Will Covid-19 Put Big Brands Back On The Shelf?

My crystal ball sees lots of changes ahead as Big Brands start buying up smaller boutique brands at rock bottom prices.

In the wake of the pandemic, people’s eating habits are shifting to more comfort foods, and often the brands they grew up with that until now had seen significant declines in sales over the past few years as shoppers gravitated to new more exciting, often healthier and trendy foods.

During their quarterly result conference calls with analysts, executives at Nestlé, Kraft Heinz and Procter & Gamble all said consumers are returning to old-fashioned brands that had previously fallen out of favor. Hershey noted that its confectionery products gained 3 percentage points of market share over the past month or so and these companies are recording their strongest sales in years.  In January and February this year, insurgent brands—defined as those that are growing more than 10 times faster than their category—captured 35% of the year-over-year growth in the consumer industry, according to consulting firm Bain & Co. In March and April, their share of growth shrank to 5%. And these brands are losing shelf space as supermarkets are relying more heavily on Big Food that can keep their shelves stocked moving away from the more curated offerings that are typically supplied by the smaller companies, who often have their goods co-packed.

And then there is another problem for these smaller brands. Last year, venture capitalists invested 54% less cash to consumer brands than in 2018, according to data tracked by Goldman Sachs as they moved on to investing in other  sectors such as health care and software. PitchBook data reports that world-wide, the number of venture-capital investments in consumer brands fell 26% in the first quarter of 2020 compared with the same period of last year.  

My crystal ball sees lots of changes ahead as Big Brands start buying up smaller boutique brands at rock bottom prices.