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September 20, 2018

The rise of ‘stealth small brands’ as Big Food fights back

just-food's incisive US columnist Victor Martino is introducing a new term to the CPG lexicon - stealth small brands.

just-food’s incisive US columnist Victor Martino is introducing a new term to the CPG lexicon – stealth small brands.

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What’s the forecast for the food and grocery industry?

The food and grocery sector thrived during the pandemic, largely due to the shutdown of the food service industry and the sector’s subsequent necessity, panic-induced bulk purchasing, and spending more time at home. The market has grown as a result of inflation. Consumer unwillingness to go out and socialize, and the reopening of several hospitality facilities, helped maintain the demand for groceries, particularly online, in 2021. As consumer behavior changes, we consume more food and drink at home, and inflation increases basket sizes. GlobalData predicts that the sector will continue to hold a higher share than had been predicted prior to the pandemic. This is true despite the fact that the food and grocery sector's share of overall retail will decline from its peak in 2020. This report will discuss market forecasts and key themes in the global food & grocery industry in 2022 and beyond. It covers:
  • Market drivers and inhibitors
  • Five-year forecasts and the impact of COVID-19
  • The performance of the online channel versus offline
  • Major trends in the market including rapid delivery, ambient retailing, supply chain disruption, and inflation
Assess developments within this sector to help your business thrive in 2022 and beyond.
by GlobalData
Enter your details here to receive your free Report.

After writing this well-received column in January, I embarked on a research project to discover some real and demonstrative examples of how Big Food might be fighting back against the challenger brand challenge.

I’ve identified a number of interesting examples – some of which might even make it into future columns – but the most fascinating one in my view is what I call the ‘stealth small brands’ phenomenon. My coinage. Perhaps it will catch on?

A stealth small brand is a brand created, developed and owned by a big CPG company which is intentionally designed to look like it comes from a start-up or emerging brands company. A small brand. A challenger brand wrapped in big brand resources.

The stealth aspect has to do with the fact the brand’s parent company is either not identified at all on the product packaging or is mentioned in small print only on the back of the package. Stealth. After all, very few shoppers look closely at the fine print on the back of a pack.

The brands look like small brands in every way but are actually owned by some of the largest global packaged goods companies on the planet.

It’s important to emphasise stealth small brands are expressly created rather than being acquired small brands. 

For example, Unilever owns Ben & Jerry’s ice cream and General Mills’ owns Annie’s Homegrown. Both are acquired brands. Neither parent identifies itself on the product packaging, nor is it required to do so. 

Although there is a stealthy nature to this, they don’t qualify as stealth small brands because the brands existed as they are today pre-acquisition by the respective parent company.

Here are five real-life examples of stealth small brands out of the many I’ve identified in my research over the last few months. The big food companies that created these brands either aren’t mentioned on the product packages or, when they are mentioned, it’s in very fine print on the back of the package.

Véa World Recipes World Crisps. Owner: Mondelez International

Véa’s positioning is as a hip, globally-sophisticated better-for-you snack food. Seeing it on the grocery store shelf you might think it came out of one of the food start-up incubators in San Francisco, Austin, New York City, London or Berlin. But, instead, it was created by a global food giant.

Maker Overnight Oats. Owner: PepsiCo

The name nearly says it all. Maker Overnight Oats evokes the perception of today’s popular makers’ movement. Hand-crafted. Small-batch. Artisan. The flavours, like Mulberry & Chia, are healthy-oriented and hip. Small brand all the way. From PepsiCo’s Quaker Oats.

Stok Cold Brew coffee and tea. Owner: Danone

Start-up small brands turned the RTD coffee and tea categories on their respective bottle caps with cold brew. Stok is Danone’s stealthy small brand challenge to the category challenger brands. Its look is small brand all the way. Its target market millennials and GenZ. Its origin story could easily be, “born in a kitchen in Brooklyn” rather than, “property of Danone”.

Outshine Frozen Fruit Bars. Owner: Nestlé

Outshine has an interesting history. It was launched as Dreyer’s Outshine Fruit Bars. Dreyer’s is a big Nestlé brand for ice cream and frozen novelties. But Nestlé decided it needed to be a stealth small brand (my coinage not Nestlé’s), so it dropped the Dreyer’s brand name and relaunched it at plain old Outshine. Nestlé actually uses this in a positive and transparent way, explaining the change on the Outshine brand website, using a small brand narrative. But, in the supermarket freezer case, it’s Outshine only.

Love Beauty and Planet. Owner: Unilever

The stealth small brands phenomenon and strategy isn’t exclusive to packaged food. Unilever’s Love Beauty and Planet personal care brand, which already has about US$60m in annual sales according to the company, was intentionally created to compete against the small, natural, personal care brands that are challenging big brand dominance in the category.

Unilever is even taking a page from small-brand distribution, selling the stealth small brand on various niche e-commerce sites and in natural foods stores, in addition to using the traditional mass-market retail store channel. The brand is positioned as natural and sustainable, and Unilever is attempting to gain those brand credentials through its marketing strategy and communications efforts.

The stealth small brands phenomenon is an emerging trend among big consumer packaged goods companies. In fact, I suggest we add the term to the CPG lexicon because based on my research it’s taking off like a highly-funded Silicon Valley food start-up.

The stealth small brands strategy is a direct and purposeful response by numerous big CPG companies to the disruption being caused by start-up and emerging brands, which are responsible for most of the growth in the consumer packaged goods market over the last five years.

For example, according to IRI’s most recent New Product Pacesetters Report, a whopping 49% of the top-ranking brands launched in the US last year came from smaller food manufacturers with annual sales of less than US$1bn.

Just five years ago, nine out of every ten of the ‘pacesetters’ launched were extensions of existing brand lines, according to the report.

Stealth small brands are Big CPG’s newest weapon for challenging the challenger brand challenge

The stealth small brands strategy is Big CPG’s newest weapon in its arsenal for challenging the challenger brand challenge. It’s been flying under the radar – until now.

There are advantages and disadvantages for big CPG companies using this strategy. 

On the plus side, they have distribution channels and marketing resources that far exceed those of the actual small brands, which means the bigger companies can get the stealth small brands into more stores faster and, if they choose to, devote massive marketing and promotional funds in order to build brand equity and drive sales.

What these big food companies don’t have, though, is the entrepreneurial and challenger brand mindset, which is the key driver behind the small brand revolution.

A potential negative for big CPG companies when it comes to stealth small brands is consumer backlash. 

We’re in an era when consumers want and expect transparency from brands and packaged goods companies. 

As more big CPG companies launch stealth small brands and as the phenomenon becomes better known, it’s possible consumers could react negatively, feeling the companies are trying to put one over on them – Goliath playing David, if you will.

Is creating stealth small brands wrong? No, as long as the parent company identifies itself in some way on the product package. I’d suggest using slightly larger font than used in the examples I’ve discovered in my research.

Authenticity and transparency are key with consumers today, which is something I encourage CPG companies of all sizes and shapes to keep top-of-mind. For big CPG companies, stealth can mean opaque to consumers. Caution is advised.

Will stealth small brands be a winner for the big CPG companies that create and market them? It’s too early to know.

But an important intangible to remember is the start-up and challenger brand mindset – the outside-the-box thinking, the creativity born in-part out of limited resources, the inner motivation to disrupt. These elements, unlike the actual small brands, aren’t easily replicated. If they were the IRI data noted above would not exist.

Big brands are not ceding their historic category dominance to actual small brands. But make no mistake, they’re concerned.

The stealth small brand phenomenon, along with acquisitions of small brands and the creation of corporate venture-capital arms and start-up brand incubators, is a direct response to the emerging brand and challenger brand challenge to big CPG brand dominance.

It’s too soon to know if big consumer packaged goods companies will be able to remain big by getting small. 

It’s not too early though to know the challenger brand challenge has just begun. But so has Big CPG’s challenge to the challengers. 

just-food columnist Victor Martino is a California-based strategic marketing and business development consultant, analyst, entrepreneur and writer, specialising in the food and grocery industry. He is available for consultation at: victormartino415@gmail.com and www.twitter.com/nsfoodsmemo.

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Free Report
img

What’s the forecast for the food and grocery industry?

The food and grocery sector thrived during the pandemic, largely due to the shutdown of the food service industry and the sector’s subsequent necessity, panic-induced bulk purchasing, and spending more time at home. The market has grown as a result of inflation. Consumer unwillingness to go out and socialize, and the reopening of several hospitality facilities, helped maintain the demand for groceries, particularly online, in 2021. As consumer behavior changes, we consume more food and drink at home, and inflation increases basket sizes. GlobalData predicts that the sector will continue to hold a higher share than had been predicted prior to the pandemic. This is true despite the fact that the food and grocery sector's share of overall retail will decline from its peak in 2020. This report will discuss market forecasts and key themes in the global food & grocery industry in 2022 and beyond. It covers:
  • Market drivers and inhibitors
  • Five-year forecasts and the impact of COVID-19
  • The performance of the online channel versus offline
  • Major trends in the market including rapid delivery, ambient retailing, supply chain disruption, and inflation
Assess developments within this sector to help your business thrive in 2022 and beyond.
by GlobalData
Enter your details here to receive your free Report.

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