INDUSTRY
Highlights
- The modern needs of consumers are evolving rapidly, and traditional incumbents of the CPG industry are unable to tap the white spaces tailored to various consumer microsegments, providing huge scope for emerging brands to make the most of the opportunities.
- Emerging, new-age direct-to-consumer (DTC) brands have risen meteorically backed by digital capabilities and consumer acceptance of innovative products.
- They, however, need a growth framework and a secret sauce to sustain and exponentially grow the business, drive profitability, and become a challenger to established brands.
In this article
Emerging brands can make a significant impact
Traditional model of consumer packaged goods industry is under threat
The consumer packaged goods industry has delivered consistent growth through mass brands over time. But this model faces great pressure due to changing consumer behavior and a dynamic channel landscape (Figure 1). While established names have the wherewithal to deal with business vagaries, even emerging brands that are agile and nimble and serve the needs of various consumer segments in a differentiated fashion, can make a significant impact on the industry landscape.
Customer behaviour and needs are constantly changing and evolving
Growth framework for emerging brands
New opportunities beckon
Given the evolving consumer preferences and industry dynamics, large consumer packaged goods (CPG) organizations are unable to design and develop right products tailored for various consumer microsegments, providing huge scope for emerging brands to tap into such opportunities.
An emerging brand can adopt a growth framework across various dimensions such as consumer, brand, products, channel, and supply chain to make the most of this huge opportunity, and seamlessly scale and grow into a large, successful brand (Figure 2).
Emerging brands should adopt an ecosystem approach to drive synergy and partnership.
Products:
Drive disruption through innovative product, niche portfolio
Emerging CPG brands must serve consumer needs for personalized healthy, hygienic, and innovative products, which are ignored by legacy brands, by leveraging first-party data. Emerging brands are, for example, developing plant-based natural ingredient products and sugar-free products addressing the health needs of consumers; content-to-commerce-led, feedback-driven ‘made-for-me’ products addressing the need for personalization; clean, toxic-free organic and sustainable products for those passionate about a greener planet; clean-label products and hero or best-in-kind products to be offered in subscription and personalization models with the tech-enabled buying experience.
Consumer:
Data-driven hyper-personalization
Data is the underlying fabric for any brand to generate deeper insights about consumer needs and develop a 360⁰ consumer profile. It is key to maintaining control over the brand experience and building differentiation.
Through the direct-to-consumer (DTC) model, emerging brands can grow direct relations with consumers and collect first-party data, launch new product variants, and bundle products. They can then deliver hyper-personalized products and services by leveraging artificial intelligence and machine learning.
Emerging brands being D2C-first will have more first-party data to personalize at scale when compared to a big brand that sells predominantly in retail or marketplace, where there is data scarcity for 1:1 personalization.
Channel:
Drive omnichannel strategy
D2C offers high velocity due to the digital-first strategy of emerging brands to position their innovative, niche products that address evolving consumer needs. It helps brands establish a direct connect with the consumer and hyper-personalize products through first-party data. An online personal care brand, for example, offers fresh, made-to-order products with a unique blend of ingredients designed just for a unique consumer, with over 50 billion combinations.
An omnichannel presence facilitated by social commerce, live commerce, content commerce, marketplaces, and traditional offline channels will be a winning strategy for emerging brands to increase their consumer base in the long term. New-age commerce platforms help emerging brands drive network effects in a community through content created by influencers, which acts as a catalyst for their success. Digital-native brands should bring their consumers and social communities into the heart of decision-making by involving them in everything—from product development to marketing campaigns—through a content-to-commerce (C2C) strategy, which will help reduce acquisition costs. An online beauty brand, for instance, leverages the C2C strategy to provide consumers the power to tell what they need from the brand.
Supply Chain:
Build an agile, intelligent supply chain:
Emerging brands must build and reconfigure the supply chain to be more resilient, agile, and flexible to fulfill consumer demands from various channels. This will ensure product availability across multiple channels, achieve faster speed to market, enable tracking and tracing of products and align supply and logistics with market demand. Successful emerging brands have altered the supply chain to maximize throughput and minimize dead stock. They are increasingly focusing on supply chain management to identify potential suppliers and procure high-quality raw materials. An online food company procures antibiotic-free meat directly from farmers with an efficient cold supply chain.
The fulfillment channel strategy also requires order orchestration across demand channels and strong collaboration. This can be designed by leveraging key partners such as marketplaces, online resellers, and last-mile and instant delivery partners. This should be supported with enhanced forecasting based on consumer analytics and point-of-sale data.
Ecosystem will drive synergy, partnerships
Forge cross-functional partnerships
An ecosystem play with cross-functional expertise and partnership will enable emerging brands to distill consumer insights, reach new markets with speed and economy, and extract business value. Successful emerging brands are forging partnerships with large CPG companies for their expertise in branding and large distribution networks.
Creating right synergy and partnerships in the ecosystem to strategically win consumers is the key for any emerging brand to maintain competitive advantage and upscale revenue.
Brand:
Align the brand to a clear consumer need
Emerging brands need to have a clear sense of identity and should fulfill consumer needs. They should embrace their fundamental brand characteristics and subsequently plot their best course of action for improving consumer experience to maintain a strong and consistent connect with consumers.
Successful emerging brands are differentiating their products through use of fresh, natural, toxin-free, high-quality ingredients.
Create a memorable brand persona
Emerging brands should create a unique brand persona for consumers to build deeper connections with the brand by leveraging first-party data as a strategic advantage. This will help them rapidly acquire mass mindshare. The brand persona should be consistent and evolve to emerging trends and consumer needs.
Create a winning brand architecture
A well-defined and cohesive brand portfolio helps consumers identify brands and sub-brands. A consistent brand architecture not only clarifies the product offerings but also presents many opportunities for emerging brands to cross-sell, thereby helping them to scale the business.
A multi-faceted approach will help emerging brands win consumers
Secret sauce for success
Emerging brands should master consumer engagement
Emerging brands should adopt a three-pronged approach (Figure 4) to drive growth and compete with industry majors in the long term to become a challenger brand.
To compete with large players, emerging brands should master consumer engagement to break stickiness with leader brands by offering innovative and differentiated products and services. They can achieve this by addressing high-stake consumer pain points that are usually ignored by large and legacy brands and offering unique, rich, and exhilarating experience to build deep consumer intimacy. Successful emerging brands are adopting advanced immersive technologies for virtual try-ons to enhance the shopping experience.
A three-pronged strategy for emerging brands to grow business.
Emerging brands should demonstrate high perceived value for both value and premium consumers to ensure lock-in and increase lifetime value with disruptive pricing strategies. Also, they should drive transparency and trust for the brand to increase consumer affinity to products and build a competitive edge.
While digital channels will provide the initial velocity, emerging brands should adopt an omnichannel strategy to scale business, increase unit economics, and expand the portfolio with house of brand architecture for profitable growth. They should utilize offline channels to increase the touch and feel of products while utilizing the supply chain of the online channel to fulfill offline demands to achieve economies of scale and offer endless aisles of products. Few emerging brands are vertically integrating the supply chain with an omnichannel presence.
Emerging brands should drive operational and manufacturing excellence to build a lean, agile, and flexible supply chain and use macroeconomic factors as a competitive edge over existing leaders.
To do all these successfully, they should have a very innovative culture with significant investments in research and development (R&D). They should also harness consumer insights to continuously innovate at speed and be competitive against large brands. While this is important for any business, it is especially critical for emerging brands looking to respond faster than big players to market demands. They should also strongly leverage ecosystems across channels and supply chains to deliver unique value to consumers.
Emerging brands need to have a strong talent base that is willing to learn, experiment, and grow to be agile and disruptive. As technology becomes an integral part of every organization, a scalable and flexible architecture with best-in-class solutions is critical. With data proving to be a competitive differentiating factor, a strong capability to leverage and harness data should be an integral part of the strategy. As the organization scales up, it should build the right operating model, institutionalize processes, and instill rigor in execution. Constant benchmarking, process redesign, automation, and analytics to drive decision-making become crucial to a seamless scaling-up process.
Direct connect with customers
Provide rich omnichannel experiences
Businesses cannot control brand perception using traditional methods as first-hand experiences and opinions of consumers and influencers about brands on social media and review sites have much more influence than pricey ad campaigns—particularly with millennials.
The growth framework listed above lays focus on the ability of emerging brands to co-create with consumers. They should leverage their unique ability to directly connect with consumers to deliver exhilarating omnichannel experiences and win their mindshare to grow and become challengers to established brands.
