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David-esque Startups Take on the Consumer Packaging Goliaths

October 12th, 2013

Given the longstanding dominance of Consumer Packaged Goods giants like Procter & Gamble Co. and Unilever, it may come as a surprise that their supremacy could be under serious threat from small entrepreneurial enterprises. To the pleasure of everyone who enjoys a good underdog story (really, who doesn’t?), and much to the chagrin of huge CPG brands, this trend does not appear to show any signs of slowing.

Many of these smaller CPG brands have credited “digital disruption” in media and retailing as a huge factor in being able to break through into the institutional field. But more than that even, Rex Briggs, CEO of the analytics firm, Marketing Evolution, has stated, “digital and social media actually tilted the playing field in favor of the new entrant who doesn’t have the legacy ways of [marketing].”

Social media allows small budget companies to realize strong returns on investments at low spending levels, while for large brands, social media reaches a point of diminishing returns quicker than other marketing avenues. Furthermore, by relying on e-commerce for 25% of their sales (compared to 9% for the big guys), the startup companies don’t have to struggle for shelf-space, as is the case when competing in traditional retail stores.

Even if the execs in the mega-corporations may not recognize the name, Eos lip-balm co-founder, Craig Dubitsky, has given the multi-billion dollar packaged-goods companies some cause for worry. Dubitsky (pictured on the right) helps CPG start-ups make partnerships with larger companies responsible for distribution: he’s connected Hello, a dental care startup, with Amazon, Walgreen’s online store, and limited distribution in Target. Has it worked? The statistics speak for themselves: after just 5 months, Hello was able to claim a 22% share in the breath-freshener industry at Walgreens. Not too shabby.

In addition to the startups’ unequal benefits in digital marketing, the companies Dubitsky backs have an undeniable appeal of authenticity that consumers associate with smaller brands (with the understanding the industry titans are only out to manipulate consumers like you to blow your hard-earned cash). By taking advantage of the hipness-factor offered by not being “mainstream,” these startups implement creative design and a unique user experience to close their target market. Consider the Eos lip-balm packaging: an original spherically shaped container with indents for ergonomic grip, coupled with unique flavors like Pomegranate Raspberry, and Vanilla Mint (what?? Kiss me with that, please) has facilitated the explosion of this brand, which you can now find in most Targets across the country.

The democratization of awareness-avenues provided by the digital age have allowed the smaller CPG brands to flourish in a market that has forever been dominated by mega-corps like Johnson and Johnson. Once they have staked a place in the consumer conscious as a company for “the little guy,” “the average Joe,” these brands employ clever identity and sleek design principles to provide their customers with a superior brand experience with an air of authenticity that CPG titans ostensibly lack in the public’s eye. With no indication of these CPG startups slowing their roll, the big companies are just going to have to learn to share the space.

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