The Small Brand Effect

24 August, 2019

In today’s world it has become apparent that there is a ‘thirst’ for something different, whether that be a new and unusual flavour or a niche alternative brand.

Consumers buying patterns are changing with more of an emphasis on transparency, empathy, consciousness with a desire to continually innovate, bringing new fresh products to the market. This has seen a rise in a number of micro brands that have tailored their marketing and their products to suit the need of their ‘local’ client base, which has seen them take market share away from the large global conglomerate’s.

Although big brands still dominate the shelf space, according to Accenture research, in the past 10 years, the top three big consumer goods brands have lost more than 5% of their share in three of those four markets. ... Small consumer brands are better built to create hyper-targeted products and distribute them locally.

Consumers are flooded by information that’s making them increasingly conscious of ethics and trust. Consumers in 2019 are seeking to find balance in a world that is rapidly tilting out of control. This shift in consumer focus means that brands have to quickly evolve to stay relevant, which a smaller brand can do more efficiently that a big brand.

40% of all luxury purchases are now influenced by a consumer’s digital interactions with a company.

It’s important for smaller companies to digitally communicate their message in an engaging format on a platform that customers can relate to. A great tool for doing this (and one we can vouch for) is through social media. Small enterprise don’t need the “stamp of quality” that comes with the backing of a long-established global company; consumers themselves are building brand trust in real time with their reviews, creating a new competitive arena in which smaller offerings can flourish through word of mouth. Small brands are able to offer a targeted approach to service specific sectors developing a more trusting and personal relationship.

The Change

And, although Alexa may currently be a small part of retail (only 2% of Alexa users use v-commerce tools regularly), this is only because customers want to see products. As screens are added to smart speakers and the experience improves, it is said transactions via voice are expected to grow significantly, generating sales worth $40 billion by 2022, against $2 billion in 2018. This is something that is at the forefront’s of our mind and small brands continuously need to react to consumer buying patterns and this is something that will inevitably change.

The spending power of ethically-minded Millennial and Generation Z customers is increasing, while environmental issues continue to dominate news headlines and public campaign efforts. So, it’s likely the ethical market, and demand for eco-friendly products, will continue to grow.

Innovate or be left behind.......

In 2019, brands can no longer sit on the fence or hide in the shadows. Customers want to know how the companies they buy from work, and what they stand for. Brands must develop connected consumer journeys. This means understanding all available touch points and delivering personalised experiences allowing consumers to purchase on the move.

Big brands are constantly battling with the ‘little guys’. Large companies are squeezed by innovative offerings from smaller rivals are now adopting their business models in search of higher growth. This has been evidenced in the gin distillery revolution, with a prominent example below.....

Fairfax Hall was sipping a gin and tonic in Union Square, New York, with his childhood friend, Sam Galsworthy, when they noticed a handful of artisanal distilleries had sprung up in the US, following the boom in craft breweries.

What fascinated the duo was seeing the reaction to these little distilleries and consumers really did care where, and how, things are made. There was a contrast with their employer at the time, Diageo, the world’s biggest distiller and owner of global brands like Johnnie Walker scotch and Smirnoff vodka. What the small distilleries were doing was almost in direct opposition to where the world of fast-moving consumer goods [FMCG] had been going — of globalisation and big companies getting even bigger.

The two men decided to join the “little guys”. Three years later, they established Sipsmith as the first traditional copper gin distillery in London since 1820. At £30 a bottle, its Sipsmith’s London dry gin costs twice as much as Diageo’s Gordon’s and one-third more than its upmarket Tanqueray gin. Despite this, Sipsmith sales have soared, and just over a year ago it was swallowed up by Japan’s Beam Suntory, the world’s third-largest distiller — though Mr Hall and Mr Galsworthy continue to manage the business.

The acquisition is emblematic of one tactic employed by some large consumer groups trying to reverse five years of weakening growth. In 2016, revenues of the large consumer goods companies — from beer to soft drinks, food and household products — grew at their slowest rate since 2009, when the recession took hold. The 2017 results for many of those companies that have reported remain weak.

To summarise in our opinion there has been no better time to for a micro business to prosper. The market is clearly demonstrating that they would like to support local businesses and if the communication to consumer is engaging the foundations are there for these companies to flourish.

Credited to the author:.

Chris Farnworth

Co-founder, Blendsmiths