The majority (53%) of growth in FMCG sales is coming from the smallest manufacturers, which have risen to 19% share of dollar sales, up 2 points over the past 5 years, according to a recent Nielsen report. In fact, the smallest manufacturers seem to be cannibalizing sales from the largest food and beverage manufacturers, whose market share has dropped to 31% and who are contributing just 2% of sector growth.
The smallest manufacturers have done well during a particularly difficult first quarter, during which the overall U.S. retail market lost $3 billion. How are they not only staying afloat but flourishing in this market? Nielsen points to product transparency, which allows consumers to make educated decisions about the products they buy, such as through ingredient lists, disclosure of product sourcing and ethical practices (which are highly valued by consumers).
“Clean label” products, which typically exclude artificial ingredients (flavors, preservatives, sweeteners, etc.), are hormone and antibiotic free and have a marketing angle, constitute 30% share of food and beverage sales, and have increased by 5.6% in dollar sales in the last 5 years. Small manufacturers have excelled at producing clean label products (40% share of total sales) in the past year, outproducing medium (38%), large (24%) and private-label (27%) manufacturers.
Smaller manufacturers are achieving success despite fewer promotions as compared to larger and private-label manufacturers. During the 52-week period ending in April 29 of this year, sales sold on promotion accounted for 27% of small manufacturers’ dollar volume, compared to 40% for the largest manufacturers.
Nielsen’s report indicates that the smallest manufacturers are benefiting from more exposure in stores: of the 900 new food and beverage items on shelves since 2013, fully 88% have come from small- and medium-sized companies.
Finally, the smallest manufacturers are capitalizing on consumer desire for premium products: premium tiers represent 44% of their sales, compared to 32% for the largest manufacturers.
About the Data: The report was based on data from Nielsen Product Insider, Total U.S. 52 weeks ended April 29, 2017 and Nielsen Retail Measurement Services, Total U.S., 52 weeks ended April 29, 2017.