Smaller brands’ path to consumer loyalty lies through differentiation

Dive Brief:

• Small and midsize brands are leading the pace of growth and influence in the overall CPG space in North America, according to an analysis of May survey data by NielsenIQ. However, within most food and beverage categories, consumers say they prefer large brands or are brand agnostic. 
• U.S. consumer preference for buying small brands is highest in fresh produce, with 19% seeking out these labels, meat (15%), as well as snacks and confectionery (13%), NielsenIQ found. It is lowest in nonalcoholic beverages, where only 8% of consumers usually buy smaller brands, vs. 36% who typically buy large ones.   
• Small and midsize brands had a 26% share of U.S. in-store food sales in the 52 weeks ending April 30, according to NielsenIQ. For small players to stand out from their large competition and gain influence, the key is shaking up consumers’ category expectations.   

Dive Insight:

Smaller brands may lack the resources of a big CPG label, but they can inspire strong loyalty in certain consumers.

In the U.S., 44% of consumers prefer buying smaller brands, according to NielsenIQ. Among consumers globally who exclusively purchase smaller brands, 47% consider them more authentic, trustworthy and likely to put their values ahead of profits than a big brand. And more than six in 10 consumers globally say they would feel less likely to continue purchasing a smaller brand after it’s bought by a multinational company. 

But smaller brands need to hustle to win and retain that loyalty — and based on the data, there are signs some are in danger of no longer surprising and delighting consumers. The pace of innovation has slowed among small and midsize brands in the U.S., according to NielsenIQ.

Within nonalcoholic beverages, the number of innovations among smaller players fell 19% in January 2022 compared to a year ago, while alcoholic innovations dropped 16%. In confectionery and snacks — where small and midsize brands otherwise have an edge — the number of innovations slipped 17%. 

Meanwhile, large brands hold the greatest sway in the beverage category. Nearly one-third of U.S. consumers said they usually buy a large brand of alcohol, while 36% typically choose one for nonalcoholic drinks. 

The key to winning consumer loyalty, NielsenIQ argues, is for smaller brands to shake up expectations for the category through meaningful differentiation. For example, the research firm cited Gallivant Mawa Ice Cream, a brand launched in 2015 that makes its frozen dessert in a variety of exotic flavors such as spicy gochujang and citrusy yuzu. It has a base of milk and mawa, or South Asian milk solids, for a creamier texture.    

Another example NielsenIQ cites is smaller brands that use upcycled ingredients or those grown through regenerative agriculture practices.  

“There’s a world of nuances and unique opportunities within today’s strategic playing field for smaller brands,” said Lauren Fernandes, global director of NielsenIQ thought leadership. “Success requires quite the balancing act, with a focus on the specific value consumers expect and associate with the brands they’ve chosen to buy.”