It’s a street fight, and we’re not sure of the outcome. Traditional CPG branding is duking it out with direct-to-consumer (DTC) upstarts, and the only winners we can predict are the consumers themselves.
The Competitive Market for CPG Branding
CPG branding is feeling the encroachment of DTC brands. These changes are forcing them to reconsider everything in light of increasing competition. It’s the same kind of street fight that we saw between brick and mortar and e-commerce, but now it’s CPG branding doing the feinting and punching against a lower cost and possibly more agile opponent.
DTC (or D2C) brands create and sell their products directly to the consumer without using a traditional storefront or other intermediaries. This lowers costs and increases control of marketing, distribution, and sales. DTC brands can experiment with new, innovative marketing models, from subscriptions to pop-ups, to sampling, and much more. DTC is hot, consumers love the savings, and this puts CPG manufacturers behind the curve in terms of their ability to flex with market trends. From Warby Parker to the Honest Company, DTC brands are emerging and creating economic ripples that threaten to turn into a tidal wave if the CPG branding community can’t figure out how to compete.
DTC alternatives are a threat to the established CPG business model. By their very nature, as the young, hip, new kid on the block, they make CPG branding look out-of-date and old school. Instead, as the name implies, DTC cuts out the middleman and sells directly to consumers, building relationships based on the reality of lower costs and the vibe of honesty and innovation.
How CPG Brands Can Compete with DTC Companies
Traditional CPG processes include an approach weighted by a technology infrastructure and an accepted way of doing business. DTC is built for modern markets, able to adapt to the speed of today’s trends, while still offering considering savings to customers. How can traditional brands compete?
Some strategies call for the “if you can’t beat ‘em” approach. Established CPG brand Unilever just bought the Dollar Shave Club. Start-up DTC companies can be purchased by established brands as a way to simply knock out the competitor and steal their fan base. It’s a move as old as business itself. It eliminates the big box retailer completely and pulls a brand much closer to the consumer with no middleman involved. Should big box brands worry? Of course, they should, but we’ll save that for another article.
CPG brands can also take an advertising page from the DTC innovation playbook. Establishing pop-up shops, creating consumer subscription packages, and working to create more memorable, personalized consumer experiences will increase the ability of CPG brands to compete in the same market as the industry upstarts.
Watch for CPG brands to invest more in digital next year. While this is a strategy that isn’t trendy at all, CPG brands still lag behind almost everyone else on the planet. This will require more investment in digital data infrastructures to help established companies glean more information to stay ahead of the latest consumer wants and desires. From video ads to paid social, CPG branding will hit new and established channels more frequently next year to keep up with their DTC competitors.
The times certainly are changing for CPG branding. Traditional approaches will likely not work given dwindling brick-and-mortar stores and increasing DTC competition.
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