Dive Brief:
- Large publicly traded CPG companies may need to rebalance their portfolios in order to produce organic volume-based topline growth, according to a report from the Hartman Group.
- The report said large companies should strategize separate playbooks for established legacy brands and for small premium brands that are on the rise.
- More CPG firms are investing in or acquiring brands operating in what the report refers to as Phase 3 of early-stage development — companies with between $7 million and $30 million in sales annually.
Dive Insight:
While mergers and acquisitions are a trusted way for legacy companies and CPGs to give their businesses a boost when topline growth goes falls into a lull, there are other options manufacturers should consider.
According to the report, the industry’s topline growth rate has decreased 31 basis points compared to 2011-2014.
Rebalancing for organic growth is a way to boost gross sales and revenue. PepsiCo has found success scaling premium brands and managing experiments in new categories, especially those that require new modes of distribution.
PepsiCo recently acquired probiotics beverage manufacturer KeVita. It was the first acquisition under the company's venture arm Naked Emerging Brands, which has diversified PepsiCo's beverage portfolio with better-for-you drink options that appeal to health-conscious consumers.
By expanding innovation beyond a struggling soda category, PepsiCo is bolstering its brand and opening itself up to the purchasing power of a younger consumer base with high demand for premium, niche health products.
Another savvy way to spur company growth — and avoid the costs and complications of an M&A — is by simply innovating with new product introductions. Additionally, topline growth can be improved through a dedicated marketing campaign that targets a particular consumer base, like promising healthier ingredients to millennials.