to achieve brand success across dollar, volume and market share values is an elusive undertaking for many consumer packaged goods companies.

This past year, companies including Lorillard, Hershey, Anheuser-Busch InBev, Green Mountain Coffee Roasters, Chobani and Idahoan made the hat trick: They proved that stimulating growth across the dollar/unit/market share success triangle is not a pipe dream.

These performances were chronicled in “Momentum Report: Which CPG Companies are Winning in the U.S. and Why,” from Boston Consulting Group (BCG) and IRI. The market research firms produced three distinct top 10 lists of winning companies: small ($100 million to $1 billion in retail sales), midsize ($1 billion to $5 billion), and large (more than $5 billion). It included in-depth analysis of more than 400 companies’ underlying performances based on IRI’s database of multi-outlet and convenience retailers.

Among large companies, the top three performers were Lorillard, the Hershey Co. and Anheuser-Busch InBev. The top-performing midsize companies were Green Mountain Coffee Roasters Inc., Chobani and Starbucks. And the top-ranked small companies were TalkingRain, Idahoan and Handi-foil.

Divergent Paths

The analysis found that all three coalitions of companies took different routes to dollar/unit/share growth, according to Dr. Krishnakumar Davey, managing director at IRI Consulting.

“Large winners grew through distribution gains generated on base business and price increases, but price increases are unlikely to deliver sustainable growth,” Davey told Convenience Store Products.

Meanwhile, winning mid-size and small companies stimulated dollar and volume sales, but also gained share at a more consistent pace than large companies. “Midsize winners are doing this through distribution and velocity, increasing consumer ‘buy rates’ significantly and capitalizing on macro trends,” he says.

“Small winners showed the largest dollar and volume growth rates and the largest share gains, while small and midsize companies both took market share from large competitors,” Davey reveals.

The Momentum report also found:

  • All top 10 small and midsize companies gained market share in 2012;
  • Eight of 10 small company winners grew by 1.0 share points or more;
  • Since 2009, large companies have given up 1.4 share points as a group—amounting to more than $10 billion in lost sales.

Living Large

Ratcheting up innovation and identifying macro trends are two ways large companies can shore up market share, says Daniel Grubes, principal, IRI Consulting.

“A push toward products emphasizing health, wellness and sustainability are examples of macro levers,” Grubes told Convenience Store Products. “Companies have to determine the definition of value to consumers. Many momentum-leaders piggyback on macro trends, plus focus on convenience and portability.”

Large companies, says Grubes, are also “focusing on ‘big bets’—it’s the type of game-changing execution that large companies can execute easier than small to mid-size companies can.”

An example would be Kraft’s 2011 development of a new product “playbook” built on the concept of “real fewer, bigger, better.” This strategy placed an emphasis on 13 “big bets,” included Cool Whip frosting, a Kool-Aid variety of MiO and Planters peanut butter with mix-ins like dried fruit and chocolate chops. 

From an innovation standpoint, Grubes said Coca-Cola pioneered new ground with the development of new beverage sweeteners, which is one way to not only protect but grow market share. Mid-size and small companies that offer beverages might lack this innovation advantage. “The multi-year R&D investment of large companies is something that mid-size to small companies can’t do.”

Davey says corporate structures play a significant role in their destiny to drive growth across dollar, unit and share simultaneously. Large food firms might be unwieldy based on their scale, thus stalling quick execution. However, he pointed to Kraft Foods and its split from Mondelez International. “As large as Kraft is even after a corporate split, the company was able to foster a ‘startup company’ mentality, which makes them more nimble.” 

As to how winning producers fare from a retail channel perspective, Davey says that convenience retailers can leverage these winning brands across all three groups by “having the right price architecture, the right pack size and variety. C-stores are a great channel to explore new-product innovations. I consider the c-store to be a low-cost trial environment for producers.” 

Grubes says midsize to small companies perceive c-stores as “an opportunity to get initial distribution, particularly through smaller, regional chains.”