New research from IRI has found that small and extra-small CPG manufacturers' and retailers' own brands gained U.S. market share over larger players during 2020. Of the CPG industry's $933 billion of total U.S. sales in measured channels in 2020, large manufacturers collectively lost 1.3 share points, or $12.1 billion in sales, to smaller players due to channel shifts, supply constraints and category shifts.
In 2020 the CPG industry grew 10.3%, with smaller manufacturers (including players with annual measured channel sales of less than $1 billion) collectively capturing nearly one-third of that growth, and private label products accounting for roughly 18% of growth. These impressive growth rates resulted in smaller manufacturers and private label products gaining 1.1 and 0.2 share points, respectively, from larger manufacturers (companies with measured channel sales exceeding $5.5 billion annually), which captured 34.1% of total CPG growth in 2020. Large manufacturers have lost market share in each of the past five years, but still represent 46.7% of total U.S. sales in measured channels.
"The consumer shift toward smaller manufacturers and private label products is something that IRI has been documenting for several years, and we saw the trend accelerate during the COVID-19 pandemic," explained Dr. Krishnakumar S. Davey, president of strategic analytics for IRI. "Many large manufacturers were not able to meet the surge in demand caused by the COVID-19 pandemic in the second quarter when they lost most share to smaller players who seized on this opportunity. Several brands attracted a number of new buyers as in-home consumption surged. Large manufacturers fared relatively better in the third quarter, but still lost significant share (-1.3 points vs. year ago as compared vs. -1.9 share points vs. year ago in the second quarter). The fourth quarter saw some improvement and reversion to historical trends (-0.8 points vs. year ago). Many extra-small manufacturers are mostly new entrants to the market into supply-constrained categories (e.g., soap, hand sanitizers, home health care kits)."
As consumers hunkered down with mobility restrictions, growth in the convenience channel—which is dominated by large manufacturers—lagged other channels. Softness in the convenience channel alone accounted for 0.5 share points of decline for large manufacturers overall. The convenience channel, which was affected the most initially, is recovering, and is expected to bounce back as consumer mobility increases later this year.
Smaller manufacturers gained market share in nine out of 10 departments, except for the home care department. Smaller manufacturers accelerated their shares in beverage alcohol, frozen food and center store food categories with products that catered to distinct needs, even as consumers sought variety and change of pace. Smaller manufacturers also gained share in general merchandise, health and beauty departments. Within nonedible categories, small manufacturers playing in high-demand categories, such as hygiene, personal care and health and wellness, saw high growth. As consumers spent more time at home, small manufacturers in breakfast categories, frozen fruit, snacks and shelf-stable products saw growth. Many smaller manufacturers took advantage of the opportunity that arose from larger manufacturers not being able to meet the surge in demand for paper products and hygiene-related products. The trend also holds true in edible categories, where consumers shifted toward smaller or niche brands, or picked up whatever was available on the shelf.
IRI's analysis of e-commerce data also shows similar trends as many smaller manufacturers, particularly in shelf-stable food and beverage products, pet care and personal grooming products, grew much faster in this channel, which grew the most in 2020.
"Looking ahead, we anticipate that consumer mobility will increase substantially over the next few months, and the convenience channel will bounce back as economic activity, especially construction-related activities, improves, providing a strong tailwind for large manufacturers," added Davey. "While some of the 2020 consumption trends will continue with consumers working from home at least part-time, away-from-home consumption will continue to gain back lost share. We expect smaller and mid-sized players to continue to gain share from large manufacturers."