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As secondary brands surge, CPG leaders need a digital playbook

For legacy CPG brands looking to compete with rising private label brands, the playbook for success has everything to do with digital, and centers around three necessary points of connection.

7 min read


As secondary brands surge, CPG leaders need a digital playbook

Image: Pixabay

In the mid ‘80s, Cabbage Patch Kids were all the rage. I wanted one, badly. But to my mother, those dolls symbolized everything detestable about the mega-consumerism rampant in the ‘60s and ‘70s, epitomizing the superficiality her generation had willfully rebelled against. She got me a knock-off — a cheaper, also-cute, unbranded alternative. I was unimpressed. A fake held no social currency.

Until recently, generics stood for one thing only: price. As a result, a knockoff in any category may have done the job well enough, but there was a reluctance around them. They were a last resort.

Fast-forward to today, and alternatives to name brand goods have been steadily on the rise in all ways: proliferation, quality, adoption, even cool-factor. As of the last three months, when the COVID-19 global health pandemic began driving unprecedented e-commerce demand — and simultaneous supply chain constraints — generics have seen an even bigger boost, and not only in fast-moving “essentials” categories like toilet paper, but in a vast array of consumer goods, including beauty products, exercise equipment, consumer electronics and home furnishings. The reason comes down to a perfect storm of counterintuitively intersecting influences — more impetus than ever to shop, and less money than before to spend.

Favorable conditions for brand alternatives

A recent study from Cleveland Research found that manufacturers expect e-commerce to reach 21% of their US retail sales in 2021, amounting to a four-plus years trajectory acceleration compared to before the crisis. Yet as unemployment rates skyrocket, belts are being tightened, so we suddenly find ourselves in a back-to-basics consumer mindset, in which the flash of a brand name — that social currency of Cabbage Patch Kid ilk — becomes a luxury hard to justify, so long as there’s an effective alternative. And, rest assured, there are plenty, from private store labels, to AmazonBasics, niche direct-to-consumer startups and total unknowns simply making the leap from wholesale by capitalizing on marketplaces such as Amazon and Etsy. According to the Private Label Manufacturers Association, one of every four products sold in the United States is private label or store brand. As of last November, Amazon alone held 146 private label brands running the category gamut, from apparel to food and grocery, beauty, health and household goods. And in October 2019, a consumer study showed that 25% of those surveyed planned to make up to 19% of their purchases from D2Cs.

Now add in the fact that nowhere is it easier to launch a new brand while mitigating risk than online, which also happens to be where we’re all currently spending the majority of our time. All of these factors conspire to create a rich breeding ground for new generics that are giving traditional legacy brands a run for their money.

What’s a household name to do?

On the other side of today’s economic downturn, however long it may last, the competitive consumer goods landscape will look different, and not all of today’s brands, known or new, will live to tell their tale. The playbook for success has everything to do with digital, and centers around three necessary points of connection:

  1. Connect marketing to sales
    In a climate where every marketing dollar spent needs to be justified, CPG companies that are advanced performance marketers have the advantage. Shopping ad formats online are consistently rising in share of media spend – accounting for 38% of social media and 44% of search budgets in Q1 2020, according to Kenshoo’s Quarterly Trends Report — and for good reason: they generate sales. CPG companies that previously focused on wide-net brand advertising, leaving the direct response to retailers, have an imperative to readily move budgets to more measurable channels or, at a minimum, launch real-time media mix experiments, such as incrementality testing, that can validate a strategy shift. With an armory of brand dollars turned to biddable product advertising, name brand CPGs can potentially displace less equipped competitors.
  2. Connect to customers as people
    One of the distinct qualities of many successful D2C brands is values-centric, human-to-human marketing, often focused on social media. Currently, consumers are 61% more engaged on social media, as they strive to find relevant information about health and the economy, and connect with one another while social distancing. Amid increased posting and consumption, brands stand to gain consumer trust on a deeper level than before, provided that they can find a way to be useful and empathetic, and convey messages that are both values-centric and convey straightforward, helpful information. A recent Edelman study showed that one-third (33%) of American consumers say trusting a brand is important because they can’t afford to waste any money on a bad purchase choice, and that was before the current health and economic crises. Currently, when emotions and perceived risk are running high and budgets are tight, consumer trust in credible, familiar brands is an especially critical advantage to lean into.
  3. Connect data to value
    Name brand CPG companies often have access to an asset that newer alternative brands don’t — a broad swath of data. While direct customer behavior and intent data can be a challenge for companies that have been largely reliant on selling through retailers, digital marketing insights from an independent, unbiased platform provider can serve to quickly fill in many of those blanks. External data, such as consumer trends, competitor initiatives, market innovation and brand health are where more established companies can truly flex some muscle, with product innovation departments that tap these insights regularly and know how to contextualize them. Connecting the dots between all of these data sources and actionable, measurable marketing decisions through cross-functional collaboration and the support of an external partner can allow CPG companies to gain material competitive advantage, plan for the future, and transform into agile, value-generating enterprises for the long haul.

The new dynamic for the new CPGs

Once, generics and startups had to fight for position against household names, and it wasn’t much of a fight. Now, the dynamic is reversed: mega, legacy brands are competing on a leveled digital playing field for share of voice and pushing to stay relevant in an unpredictable economy. CPG companies that utilize this time to both leverage their foundational strengths and learn a few tricks from the new generics will not only survive but stand to thrive, both today and tomorrow.

Margo Kahnrose is senior vice president of marketing for Kenshoo, a global leader in marketing technology. A brand builder and marketing leader who connects the dots between audience, positioning, visuals and voice, she is equal parts thinker, doer and leader, sitting in the crosshairs of strategy and creative. She can be reached at [email protected].

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