Incumbent brands are taking note of how insurgent brands are putting the consumer back in "consumer goods".
There's no question that insurgent brands are here to stay. The barriers to entry and the cost of launching a new brand have never been lower. But there is hope on the horizon for the large established consumer goods companies that have been battling them in the war for growth.
New research from Bain & Company, Grow like Insurgent Brands: How to put the Consumer back in Consumer Goods, suggests that insurgent brands – those with at least $25 million in sales and growing at least ten times their category rate in the past five years – will continue to capture a significant share of growth in consumer products.
A prior Bain & Company study found that these brands accounted for less than 2 percent of the market share across the 45 categories that they have disrupted, but captured around 25 percent of the growth from 2012 to 2016. Two years later, insurgent brands' share of growth increased to around 30 percent of the growth from 2014-2018. However, Bain & Company expects that their share will stabilize at 35 percent by 2025.
"The more we see insurgents gaining ground, the clearer their path to brand growth comes into focus," said Brian McRoskey, co-author of the report and a partner in Bain & Company's Consumer Goods practice. "In some ways, they represent a return to the basics for brands: being close to consumers and creating unique offerings that meet consumer needs. At large companies, the combination of scale, cost pressures and bureaucracy have made it hard to maintain a single-minded focus on the consumer."
Bain & Company's findings offer a double-dose of hope for these larger companies. It means that industry growth prospects are more promising than many big companies may have believed - when a brand serves its consumers well, they buy. It also means a blueprint for growth exists as insurgent brands provide continuing lessons to the broader industry in agile ways of working, asset-light business models, and purpose-driven consumer focus.
To compete, incumbents cannot continue running their businesses as they have for decades. But they also cannot simply try to replicate the insurgent model for success. Instead, large consumer goods companies need to create a hybrid model that maintains the economics of their existing brands while they develop new approaches that embed insurgent learnings.
That will mean focusing on four areas.
1. Rediscover the consumer. Among the hallmarks of insurgents are their ability to authentically and purposefully serve an unmet consumer need and maintain a strong and consistent connection with those consumers. Some large consumer goods companies are starting to put the consumer back in the center.
2. Rethink brand portfolio strategy. Winning incumbents take a holistic approach to brand portfolio strategy, balancing brands of different sizes in order to meet the future needs of their consumers.
3. Build repeatable M&A capabilities. Increasingly, large consumer goods companies are turning to M&A to acquire insurgent brands. Acquisitions help incumbents create faster-growing portfolios that leverage scale and breadth of distribution to further grow the insurgent - potentially taking the insurgent brand into other categories or markets. As demonstrated by Bain's long-term research into M&A performance, the best companies will develop repeatable capabilities for M&A success.
4. Create nimble ways of working. Finally, incumbents need to change their ways of working to be faster, more agile and to accelerate capabilities for test-and-learn. And they need to do this across and throughout a billion-dollar corporation.
"Given the low barriers and low cost to build brands and bring products to market, insurgent brands are here to stay. There will continue to be insurgents looking to capture the growth by relentlessly upping the game," said John Blasberg, a parter in Bain & Company's Consumer Goods and the report's co-author. "Incumbents that learn from these insurgents and respond by focusing on these four key areas can capture and create their own growth, creating the consumer products company of the future. The more that incumbents can learn from insurgents, the less they have to fear."
About Bain & Company
Bain & Company is the management consulting firm that the world's business leaders come to when they want results. Bain advises clients on private equity, mergers and acquisitions, operations excellence, consumer products and retail, marketing, digital transformation and strategy, technology, and advanced analytics, developing practical insights that clients act on and transferring skills that make change stick. The firm aligns its incentives with clients by linking its fees to their results. Bain clients have outperformed the stock market 4 to 1. Founded in 1973, Bain has 58 offices in 37 countries, and its deep expertise and client roster cross every industry and economic sector.
For more information visit: www.bain.com
Media Partner - News and Articles>
THE BEST CEOS OF THE YEAR
DESTIG: HAWAII - THE EXPRESSION OF ALOHA
DESTIG: TOP ARTISTS FOR 2019
WORLD BIZ MAGAZINE - SPRING 2019 ISSUE
Amazon has defended its position as the world's most valuable brand, growing nearly 25% to US$187.9 billion, according to the latest Brand Finance Global 500 report that was launched earlier this year at the (WEF) World Economic Forum in Davos. Due to an ever-diversifying portfolio, it seems no industry is safe from Amazon's reach.
The retail industry has felt the biggest impact, as ecommerce has now become the consumer norm. Walmart, which held the top position in the Brand Finance Global 500 just 10 years ago, has now dropped out of the top 10 for the first time. Although its brand value has grown 10% to US$67.9 billion, the company continues to struggle with product fulfilment issues, increased transportation costs, and slow gains in its online sales.
Apart from disrupting traditional industries, the tech sector has carved out a clear space of its own, demanding 6 positions in the top 10 most valuable brands. Apple (2nd, US$153.6 billion) and Google (3rd, US$142.8 billion) round out the top three ranks. As Apple struggles to grow in key emerging markets and shows little motivation to diversify its portfolio, it could be the opportune moment for Google to shift to 2nd place in 2020. Will Apple share Walmart's fate as its overreliance on handset sales endangers its long-term prosperity?
Microsoft makes a comeback to the top 5, up from 6th to 4th in the Brand Finance Global 500. With a 47% increase in brand value to US$119.6 billion, it is the fastest growing brand among the top 10 most valuable. While it once may have seemed that Microsoft was out the game, its determination to adapt is a great example how a brand can use change to its advantage. The company's transformation to a cloud-centric business model has proven successful.
"A business cannot concentrate all its efforts and resources in one area and expect to survive long-term. The brands that evolve and experiment in new sectors, like Amazon and Microsoft, are the ones which will continue to outperform competitors; while the brands that are slower to adapt or diversify, like Walmart and Apple, will miss a key opportunity to grow brand value," said David Haigh, CEO of Brand Finance.
"The brands that evolve and experiment in new sectors, like Amazon and Microsoft, are the ones which will continue to outperform competitors; while the brands that are slower to adapt or diversify, like Walmart and Apple, will miss a key opportunity to grow brand value." - David Haigh, CEO of Brand Finance.
In the media industry, new players are also upsetting the status quo. The majority of the world's biggest network brands have felt the pinch while digital platforms encroach upon their viewership. iQiyi, China's answer to Netflix, is the world's fastest-growing brand of 2019, up a whopping 326% year-onyear, three times the 105% hike by its US counterpart.
Aside from calculating brand value, Brand Finance also determines the relative strength of brands through a balanced scorecard of metrics evaluating marketing investment, stakeholder equity, and business performance.
While Facebook held on to its spot as the 7th most valuable brand, following a succession of scandals, its brand strength suffered the second worst decline in the top 100, resulting in a brand rating downgrade from AAA+ to AAA-.
Sporting a far better performance, Ferrari has taken the title of world's strongest brand of 2019. The Italian supercar manufacturer's Brand Strength Index (BSI) score increased from 91.5 to 94.8 out of 100, overtaking the likes of Disney McDonald's, Coca-Cola, and Lego. It is the strongest of only 14 brands in the Brand Finance Global 500 2019 ranking to be awarded the elite AAA+ rating. "As the world's foremost luxury carmaker, Ferrari has an unparalleled level of brand recognition, upholding excellence for design and innovation. Its prancing horse logo is a perfect symbol of the brand's strength and vitality as it plans new models and reaches outside the auto industry," Haigh added.
About Brand Finance: With offices in over 20 countries, Brand Finance is the world's leading independent brand valuation and strategy consultancy. www.brandfinance.com