Who Wins, David or Goliath?
When the office of one of our smaller markets – Green Seed Nordic, based in Denmark – shared their outrage at Donald Trump demanding Greenland, the Green Seed Group WhatsApp group went into overdrive. As a close international network, we share clients and ideas, and support one another in many different ways. We even considered renaming ourselves the ‘Greenland Group’ for a day in solidarity!
This made me think about how little v large operates in the food and drink industry and whether, and if so, how size matters.
Markets
Firstly in choice of export markets. If there’s one clear lesson we can draw from our experience it’s that size of market does not necessarily equal sales potential. A decade or more ago it was fashionable to chase BRIC markets and UK government initiatives and subsidies focused much more on markets like China than those nearer home. Yet our exports to markets like little old Belgium were still greater than the total shipped to Brazil, Russia, India and China. And trade focused smaller countries often punch above their weight with their own exports too – The Netherlands being an excellent example.
Geographical proximity helps. One of the key arguments put forward against Brexit was that countries naturally tend to do much more business with closer markets (whatever the potential attractiveness Trans Pacific trade partnerships). It’s easier to understand markets and customers you can visit in hours, and easier for EU retailers looking for innovation to take a look at what’s new in in the UK to identify trends and source potential suppliers. Direct supply to end customers can also be possible, leading to stronger relationships and more competitive pricing. Better to take a laser-like focus on a niche opportunity and execute well, than be seduced by markets with much bigger populations, but a harder to reach target demographic.
Brands
Turning to brands, in the UK recent history for smaller challenger brands has been, appropriately, ‘challenging’. But their prospects might be improving. Pre pandemic, legacy players found organic real growth hard to come by. New brands began to pop up offering ranges with a greater emphasis on sustainability, clean ingredients, health and plant-based solutions, highlighting their credentials vs the less than ideal propositions of the Goliaths in their category. And they could fight on a more level playing field of social media and direct consumer engagement, which began to assume greater importance over traditional and costly advertising.
Covid came, which boosted online sales for many. But more impactful was the real hit to hard won retail distribution gains as supermarkets delisted smaller companies while boosting order volumes of larger brands to ensure product availability.
Since then inflation and cost of living pressures have been the dominant themes in grocery, putting more pressure on (often) higher priced products from challengers. But things are beginning to change: retailers have realised that fighting on price alone just plays into the hands of the discounters, that they need to show they offer something different and communicate that to their shoppers. This is where challenger brands can begin to help them to attract new shoppers to their stores with innovation or better for you solutions. What’s more, after some criticism of earlier versions producing very few permanent listings, there now seems to be some momentum behind incubator and accelerator schemes offered by the multiples to help brands develop and learn how to do business effectively, and retailers to test innovation, suggesting it’s more about longer term business development for all, than just a PR tool for big retail.
2025 will be the year of the challenger brand – or so believes YF, a consultancy previously called Young Foodies. Whether that’s a well calculated prediction or just an expression of determination, we’ll have to wait and see. For those that have something genuinely different, can demonstrate agility and powerful consumer connections – and with a strong financial base – it just could be. Size alone won’t be the deciding factor.
Simon Waring
swaring@greenseedgroup.co.uk