The Supply Side: CPG growth shifts to smaller companies 

by The City Wire staff ( 24 views 

The consumer packaged goods (CPG) industry reported total sales growth of 1.5% in 2013, down from 2.8% in 2012 and lower than the 3.4% in 2011. Last year’s growth was nearly on par with the same increase coming out of the recession in 2010.

A recent study by Boston Consulting Group and IRI Worldwide notes that large CPG companies are ceding market share to midsize and small companies to the tune of $14 billion in lost sales since 2009. Last year small companies (less than $100 million in sales) collectively grew by 4.3%. At the same time large companies lost 0.5% in market share, mostly captured by the small companies.

The recent report notes that emergence of digital media has been an equalizer for small companies because it has reduced advertising costs. Smaller players also are benefiting from the rise of online and speciality retailers which offer new selling opportunities.

Despite a decline in their overall share, large companies (more than $5 billion in sales) collectively performed better in 2013 than in 2012. Even so, just one in three reported gains in market share last year, according to the study. This was particularly true for the five top-ranked large companies listed here in random order: Hershey Company, Lorillard, Mondelez Interntional, Campbell Soup Company, and Procter & Gamble.

The study shows dollar sales growth among these five companies ranged from 6.1% to 1.2%; their volume sales growth ranged from 4.7% to 0.5%, and their market share percentage-points gains ranged from 1.2 to 0.2.

Gains were largely driven by a renewed focus on delivering volume growth instead of raising prices to achieve short-term gains in dollar sales, with tactics including garnering more shelf space with the right assortments and revenue management. The other top-10 large companies include: Johnson & Johnson, PepsiCo, Grupo Bimbo, Coca-Cola Company, and Kimberly Clark.

Four of these five large companies also posted dollar sales gains ranging from 2.4% to 0.5%. Coca-Cola was the exception with a 1% dip in dollar sales during 2013. J & J and Kimberly Clark posted volume gains of 3.2% and 0.7%, respectively. Coca-Cola realized a 0.2% gain in market share while PepsiCo’s share rose 0.1%. The study found the top 10 large companies had average sales growth of 1.7%, volume growth of 1.1% and a market share change 0.3%. 

Companies with sales ranging from $1 billion to $5 billion are considered midsize in the study. The top-performing midsize companies last year include:
• Green Mountain Coffee Roasters, 
• Chobani 
• McKee Foods, 
• Sterilite, 
• Monster Energy Company, 
• Gruma, 
• Red Bull, 
• Land O' Lakes,
• Link Snacks, and 
• Starbucks.

The study revealed that Green Mountain, Chobani and McKee posted double-digit dollar sales growth of 25%, 18.3% and 14.1%, respectively. Volume growth for these top performers was 24.9%, 22.6% and 10.1%, respectively. Four of the top five had market share gains of 2% or greater, with McKee at 2.7%. On average, the top 10 midsize companies had dollar sales growth of 10.9%, volume sales growth of 10.6%, and grew market share by 1.8%, according to the study.

The top 10-performing small companies noted in the study include:
• Kind, 
• Paris Presents, 
• TalkingRain, 
• Old World Industries, 
• Idahoan, 
• Materne Industries, 
• All Market, Promotion in Motion, 
• NJoy, and 
• Aqua Star.  

Among these companies with less than $100 million in sales, three realized triple digit dollar sales gains. The study shows NJoy was up 126.9%, Kind increased 122.6% and TalkingRain dollar sales rose 103.6% from the prior year. Each of the other small companies posted double digit gains, the smallest being 11.8% by Idahoan.

LIkewise, volume sales gains rose by triple or double digits by all ten small companies. The only company to lose market share was NJoy, at a 1.7% dip. On average, the top 10 small companies had dollar sales growth of 54.9%, volume sales growth of 50.3%, and 2% gain in market share last year. 

The smaller companies' success at discovering new pockets of growth within mature categories underscores how crucial it is for companies to spot and timely capitalize on trends, noted the researchers.