Today, the grocery store experience can be categorized as a place of discovery, community, and a space to congregate. With once niche markets like Whole Foods becoming mainstream; a simple “trip to the market” today can be more experimental than functional. Grocery store chains have taken note that in order to compete with Amazon, they need to elevate the experience, ambience and product offering to lure back customers. Consumers can be motivated by curiosity and a fun adventure to try the next big thing, or driven by pure marketing schemes thought up by high paid execs who have all the right tools to get us to make that “impulse” purchase. Whether purchases are stemming from curiosity or marketing, it is evident there has been an overwhelming entrance of new products to try at our disposal. The pace of new products is radically moving in a new direction. The store itself isn’t getting bigger, they are in fact decreasing placement of legacy products. Combining a new shift in generational needs with readily available information in the ‘better for you’ space has consumers demanding clean label safe foods.
What is happening to the once thriving products that are being phased-out and no longer deemed ‘trustworthy?’ In 2015, Fortune Magazine wrote an article entitled ‘the War On Big Food.’ This studied and highlighted tens of billions of dollars in market share lost by the 25 largest CPG brands in the years leading up. That market share has been picked up by emerging consumer brands that offer new generation shoppers a fresh take on authentic, less processed, non-GMO or organic products.
There are over 70 million millennials in the US and it is estimated in 2019 around 30% of the global population will be comprised of millennials. A majority of these millennials are spending money very differently than previous generations. They have different perceptions of brands that once had the ‘tried and true’ halo. People now have the knowledge and immediate access to information on which ingredients can be potentially helpful or harmful to their health. Because large CPG brands are now perceived as mass produced and low quality, there has been a loyalty shift from legacy brands to emerging small scale companies with an authentic story and cleaner origin.
Grocery store chains have taken note that in order to compete with Amazon, they need to elevate the experience, ambience and product offering to lure back customers.
Let’s go back in time to the early 2000s. Checking out at the grocery store was most likely a far different scenario than today. In the carts of our neighbours, one would see items such as milk, high sugar breakfast cereals, bread, mass-produced frozen and snack products such as hot pockets and soft drinks. We see modern purchasing decisions are heading in a cleaner direction. Today, shoppers are stocking up on gluten-free bread, kombucha, organic eggs and dairy alternatives such as almond milk, products that didn’t exist or were considered niche just a few years ago.
A massive shift in generational preferences and spending is one major component that redefines consumer products. Another component is decreased barriers of entry. Prior to sources such as the internet, e-commerce, social media & influencer marketing, product growth on knowledge and self-promotion alone was almost unavailable. Competing for market share against goliath international conglomerates and their multi-billion-dollar global marketing budgets was significantly more challenging than today. E-commerce platforms have given emerging brands a direct pathway to customers, often cutting out the brick-and-mortar store altogether. Social media presence has allowed emerging brands to build a personal relationship with their core customer. These platforms have sparked communities of knowledge, trust and engagement between the brands and their core customers, thus decreasing the reliance on traditional and expensive modes of advertising such as TV, radio and print.
The third component of quickly scaling an emerging brand is funding and investment. Funding for early-stage consumer brands is vastly underserved. It’s estimated that only 4% of all venture capital investment goes to consumer product companies while the majority is allocated for technology and medical investments. Meanwhile, consumer products make up 20% of the Gross Domestic Product (GDP.) Over the last five years, there have been over $235 billion dollars of mergers and acquisition transactions (M&A.) This is double that of tech and biotech, according to a Thompson Reuters PWC Analysis. There is a clear opportunity for firms like Cambridge SPG that have been able to lead this vastly under-served market and quickly institutionalize the funding process for emerging brands.
People now have the knowledge and immediate access to information on which ingredients can be potentially helpful or harmful to their health.
Over the last two years, Cambridge SPG has invested over $25 million of equity in some of the hottest and fastest growing ‘better for you’ consumer brands in North America. Cambridge SPG has a clear mission to incrementally revolutionize the nutritional landscape in North America and beyond.
Cambridge SPG Partner and Chief Operating Officer, Filipp Chebotarev, said: “Our portfolio revenue in 2018 is over $200 million up from $42 million in 2017. As we expand the scope of the consumer categories in which we invest our portfolio companies continue to serve more customers. There is a measurable positive social impact on society as consumers eat cleaner and healthier foods, and this is what drives our team.”
“Cambridge SPG brands have experienced tremendous growth in 2018 due to their unique and innovative positioning in the ‘better for you’ consumer food and beverage sector. We invest in exceptional people who manage efficient businesses.
We are proud to have been able to provide an array of female founders a pathway to success as 70% of our current portfolio companies are either cofounded or led by women,” states Polina Chebotareva, Partner at Cambridge SPG.
Below is the Cambridge SPG 2018 consumer portfolio. What is next for Cambridge SPG in 2019? The partners at Cambridge SPG are looking to continue to grow the existing portfolio and enter innovative, fast-growing categories.