When brands combine (think Amazon and Whole Foods), many consumers hope that nothing will change. But this often isn't the reality. Here is a look at the potential when two brands combine and how your company can come out on top.
M&A in CPG Industry Can Be Messy
The CPG industry is no stranger to mergers and acquisitions. Amazon and Whole Foods. The Hershey Co. and Amplify Snack Brands Inc. Campbell Soup Co. and Snyder’s-Lance Inc.
This is all just a little bit like that Easter commercial with the chocolate bunny and the peanut butter jar. But do all these mergers and acquisitions really end up with a perfectly even mix of PB and chocolate to make a delicious Reese’s Peanut Butter Cup?
Turns out, it’s a little more complex than that. CSP says smaller companies are the ones driving all the M&A activity in the CPG market. These up and comers are pushing hard to build their brand strategy and may not rollover to even a more established or bigger brand.
CPG marketing for these small companies can be all about innovation. But traditional (more established) brands may fall back on a tried and true product and be unwilling to change. Sometimes this tactic is a good one, too; if you know the story about New Coke, you’ll understand why sometimes an old faithful product should be left alone.
So, what is the answer? How can two equally strong and perhaps hardheaded CPG brands come together during a merger? The answer is, of course, to capitalize on the best qualities of both brands to get to the peanut butter cup. That’s the whole point of a merger or acquisition. Ultimately, the consumer is always affected, as is the retailer carrying the product. According to MediaPost, some of the typical changes we see in CPG branding include:
When Keurig and Dr. Pepper Snapple merged, they created a new brand portfolio melding the ready-to-drink market with a strong in-home brand.
When PepsiCo purchased Soda Stream, it created new recurring sales in replacement syrups and CO2 cartridges.
When Nestle acquired the Blue Bottle coffee café chain, it opened a new specialty coffee product line, which then morphed into the purchase of rights to market Starbuck’s foodservice products.
A similar acquisition between Coca-Cola and Costa Coffee increased Coke’s coffee market considerably by adding hot beverages.
CPG M&A Makes Sense When It is Customer-Focused
McKinsey & Company suggests that CPG branding has been challenged with weak and fluctuating markets over the past few years. They point out, “Consumers, channels, and competition are all different than they were a decade ago.”
Take retail. These organizations have traditionally favored CPG manufacturers with store shelf space. Today, they are much more willing to place their faith in smaller, boutique brands that have a strong market niche over traditional brands with less focus. CPG branding must shift with these market factors by offering better choices, lower prices, and more convenience in all brands.
If the question is, ultimately, how companies handle merging two separate brands under one corporate approach, the best answer is—whichever path will appeal to customers and gain their loyalty while selling more product. This almost certainly means that, as mergers occur, CPG branding will also evolve.
Hangar12 is at the forefront of CPG marketing strategy and more. Subscribe to our blog to stay up-to-date with our latest insights.