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Small players take on consumer goods giants

Digital tech has lowered barriers to entry, so they engage with consumers directly

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From Coca-Cola and Nestlé to Unilever and Procter & Gamble, the fast-moving consumer goods industry has traditionally been dominated by giants.

Singapore

FROM Coca-Cola and Nestlé to Unilever and Procter & Gamble, the fast-moving consumer goods industry has traditionally been dominated by giants.

But a growing pool of smaller upstarts - some from Singapore - are taking on the big boys, buoyed by social media and other technologies having lowered barriers to entry and making it easier for them to connect with consumers.

Consumer goods giants have typically gone for mass marketing, big sales forces and investments in big manufacturing plants. But smaller, nimbler startups - even though without large marketing budgets - have reached out to their customers online, eschewing retailers to distribute their products.

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The Boston Consulting Group (BCG) notes that US$22 billion in industry sales was transferred from large to smaller companies in North America between 2011 and 2016. The share of the consumer goods market held by smaller companies grew from 23 to 26 per cent over the same period, and a similar trend has emerged in Europe.

One such startup is Singapore-based health, beauty and fitness products retailer Supernova. The four-year-old company has enjoyed runaway success with its four brands - fitness programme BodyBoss, skincare brand Sand & Sky, detox tea SkinnyMint and hair masque brand Coco & Eve -- thanks largely to social media marketing.

SkinnyMint, for instance, rode the "teatox" trend on Instagram, where lithe-limbed bloggers and influencers claim that detox teas help them to lose weight, reduce bloat and cleanse their systems.

Supernova co-founder Emily Hamilton said the company's brands are "digitally native", adding: "You might launch a brand and spend two years trying to get your product into the retail space. Instead, we started connecting with customers right away, bypassing the retail channel.

"With the growth of social media, it's a real opportunity for brands to connect directly with customers."

The company, which works with partners to develop brand concepts and manufacture its products, saw its revenue surge 75 per cent last year; it is on track to grow sales by 100 per cent this year.

The US is Supernova's biggest market, but there are plans to ramp up growth in Asia. The company has about 90 staff in its offices in Singapore, Australia, India and Britain.

Physical retail remains an important sales channel, said Ms Hamilton: "Social media is an amazing way to launch a brand and get traction, so when you launch in retail, people have already heard of you. Previously retailers were the gatekeepers."

Fabio Vacirca, the senior managing director and lead for the products operating group in the Asia-Pacific, Africa, the Middle East and Turkey at consulting firm Accenture, noted the role of technology in levelling the playing field for smaller players like Supernova.

He said, however, that consumer behaviour is unpredictable, and that companies can no longer just rely on brand loyalty to predict consumers' behaviour and spending patterns.

With digital consumerism and the movement away from physical stores, barriers to entry are now lower; companies thus get their products direct to consumers, often in innovative ways "which attract and sustain the interest and spending of their market", Mr Vacirca said.

This means smaller players "who are not held back by legacy systems or old ways of interacting with consumers have an invaluable edge".

Another Singapore-based firm riding this wave is bioscience company NamZ, which uses bioscience technologies to create natural foods, beverages and cosmetics ingredients sustainably. Its products include CoconutZ, a natural derivative of gula melaka, and AchromaZ, a food-grade cosmetic ingredient.

NamZ, which went from three employees in 2014 to the current 20, operates in the business-to-business space, said chief executive Christoph Langwallner. It is now looking to launch a direct-to-consumer beauty brand in Singapore this year, and is eyeing Asean as "an excellent market to play in".

Mr Langwallner said: "We have been hovering under the radar because we were self-funded and didn't need publicity. That has given us the freedom to develop and position ourselves nicely.

"Small companies can launch a consumer brand for a little money today. That's much harder for an MNC to do; given their complexity and structure, they are slow. We can be more agile and flexible, and leaner in the way we organise ourselves."

Chan Ih-Ming, director for consumer businesses at the Economic Development Board (EDB), said smaller companies in the consumer packaged goods space can take advantage of Singapore's ecosystem to grow.

He noted two emerging trends - that of seasoned fast-moving consumer goods executives starting their own companies in Singapore, as well as local contract manufacturers moving beyond the business-to-business market to sell direct to consumers. These trends indicate that potential partners in Singapore's ecosystem - such as market research and design firms - are stepping up to support companies' growth aspirations.

The EDB will continue encouraging large companies to source for solutions and ideas in Singapore "so our local ecosystem benefits from exposure to this regional work", he said.

He added that the consumer packaged goods industry is a growth sector for Singapore; key segments include skincare, flavours and fragrances, confectionery and nutrition. Top consumer firms such as Unilever, Johnson & Johnson and Nestlé have regional bases here to tap the region's growth opportunities.