The trend of consumers inherently distrusting big businesses, and strongly trusting small brands, will continue, according to recent research about consumer trust – including the most recent FoodThink study.
Simply put, consumers trust and have more confidence in small brands.
Food-wise, consumers perceive small, up-and-coming challenger brands as more trustworthy than national brands/Big Food companies (52% vs. 43%).1
Accordingly, consumers are supporting the small businesses they trust.
The difference between big brands and small brands
For our purposes, here’s how we’re defining brand types:
- Traditional brands: Bigger, established food brands. They’re often well-known, produced by large companies and have been on the market for years or even decades.
- Challenger brands: Smaller, independent and/or up-and-coming food brands. They often compete with or “challenge” more traditional brands for market share.
Big brands should care deeply about trust
Big brands must move quickly to address consumers’ low level of trust and confidence in them. Being cautious and risk-averse may have worked well in the past, but in today’s fast-moving markets, big brands can’t afford to sit still while trust erodes.
The perception that “big is bad” opens the door for challenger brands to build trust with consumers quickly by transparently telling their food production stories.
Our previous FoodThink white paper, Trust in Food: Creating Trust in an Era of Skepticism , found low consumer trust in food production companies. In this time of pervasive distrust and volatility, addressing trust issues head-on – as many challenger brands are doing – is imperative.
But much of the damage is already done. Small food companies are chipping away at big brands, both in terms of market share and revenue. Twenty-nine percent of consumers say they currently buy challenger brands “almost always” or “most of the time” when at the grocery store.1
Marketplace sales data supports this shift in consumer spending: Since 2013, more than $17 billion has shifted from large brands to challenger brands.2
And perhaps most alarming to large brands is the sheer number of challenger brands that have appeared on retail shelves in recent years.
Consider Halo Top ice cream, Evol packaged meals, Krave jerky and Ugly beverages – each has won market share from long-established category leaders.
Let’s revisit PACT – an effective method for building trust
FoodThink’s “Trust in Food” white paper, revealed that overall consumer trust has been on the decline in the U.S. for two decades,3 and the food industry is especially vulnerable to distrust.
For those deemed “untrustworthy,” it’s possible to improve trust and consumer perceptions. But doing so takes time and real commitment.
Food brands most effectively build trust when they create a PACT with their consumers by focusing on Purpose, Authenticity, Consistency and Transparency.
For quick reference:
Purpose: Understand your brand values. Establish what you stand for and the unique role your brand will fill with consumers.
Authenticity: Your brand needs to be true to itself. Don’t try to be another brand. Authentically live your brand’s unique values.
Consistency: Don’t waver from your brand values, and consistently communicate them to your consumers. Ongoing communication and dialogue will build recognition and trust.
Transparency: Be forthright in your ways. Establish and commit to straightforward, clear communication.
Understanding and implementing each of the four pillars is crucial. To learn more, read why creating a PACT with consumers matters.
How smaller brands are bursting onto the scene and quickly establishing trust
It’s difficult to launch a food brand when lacking the inherent advantages of big companies – research and development resources, solid distribution strategies, ample marketing dollars and the luxury of being able to fail without wiping out the entire organization.
Small, upstart brands must enter the marketplace prepared to win consumers by proving – quickly – that they’re delivering product and brand attributes that consumers prefer more effectively than their more-established competitors.
Successful challenger brands are pulling it off by leveraging evolving demographics and consumer preferences.
Along with prioritizing must-have attributes of high quality and great taste (as many big brands do well), challenger brands are coming to market addressing long and growing lists of consumer demands, including:
Many long-standing traditional brands are unable or unwilling to innovate to keep up with these increasing and evolving demands. In response, consumers – especially younger shoppers not committed to long-standing brands – are willing to try new brands.
Large brands are responding to the pressure from these challengers in a variety of ways. For example:
- Some are rolling out product lines with the appearance of smaller niche brands.
- Others are acquiring or investing in challenger brands to stop the market-share bleeding (more on this in an upcoming blog post).
Consequently, consumer attitudes toward challenger brands shift following acquisition. Consumers indicated they might continue to buy challenger brands if acquired, but some acknowledge they may think less of those brands moving forward.1
So, when a large company acquires a challenger brand, it should be prepared to address consumer skepticism by attempting to maintain the brand identity and essence that made the challenger brand preferable in the first place.
Who is purchasing challenger brands?
Like so many other industries, younger generations are driving the growth of challenger food brands.
Millenial and Gen Z shoppers report purchasing challenger brands up to 1.6 times more often than the average consumer.1 Younger people seem most inclined to try new things, are more heavily influenced by social media and consider themselves more adventurous when it comes to eating.
But they aren’t the only ones willing to ditch food-brand Goliaths when the right Davids come along.
Nearly a third (29%) of all consumers say they buy challenger brands almost always/most of the time.1 In addition to demographics, lifestyle choices factor into a shopper’s willingness to try new brands.
For example, confidence in the kitchen appears to translate to confidence in purchasing new brands. Consumers who consider themselves to be skilled cooks are more likely to buy challengers (34%) than those who consider themselves to have poor cooking skills (17%).1
And discerning shoppers seeking organic or natural foods are more likely to seek out challenger brands whose product labels provide nutritional information, details of their food production practices or other claims.
Consider Halo Top and Evol – two highly successful challenger brands that fulfill evolving consumer demands.
They, among many others, are connecting with their desired customers in emotional ways that transcend the traditional price-quality decision matrix.
Big name brands need to accept reality: Challenger brands aren’t going away.
The same study that uncovered the $17 billion large-to-small-brand shift also found sales among “extra small” brands (those with less than $100 million in annual sales) rose 4.9% this year, rendering it the fastest-growing CPG segment.2
As “extra small” brands grow by winning market share, respondents to the FoodThink study indicated that increases in challenger brand purchases will continue.
Trust is a big driver of that success. Challenger brands, with their high degree of trust, can take advantage of a young demographic willing to try new things, be adventurous in their food choices and support their values relevant to their health and environmental concerns.
But not all is necessarily lost for larger, more established brands.
While big companies need to plan and execute against smaller competitors’ superior habits, traditional food brands are able to innovate to stay fresh. And unlike most challengers, traditional market leaders can apply strategic leverage and tap into their vast resources to win and build trust with growing consumer segments.
Large brands should commit to making a PACT with customers
Building trust is no easy feat, and rebuilding it is even harder if trust has been lost. Overcoming the inherent distrust of “big” is best accomplished by focusing on PACT.
Leaders of large brands should focus on establishing and communicating their Purpose, operating with Authenticity, demonstrating Competency and working every day toward Transparency with consumers.
Patience and persistence are required to build an effective PACT. But for big brands’ sakes – both now and far into the future – it’s worth it.
Download the newest FoodThink whitepaper, Challenger Brands, for more insights.
1Challenger Brands FoodThink study.
2IRI, 2018.
3Trust in Food white paper.
