Small C.P.G. companies: Sargento, Quest, Bai, Vita Coco
Such companies as Quest Nutrition, Bai, Vita Coco and Sargento Foods were identified as small and mid-size firms with annual sales of less than $5 billion that ranked among the C.P.G.-industry growth leaders in 2015.

CHICAGO — Small and mid-size consumer packaged goods companies are gaining market share at the expense of larger companies, according to a report published this past April by the market research firm Information Resources, Inc., in conjunction with the Boston Consulting Group. The research found that U.S. sales of consumer goods in 2015 rose by 3.1% to $670 billion. It also found that small companies, those with less than $1 billion in sales, and mid-size companies, those with sales between $1 billion to $5 billion, accounted for 46.4% of total C.P.G. sales, a 0.5% gain since 2014 and a 2.7% gain since 2011. The gain translates into an $18 billion shift in market share during the past four years, I.R.I. said.

The findings in the report titled “How healthy, protein-rich foods are nourishing growth in the consumer packaged goods industry,” are based on the fourth annual analysis by B.C.G. and I.R.I. of the growth performance of more than 400 C.P.G. companies with annual U.S. retail sales of more than $100 million. The study included both public and private C.P.G. companies and focused on what consumers actually bought in measured channels as opposed to what factories shipped. Companies were ranked on a combination of three metrics: dollar sales growth, volume sales growth, and market share gains. The study also analyzed trends driving performance in the sector.

The report’s authors pointed to such companies as Quest Nutrition, Fairlife, Bai, Vita Coco and Sargento Foods as small and mid-size firms with annual sales of less than $5 billion that ranked among the C.P.G.-industry growth leaders in 2015.

KK Davey, I.R.I.
Krishnakumar “KK” Davey, president of strategic analytics for I.R.I.

“We have been observing this shift for the past three or four years,” said Krishnakumar “KK” Davey, president of strategic analytics for I.R.I., in an interview with Food Business News. “Sometimes it comes down a little bit, but it is very consistent. Smaller companies are stealing share from large companies. Medium companies have also gained share.”

Mr. Davey cited a number of reasons for the shift, including lower barriers to entry into the food and beverage business, an influx of capital for smaller companies to access, a fragmented retail marketplace and a large pool of industry talent.

“There are more ways for smaller companies to get into the business,” he said. “They can get a contract manufacturer to produce a product and sell it on Amazon.

“Plus they are able to identify opportunities larger companies may not be interested in. Large companies will say ‘don’t bring me an idea that will not reach $50 million in sales. They are not interested in small ideas, but for smaller companies $20 million in sales is a big turn.”

Mr. Davey added that the cost-cutting among larger companies that has taken place during the past few years has created a large talent pool of industry executives still interested in staying in the industry.
“These people have the knowledge and the contacts to create a food business,” Mr. Davey said. “You combine that with more investors willing to support a startup and you can see how this is happening.”

Another finding of the research was that the small C.P.G. companies identified as performance leaders are achieving strong growth through wider distribution of their products. In some cases, according to the study, smaller brands are getting better placement on retail shelves or forming distribution partnerships with larger companies to expand their reach in the marketplace.

Mr. Davey said the better placement of smaller brands on store shelves is a reflection of how competitive the retail market has become.
“We’ve seen many traditional retailers reporting bad quarters,” he said. “Amazon is growing and everyone feels they are under attack. Many are trying different propositions to compete. Much is happening on the perimeter and we see a lot going on in the center of the store as retailers try to differentiate.

“It’s an interesting place to be right now. Competition is driving change and that change is affecting everyone.”

To learn more and download the complete 2015 C.P.G. growth leaders report from I.R.I. and B.C.G., please click here