The fast-moving consumer goods (FMCG) industry may have got its name because it represents items that are sold at a fast pace, but it’s not just the products that move rapidly. Entire businesses are started, grow, adapt, and thrive in what feels like an instant. In this industry, more than any other, established corporates are constantly having to fight off competition from ‘challenger brands’.
A relatively new concept that FMCG corporates have had to consider in the market landscape is that of the “challenger brand.” These are companies that love disrupting the status quo - and eating into the market share of more established FMCG players. But surprisingly, this isn’t the ultimate goal for challenger brands.
Challenger brands aren’t focused on becoming market leaders. They aren’t defined by sales figures. They are aiming at something much bigger. They want to challenge established concepts. They want to change hearts and minds.
What is a challenger brand?
Neither the market leader nor a niche player, challenger brands are generally young, agile companies that take on more established, larger FMCG rivals. These brands typically grow two to three times faster than their fair share, according to a McKinsey study on disruption in the FMCG market.
Take a look at a brand like Pip & Nut. In a crowded marketplace, Pip & Nut managed to achieve 400% annual growth in its first year. It achieved this growth by putting its values front and centre. The company became a B-Corp business in 2019, a certification for businesses aiming to be a force for good. It’s palm-oil free, uses ethical chocolate and has a road map for achieving net zero. And it offers a first-rate product. That’s the first thing all challenger brands have to get right.
Challenger brands are prepared to do something bold. And, increasingly, that’s what consumers are looking for too. Among younger demographics, in particular, consumer purchasing decisions are not driven by price; they are determined by values - whether that’s sustainability, social-political issues, or transparency. Three out of five millennials believe their purchasing can make a difference to the world. Here are some of the defining characteristics of challenger brands:
Challenger brands are authentic storytellers. They have a purpose and genuinely care about their customers (they don’t view them as just another sale). In fact, research by AdWeek found that 49% of brand marketers view the ability to craft a brand narrative as the most important characteristic of a challenger brand.
Founder of Pip & Nut, Pippa Murray attributes much of the success of her challenger brand to marketing. “Getting the brand right was vital, especially in such a crowded space,” she said. “I wanted a distinctive brand, something playful that would allow us to have fun with our marketing.” The company has a clear personality that runs through everything it does - made clear through the squirrel-themed language used across all its packaging.
It’s not just their product offerings that set FMCG challenger brands apart, however - it’s how they market them too. Challenger brands have discovered that they don’t need a big marketing budget to compete with the big boys. Social networks have enabled challenger brands to connect directly with their customers without having access to huge resources, providing them with further opportunities to flaunt their honesty, trustworthiness and authenticity.
For example, TikTok has demonstrated the power of brands showcasing their playful side. Modern digital platforms allow FMCG brands to market themselves on their own terms, in their own way. Challenger brands are happy to launch, iterate (possibly fail), and ultimately find new growth opportunities. A lack of fear. That’s why the challenge they present is so formidable.
What can corporates learn from them?
Challenger brands usually start off small - but they don’t have to stay that way. This makes them attractive models for FMCG corporates to follow. Many established FMCG corporates have launched venture capital teams to invest specifically in challenger brands. Take a look at this article to see which challenger brands are set to shake the FMCG industry in 2023.
In the UK, for example, leading baking firm Warburtons launched Batch Ventures in 2020. The investment arm backs innovative bakery products and has already supported a number of challenger brands like Snackzilla, an FMCG brand targeting the children’s healthier snacking market. It received a £250,000 investment.
Corporates are realizing that challenger brands have a lot to teach them in terms of identity, mindset and value. Whether they launch their own challenger brand from scratch or invest in an exciting start-up, corporates increasingly understand the power that challenger brands possess in carving out their own distinctive niche. They may not be leaders in terms of market share, but they can lead in other ways. And that counts for a lot with consumers.