Large Companies Claw Back Some Momentum in 2013's Slower-Growth U.S. Consumer-Packaged-Goods Market

CHICAGO, IL--(Marketwired - Mar 11, 2014) - While large companies continue to cede market share to small companies in the U.S. consumer-packaged-goods (CPG) industry, the pace of that share loss has slowed over the past year, thanks in large part to big players' renewed focus on driving volume growth instead of raising prices, according to new research by The Boston Consulting Group (BCG) and Information Resources, Inc. (IRI).

For the second year in a row, BCG and IRI examined more than 400 CPG companies with annual U.S. retail sales greater than $100 million, then ranked them on the basis of their growth performance using a combination of three metrics: dollar sales growth, volume sales growth, and market share gains. The study, which also analyzed trends driving performance in the sector, remains unique because it includes both public and private CPG companies and focuses on what consumers actually bought in measured channels as opposed to what factories shipped.

Because manufacturers of different sizes face disparate challenges and opportunities, BCG and IRI generated three top-ten lists of the best-performing companies: small ($100 million to $1 billion in IRI-measured retail sales), midsize ($1 billion to $5 billion), and large (more than $5 billion). Making the list signifies that a company has performed at the top of its class over the past year and has growth momentum in the marketplace.

The top three large companies showing strong growth momentum are The Hershey Company, Lorillard, and Mondelēz International. Among midsize companies, Green Mountain Coffee Roasters Inc. and Chobani continue to hold the number one and number two spots, as they did last year, followed by McKee Foods at number three. Leading the small-company top performers are Kind, Paris Presents, and Talking-Rain.

"The 2013 rankings show the importance of maintaining a focus on the base business," said Dan Wald, a Chicago-based partner at BCG. "The winners innovated, but they innovated to complement their base business, not replace it."

Small Companies Expand Share Despite Slower Industry Growth

The U.S. CPG market expanded by just 1.5 percent in 2013, down from the 2.8 percent growth rate in 2012. A key reason: companies were more restrained than in the past when it came to raising prices.

That headwind, however, did not slow the small and extra-small (less than $100 million in sales) players, which collectively grew 4.3 percent in 2013. Large companies lost 0.5 percentage points in market share in 2013, mostly captured by extra-small companies. In total, since 2009, large players have ceded 2.3 share points to midsize, small, and extra-small companies, representing $14 billion in lost sales. The inroads by small and extra-small companies in particular have come in part through reduced barriers to entry, including the emergence of digital media, which lowers advertising costs, and the rise of online and specialty retailers, which offers new selling opportunities for small and extra-small players.

Despite a decline in their overall share, large companies collectively performed better in 2013 than in 2012. This is especially true for the five top-ranked large companies, which broke away from the pack in 2013 and recaptured market share. Improvements were largely driven by a renewed focus on delivering volume growth instead of raising prices to achieve short-term gains in dollar sales.

"It is important to note that the large-company winners are using multiple tactics to drive volume growth, such as garnering more shelf space with the right assortment and revenue management," said Dr. Krishnakumar (KK) Davey, managing director at IRI Consulting. "However, small players are clearly discovering new pockets of growth within mature categories, so it's imperative for all companies to spot trends quickly and capitalize on them."

Winners Deploy Similar Tactics

Regardless of size, the strategies of winning companies share some striking similarities:

• Of the top 30 companies across all size categories, 28 generated growth from their base business. This marks a departure from 2012, when a number of top-ranked companies saw weak growth -- or even deterioration -- in their base.
• High-performing companies have successfully created offerings that are focused on specific, unmet consumer needs and that often serve as a replacement to undifferentiated products found in large, established categories.
• Winners tend to use pricing to enhance volume growth, while laggards tend to use it as a short-term tactic for driving dollar value growth in the face of declining volumes. This is particularly pronounced among large companies, where the top ten performers garnered just 0.6 percentage points in growth from pricing, while the rest of the large-company universe generated 1.3 percentage points of growth from price increases in an effort to offset even larger base-volume declines. 

To request a copy of the research summary, "Growth Leaders in U.S. Consumer Packaged Goods and What's Driving Their Success," or to arrange an interview with one of the authors, please contact Madeleine Desmond at +1 212 446 2856 or desmond.madeleine@bcg.com or John McIndoe at +1 312 474 3862 or john.mcindoe@IRIworldwide.com.

About IRI
IRI is a leader in delivering powerful market and shopper information, predictive analysis and the foresight that leads to action. We go beyond the data to ignite extraordinary growth for our clients in the CPG, retail and over-the-counter healthcare industries by pinpointing what matters and illuminating how it can impact their businesses across sales and marketing. Move your business forward at www.iriworldwide.com. 

About The Boston Consulting Group
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