Anyone who has worked in the fast-paced world of CPG can tell you there is a constant state of evolution taking place within categories. Sparked by innovation, new health trends, or shifts in consumer mindset, a category that has been relatively quiet and flat comes to life and begins to take center stage. Take for example the meat snack category. For years, jerkies and meat sticks were primarily c-store road trip snacks on the low end or food for serious hiking/camping enthusiasts at the higher end.
Then in 2013, America took a renewed interest in protein. Jerky suddenly became a fashionable and sought-after snack in a more mainstream way, moving from hikers’ backpacks to lunchboxes and gym bags. Other trends have recently fueled evolution in jerky, too, including natural snacking, the idea of a snack replacing a meal, and the popularity of back-to-basics fitness and diets such as Paleo and CrossFit. Taken together, it’s no wonder jerky has seen skyrocketing growth.
Everyone has a plan ’till they get punched in the mouth.—Mike Tyson
As a result, dozens of new meat snack brands and products have entered the market, most of them at the premium side of the category introducing new flavor variations, new product shapes, sizes, consistencies, and packaging concepts. Some notable ones like Field Trip, The New Primal, Country Archer>, Chef’s Cut, Caveman, and Three Jerks have brought some true innovation to the highly expandable category. As consumer interest and selection grew, sales continued to soar. The meat snack category has posted compound annual sales growth of more than 7% over the past four years (Nielsen). Over the last year, meat snack sales have increased another 3.5 percent to $2.8 billion. They are now second in sales in the entire salty snacks category behind only potato chips.
And all this growth and resulting fragmentation has led to some high profile (and profitable) acquisitions. Hershey bought Krave in early 2015. Jack Link’s bought Grass Run Farms and then subsequently launched Lorissa’s Kitchen. In 2016 General Mills bought Epic Provisions. Then in 2017, ConAgra purchased Thanasi Foods and the Duke’s brand of premium meat snacks.
YOY sales are beginning to show signs of slowing. Mintel suggests in their April 2017 Salty Snacks Report, growth will be tempered in the category to around 5% thus beginning what many believe will be the consolidation phase. Inevitably there will be a brand shakeout. The brands who are strongest and most well-aligned with the consumer needs will survive by either being acquired by a larger brand or through growing their own share via a differentiated market position. Many more will begin to decline as the retailer begins to pull back on the category choosing to support a more selective brand mix to better reflect the slower or flattened growth and to make room for the next hot, fragmenting category.
While categories and retailers are generally more tolerant of fragmentation than they were in the past due in part to changing consumer dynamics, shelf space will always expand and contract to some extent.
As a brand, understanding and anticipating the fragmentation/consolidation cycle is essential for knowing when to enter and exit the market optimally. Obviously, it’s fairly easy to spot when a category is in full-on fragmentation mode but much more difficult to anticipate which category might be next in order to get ahead of the curve. It can be just as difficult correctly predict when the tide may turn towards consolidation to make certain your brand is strong enough to survive or attractive enough for purchase.
Staying Power Through Brand Differentiation
Brands entering the cycle too late, unless highly differentiated, are generally at a disadvantage to those who entered the fragmentation early giving themselves more time to resonate with the consumer, establish ACV, scale and most importantly brand coherence. We no longer live in a world where only the big guys will survive, but we do live in a world that favors strong brands with true distinction and authenticity.
So, what should a brand can do to protect itself when it seems the category is cooling and showing signs of pending consolidation? Having worked with hundreds of CPG brands over a couple of decades, we’ve assembled our experience-based learnings into five core recommendations for brands. If you’d like to learn more, send me a note at firstname.lastname@example.org and I’ll share our thinking in a return email.