While brand owners, from Unilever to Mars, dominate the retail landscape, startups that can boast artisanal values and specialized offerings have an appeal that many bigger firms can’t match. And, as consumers face more choice than ever before, it’s essential that stalwart brand owners evolve how they develop new product offerings.
The likes of Unilever and Mondelez have tried and tested production methods, perfected after decades of experience, and usually have a long chain of command, which can make it harder for them to adapt to changing consumer needs at pace. In contrast, startup leaders are pioneers of test-and-learn and can form deeper connections with end-users, who can easily access the startup brand’s ethos on social media platforms, creating a live line of public conversation that sparks interest.
Alongside this, consumer trust for larger firms isn’t always where it should be after a succession of scandals over the past decade. In 2021, for example, Boohoo customers accused the retail giant of trying to ‘fool them’ by selling identical clothing at different prices across its brands. Incidents such as these, coupled with an increased focus on trending global issues like sustainability, have fueled growing pressures for better business.
It’s time for established brand owners to rethink how they attract consumers and become more innovative and forward-looking.
Getting ahead of the curve
First, traditional brand owners should get more specific about what they can offer. Most startups are usually made by the consumer for the consumer, or to fill a gap in the market where a given product didn’t exist. Huge growth in product categories such as low-alcohol drinks and vegan foods was largely driven by startups after founders weren’t satisfied by what was on offer in the mainstream market.
Oppo Brothers ice cream, for example, was created after its founders were unconvinced by the range of ‘healthy’ ice cream choices on offer and decided to create one themselves. Another successful example is in personal care, where startups such as Dollar Shave Club and Harry’s have become a big threat to the dominance of established brands like Gillette, largely through clever advertising focusing on personalized offerings and direct-to-consumer models.
A change of mentality is also needed to really reset. Although taking the view that “we know best and this is how we’ve done things for decades” is understandable, such thinking can result in the oversight of ideas that then go on to transform a given market.
Instead, incumbents must embrace new ideas and ways of working. Some are already doing this well. To tap into popular trends such as dairy-free and plant-based foods, Mars launched the Seeds of Change Accelerator program in 2019. The program helps early-stage, food-focused companies to fast-track growth, with the food giant selecting six startups, including Fora, which makes non-dairy butter, to work with. Through this, Mars was able to show it understood changing consumer tastes and could back new brands with its scale, knowledge, and strong retailer relationships.
WeDo, a haircare brand that develops vegan and eco-ethical products for Millennial and Gen Z customers, was launched under major German haircare company Wella and can be seen as another example of success. It’s positioned itself as a force for good and an agent of positive change.
Simply buying up innovative companies in response to competition is no longer guaranteed to be a winning strategy either. Incumbents may face accusations of ‘brandwashing’, with consumers feeling what made the startup unique has been exploited by the larger organization as a shortcut to commercial success. This perception can quickly cause the startup to lose its authenticity and appeal, limiting the success of the investment and in some cases diluting the beauty of what made the brand unique.
“Likewise, brand owners that allow businesses under their ownership to maintain the public image they’ve cultivated over time can share mutual success.”
With a more open mindset and diverse talent pool, brand owners will be in a strong position to be true incubators of change that allow startups to flourish and grow. Unilever acquired the leading healthy snacking brand Graze in 2019 and embarked on expanding the brand beyond office delivery to being stocked in leading supermarkets. Through this, Unilever was able to help Graze expand its brand footprint and accessibility to a larger mass audience.
Likewise, brand owners that allow businesses under their ownership to maintain the public image they’ve cultivated over time can share mutual success. A good example is Unilever’s ownership of Ben & Jerry’s, with the ice-cream brand continuing to make bold political statements, speaking up on contentious issues such as the Israel-Palestine conflict. Taking this approach can show that the ‘spark’ of what made Ben & Jerry’s unique still lives on and avoids any accusations of brandwashing.
Widening the talent pool
Established brand owners should also look beyond traditional recruitment pools to bring in talent from outside their respective industries. Attracting those who are at the top of their game in other sectors, such as technology or sustainability, will enable leadership teams to become more rounded in their thinking as well as have a variety of ideas and conversations streaming through their workforces. This can also create a start-up culture within a company that has perhaps been more traditional in its outlook.
A great example is Hubert Joly, who became CEO at Best Buy in 2012 after having a varied background in sectors such as hospitality and travel. At the time, Best Buy was in crisis as the previous CEO had been suddenly removed, its share value was plummeting, and investor confidence was dwindling. Joly undertook a transformation to change the brand experience to one that allowed customers to see, touch, and experience technology, while overhauling the workplace culture to focus on enriching the lives of customers, rather than just selling products.
This turnaround was staggering, with Best Buy becoming a thriving organization. Joly drove five consecutive years of sales growth, a 263% increase in shareholder return, and doubled online sales. It’s clear that diversity within a boardroom can bring increased success and standout progress.
Pathway to success
Startup and challenger brands continue to threaten long-established brand owners’ market share and incumbents face a pivotal choice: evolve or give up customers to new players. While simply buying out challengers can bring some short-term success, it may not be enough to reach the heights intended when the challenger was initially acquired. The incumbent brands that succeed will be those that take radical steps to tap into the energy and mindset that initially powers startups.
Harnessing this energy will help to reconnect with many consumers who have lost faith in ‘big business’. It‘s no easy task, but brands such as Mars and Wella have provided blueprints for how winning back trust, talking to new consumers, and acting on future trends can be done.
Cover image source: Hybrid Storytellers