Healthy appetite steers US CPG market to $670 billion revenue

28 April 2016 4 min. read
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The SME sector is outsmarting the giants of the US CPG industry to increase their market share. A new study suggest that healthy eating trends and the growing appeal of convenience stores are boosting SME performance.

A growing appetite for healthy food and snacks has helped smaller players corner a larger share of the US consumer packaged goods (CPG) market. New analysis from BCG highlights a broad shift in consumer patterns, favoring products advertized in the healthful, mindful and wellness sectors.

Working alongside Information Research, BCG analysts dug deep into the performance of 400 major CPG companies, each with annual sales exceeding the $100 million benchmark. Those with revenues between $100 million and $1 billion were pegged as small companies. Medium-sized enterprises has sales between $1 billion and $5 billion.

Small and midsize CPG companies continue to take share from larger ones

Growth was recorded in all sizes, but at 1.3% was least among larger companies where sales exceeded $5 billion. Medium-sized companies notched up a 3.2% growth rate, while smaller players posted a stronger 4.4% growth.

An eye-catching total of $18 billion in sales shifted from larger companies to their SME rivals in the four years analyzed in the BCG report. Small companies increased their share of the $670 billion market last year to 14.8%. Extra small companies performed even better, increasing their market share by 1.1% over four years to reach 10.2%.

Midsize enterprises saw their market share rise to 21.5%, an increase of 0.6%. Only large companies saw their share decline, dropping from 56.3% in 2011 to 53.6% in 2015, a drop of 2.7%. A drop of one percentage point was equivalent to a loss of $6.7 billion.

Hunger games

BCG also ranked the best performing CPG companies in the US market by evaluating volume and dollar sales growth, and market share gains or losses. Quest Nutrition, Fairlife and Teva Pharmaceuticals excelled in the small company sphere. GlaxoSmithKline took top spot in the midsize bracket, followed by Starbucks and Hostess Brands. Among the heavy hitters, Reynolds American, Unilever and Altria were dominant.  

The best performing CPG companies in 2015

Researchers attributed the shift towards SMEs to evolving consumer behaviour. Buyers gravitating to the expanding healthy food market are being successfully targeted by small companies - such as Quest Nutrition and Fairlife - which have broad ranges of protein bars. Healthy snacks, coconut water and ready-made salads are among the favorites sold by top performing VitaCoco and Bai.

“Our research confirms that consumers’ desire for more healthful eating remains a powerful trend that packaged-foods companies can’t ignore,” says Jim Brennan, a BCG partner and co-author of the study. Peri Edelstein, a BCG principal and a co-author, adds “These findings underscore that the growth opportunities in consumer packaged goods remain diverse. The top performers are companies that best understand and capitalise on consumer trends and are able to stimulate fundamental demand.”

A broader pattern of consumers choosing local, independent and convenience stores over large outlets was also identified. Under the broad umbrella of convenience stores, these smaller outfits accounted for 18.7% of all sales, but contributed 36.7% of retail sales growth.

“Strong sales at convenience stores, which were helped by lower gas prices and reduced unemployment in 2015, boosted growth of tobacco, beverage, snack, and liquor companies, such as Altria, PepsiCo, Red Bull, Mars, and Constellation Brands,” said Krishnakumar (KK) Davey, the president, of IRI Strategic Analytics. "The top categories in these channels benefited the most, and manufacturers that have an advantage in this channel delivered stronger growth."