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2019 CPG Growth Leaders Report

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This annual BCG/IRI study identifies four main levers fueling short- to mid-term growth in the CPG market.

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2019 CPG Growth Leaders Report

  1. 1. MARCH 2020 2019 Growth Leaders US CPG Growth Leaders: Who they are and why they win
  2. 2. 2 Executive Summary Growth in the US CPG industry accelerated slightly in 2019, reaching 2.2% in measured channels, vs. 2.0% in 2018 Pricing/mix drove growth (+2.5% YoY) for third straight year in measured channels; volume declined (0.3%) for first time in seven years… • Growth yet again propelled by small CPGs (<$1B revenue) & Private Label, taking $19B in value from medium/large players since 2014 – However, PL growth and share gain both decelerated in 2019 (3.9% growth vs. 5.4% in 2018) • Mid-sized & large companies grew at a slower rate, but accelerated slightly (1% YoY growth vs. 0.8% in 2018) …with continued movement towards unmeasured channels, including eCommerce, store pickup, mom and pops, and Club Growth Leaders index highlights winning small, medium, and large companies leading their peers in share and $ / volume growth 9 of top 10 large Growth Leaders have previously been on the list – while small & medium sized leaderboards saw new top entrants • Large ($5.5B+): Constellation Brands topped list for third year in a row, with Modelo and Corona growing ~$500M • Medium ($1B-5.5B): Mark Anthony Brands, new to the list, ranked 3rd, driven by White Claw Hard Seltzer (+300% YoY) • Small (<$1B): E-cigarette company NJOY, also new to the list, was fastest growing small company declining tobacco category Given low growth environment, top 10 large Growth Leaders collectively saw volume declines for first time (-0.6% YoY growth contribution) • However, large Growth Leaders outperformed other large peers, which declined 2.8% in volume growth contribution YoY Growth Leaders have consistently driven performance using four levers: Innovation, Pricing, eCommerce & addressing consumer trends • Innovation: Supplementing acquisition with core innovation across both acquired & owned brands (e.g., Tyson Hillshire snacking) • Pricing: Increasing price surgically by sub-category to counter higher COGS and lower sales volumes (e.g., P&G in paper towels) • eCommerce: Driving increased eComm penetration by deploying consistent approach to win on digital shelf (including click & collect) • Consumer trends: Tapping in to evolving trends, e.g., protein on-the-go, premium and natural self care, Hispanic, etc Small, medium & large companies that proactively address these trends will be better positioned to capture growth in years to come
  3. 3. 3 2014- 2018 CAGR 2018 % Chg. versus YA 2019 % Chg. versus YA Private Label 3.2% 5.4% 3.9% Extra Small 3.3% 3.0% 3.9% Small 3.0% 3.0% 2.7% Mid-Size 2.1% 1.5% 3.0% Large 1.1% 0.8% 1.0% Private Label (PL) and extra small (<$100M) companies continue to drive growth 48.7% 47.1% 46.6% 16.0% 15.9% 16.0% 11.5% 12.1% 12.1% 9.1% 9.5% 9.7% 14.7% 15.3% 15.6% 20192014 $757B 2018 $836B$818B Note: Extra Small = <$100M, Small = <$1B mid-size = $1B-$5.5B, Large >5.5B. Source: IRI data for multi-outlet and convenience (MULO+C). IRI Consulting & BCG analysis. +0.5 +0.5 -0.1 -1.5 +0.2 +0.1 +0.1 -0.6 +0.6 +0.3 $19B in industry sales have shifted from large and mid- sized to private label since 2014… … however, PL decelerating vs. 2018 growth, while mid size / large accelerating % Value Share by Manufacturer Size
  4. 4. 4 0.1% 1.4% 2.9% 2012 2.3% 1.9% 0.8% 2013 2.0% 1.6% 0.2% 3.0% 0.1% 2014 0.7%2.4% 0.1% 0.6% 2015 2016 1.4% 0.0% 2.5% 2017 2018 2.5% 3.0% -0.3% 2019 1.7% 1.5% 2.2% 2019 IRI U.S. CPG: Price/Mix carrying growth despite volume declines 1. eCommerce not included in MULOC – select click & collect in coverage including Walmart, Kroger, and Target. Source: IRI data for multi-outlet and convenience (MULO+C). IRI Consulting & BCG analysis. MULOC includes Food, Drug, Mass, WM, Dollar, Club xCostco, and DeCA Price/mix accelerating and continuing to drive growth Year-on-year volume decline Continued growth in e- commerce, including store pick-up, delivery and shipment1 Observations Channel growth Price/mix Volume Change $ sales vs. prior year (%)
  5. 5. 5 2019 Growth Leaders Which CPG companies are winning in the US and why? Eighth annual report First to compare public and private CPG company performance 430+ CPG manufacturers with >$100M sales in measured channels1 Top 10 large: >$5.5B sales Top 15 midsize: $1.0—$5.5B sales Top 15 small: $100M—$1B sales Three distinct sets of top CPG winning companies: Disaggregation of the companies’ underlying performance 1. Multi-outlet and convenience (MULOC) retailers are defined as food, drug, mass, Walmart, club (excluding Costco), dollar, military, and convenience
  6. 6. 6Source: IRI and BCG analysis DisaggregationThree Growth metrics Dollar sales % change Growth contribution due to distribution versus productivity Volume sales % change Growth due to volume versus pricing Price increases analyzed by true price versus mix shift Dollar share point change Percent portfolio gaining, holding and losing share Category dynamics (e.g., category trends, portfolio concentration) 1 2 3 We use a composite growth index to understand who is winning
  7. 7. 7 2019 CPG Growth Leaders Note: Extra Small = <$100M, Small = <$1B Medium = $1B-$5.5B, Large >5.5B Source: IRI data for multi-outlet and convenience (MULO+C). IRI Consulting and BCG analysis 6 66 7 77 8 88 9 99 10 1010 11 1 11 11 22 2 12 12 33 3 13 13 44 4 14 14 55 5 15 15 Large Companies Double click on next page Mid-Size Companies Small Companies New to list versus 2018 New to list versus 2012-182018 Growth Leader * Fairlife acquisition by Coca-Cola completed in Jan 2020
  8. 8. 8 #1 growth category Brand 1 ($M) Brand 2 ($M) Brand 3 ($M) Top 3 Sales Combined Contribution % Top 3 Growth Combined Contribution % Beer +$380 +$118 +$22 71% 108% Skincare +$90 +$86 +$51 42% 64% Breakfast-frozen & meat +$166 +$108 +$24 52% 127% Pet Food & Treats +$335 +37 +$29 13% 117% OTC medication +$125 +$118 +$100 22% 30% Chocolate Candy +$176 +$34 +$30 30% 110% Cookies +$92 +$63 +$47 40% 128% Gum +$97 +$65 +$50 29% 56% Salty Snacks +$148 +$83 +$33 35% 178% Cream/Creamers +$48 +$30 +$27 31% 139% 6 7 8 9 10 1 2 3 4 5 Note: 2019 year-over-year sales growth in US$ 1. Coffee creamer contributed ~70% of growth. Large Growth Leaders: Brands that drove sales growth Double click on next pg Indicates top 3 brands growth exceeded overall company sales growth 1
  9. 9. 9 • Model Especial contributed ~90% of Modelo brand growth (+$330M in sales and +31M in volume) with more focused strategy Constellation Brands is #1 large Growth Leader for 3rd consecutive year, driven by Mexican beer - primarily Modelo  Expanded key distribution channels: on- premise and mom & pop store presence1  Targeted specific geographies and MSAs— became #1 beer in Southern California  Focused on advantaged price point, benefiting from shift to premium products  Pursued core Hispanic consumer e.g., Brian Ortega UFC commercial 1. Unmeasured IRI channels Source: Industry Week, BCG analysis; Note: Constellation was previously on mid-size Growth Leader company list • New products drove combined ~$100M sales growth for Corona brand, including Premier, Familiar and Refresca  Successful product innovations extended portfolio beyond Corona Extra  Corona Premier and Refresca enabled brand to defend against impact of hard seltzers  Built innovative marketing platform for Premier based on golf and the US Open sponsorship  Will launch own seltzer product in Spring 2020
  10. 10. 10 eCommerce as a growth engine Focused on emerging trends Surgical pricing across portfolio Acquisitions supplemented by innovation 1 2 3 4 2019's large Growth Leaders have driven sustained growth since 2014, leveraging several common drivers 2014-2019 Revenue CAGR Growth for Large Companies Top 10 Growth Leaders Others 1.7% 0.5% 3+x Key growth drivers – deep dives on coming pages
  11. 11. 11 Acquisitions an important driver of growth for several large leaders Over last 5 years, mix of acquisitions and portfolio shaping (incl. innovation) have driven growth 2019 Growth $M vs. YA (Acquired in last 5 years vs. Legacy) Acquisition in last 5 years as % of portfolio Acquisition in last 5 years % of total growth Leading acquisitions from last 5 eyars 3% 1% 9% 19% 53% 85% 8% 100% 0% 1% 7% 15% 2% 12% 5% -2% 3% 7% 54% >100% Note: Based on acquisitions made in last five years (since 2014) Source: IRI Consulting and BCG analysis 3 10 261 51 19 287 1 342 1,133 15 184 33 75 358-7 138 -14 89 480 323 337 343 1,148 217 157 148 63 477 138 351 Acquired in last 5 years Legacy Declining Acqusition 1 Acquisitions supplemented by innovation
  12. 12. 12 Growth Leaders continued to drive innovation with acquired and owned brands Acquired growth: Driving new category innovation from acquired brands Organic growth: Growing through innovation with established brands Note: IRI sales data for first 52 weeks of 2019 and 2018 Source: IRI New Product Pacesetters (2019) Hillshire Snacking was introduced post- Tyson acquisition, marketed as a “perfectly portioned protein snack for an on-the-go experience”, capturing momentum from protein trend Activia Probiotics Dailies delivered occasion-focused innovation through a smaller, on-the-go format (3.1 fluid oz), promoting the ease of working probiotics into a healthy and active routine +$33M +$17M '18-19 YoY Product Sales Danone Baileys Coffee Cream was launched after Danone’s acquisition of Whitewave and International Delight leveraging the expertise acquired via acquisition to build a new licensee-based expansion in the coffee creamer category+$22.5M The Blend, a pattie with beef and plant- based protein was introduced as part of Tyson's new "Raised & Rooted" brand to capitalize on the growth of plant-based protein while leveraging Tyson's historic strength in animal protein 1 Acquisitions supplemented by innovation
  13. 13. 13Source: BCG and IRI Consulting Analysis, Merger Market segments Consumer Database Small Growth Leaders Acquired Since 2012 2012 2013 2014 2015 2016 2017 2018 2019 Year of Acquisition Acquired Investment/JV Acceleration in acquisition and investment in small Growth Leaders 1 Acquisitions supplemented by innovation
  14. 14. 14 Top 10 large Growth Leaders decreased in volume overall (vs. prior years where volume increased) Large Companies Volume and Price Contribution Note: Extra Small = <$100M, Small = <$1B Medium = $1B-$5.5B, Large >5.5B Source: IRI MULO+C POS data. IRI Consulting and BCG analysis 2 Surgical pricing across portfolio 5.4 3.3 2.3 -4.6 -0.6 -0.2 -2.1 -0.6 -0.7 1.9 3.7 0.5 8.5 3.1 2.2 5.1 2.4 2.0 2.5 0.8 2.1 4.5 7.3 3.4 2.7 3.9 3.0 1.7 1.3 Volume % Chg vs. YA Price/Mix % Chg vs. YA Double click on next pg Top 10 Large Growth Leaders Only top 4 increased volume -2.8 4.0 2.9All Others Top 10 3.3 0.1 -0.6 Price/Mix % Chg vs. YA Volume % Chg vs. YA 2.9% Top 4 vol. growth -2.5% 6-10 vol. decline
  15. 15. 15 Top categories by sales growth and corresponding ASP increase1 Examples of ASP Changes at SKU Level P&G executed surgical pricing increases across portfolio to drive value • Driven by consumer insight and competitive landscape • ASP increase differed by category; 38 of 56 categories saw an ASP increase relative to prior year 1. Same SKUs with volume above 10k both 2019 and 2018. Excludes new and discontinued SKUs 2. Sales growth for Bounty Select a Size 12-roll SKU exceeded overall Bounty brand growth due to partial cannibalization for smaller pack sizes. Source: IRI data for multi-outlet and convenience (MULO+C). IRI Consulting and BCG analysis. Surgical pricing across portfolio 4.2% 4.1% 7.1% 4.6% Baby Wipes Toilet Tissue Paper Towels 0.5% 0.5% Diapers Laundry Care 2.8% Deodorant Air Fresheners Cold/Allergy/Sinus Liquids 0.6% 2.3%Cold/Allergy/Sinus Tablets 3.0%Gastrointestinal - Liquid 2018 ASP $18.02 2019 ASP $18.84 YoY Sales Growth +$128M2 SKU 12 roll $13.41 $13.55 +$36M 30 oz $804 M $614 M $544 M $193 M $58 M $29 M $28 M $26 M $24 M $21 M Sales Growth ASP Growth "We’re looking, as we innovate, to be able to modestly [increase] price and still build value -Jon Moeller, Vice Chairman, COO, CFO Q4 Earnings call 2
  16. 16. 16 3 eCommerce as a growth engine eCommerce growing in significance – estimated to be ~10% of CPG portfolio by 2022 20222019 ~4-5% ~10% Digital shelf Growth Leader winners deploy a consistent approach Investing in a digital commerce organization (CoE or dedicated digital teams) 4 Leveraging investment in trade marketing in an eCommerce setting (e.g., banner ads on amazon) 3 Restructuring channel operations and merchandising to ensure right SKUs are available 1 2 Optimizing digital shelf / marketing for pre- purchased in store pick ups at key retailers 5 Having a dedicated brand store optimized for user experience (DTC considerations) eComm penetration as % of CPG sales GL DTC Store Examples Note: eCommerce includes all forms of online shopping (including click & collect) Source: IRI Ecommerce Trends
  17. 17. 17Source: IRI Data for MULOC (multi-outlet and convenience), IRI Consulting and BCG analysis Winning manufacturers and brands are tapping into evolving consumer trends Protein On-the-Go Quicker and easier options to meet daily protein needs Better-for-You Snacking Healthier versions of traditional snacks Simple & Transparent Natural, organic, minimal ingredients Hispanic focused Geared toward growing Hispanic population emphasizing heritage Multi-Functional Beverages Beverages offering superior hydration or energy through simpler and cleaner ingredients Premium/Natural Self Care Willingness to pay a premium to take care of body and/or household Deep dive in subsequent pages New in 2019 4 Focused against consumer trends
  18. 18. 18 Multi-functional beverages are outpacing traditional sugary alternatives Growth leader examples: Multi-functional beverages provide consumers with many nutritional benefits Energy Hard Seltzer Source: IRI ILD POS database, MULOC. IRI Consulting and BCG analysis Double click follows 11% 6% 6% 17% 11% 6% 2% 0% -1% -1% -2% Refrigerated Teas 232%Hard Seltzer Sports Drinks Refrigerated Coffee Seltzer/Sparkling/Mineral Energy Drinks Iced Coffee Regular Soft Drinks Rfg Juices/Drinks Drink Mixes Canned And Bottled Tea Bottled Juices 2019 YOY growth (%) Hard Seltzer Energy Sugary Alternatives 4 Focused against consumer trends Hydration Hydration
  19. 19. 19 2014 201920182015 2016 $1,138 $2 2017 $1 $7 $32 $308 Bang energy growth trajectory 2014-2019 retail sales, $M Bang's path to growth had several key elements • Identified and solved consumer friction point for energy drinks with sports and performance benefits • Ritualized usage on back of new need created (e.g. drink a Bang Energy Drink before workouts) • Targeted distribution (e.g. gyms) to reach intended audience, coupled with effective digital marketing (e.g., Instagram / influencers) • Disrupted "better-for-me" with primarily sugar-free formulas Source: IRI MULOC; desk research; industry publications; BCG analysis Year 5 Bang Energy 3x growth now exceeding $1B by addressing unmet need at intersection of energy / sports 4 Focused against consumer trends
  20. 20. 20 White Claw Convenient, personalized, and better for you, driving 300%+ YoY growth Source: IRI MULOC; BCG and IRI Consulting analysis Multifunctional convenience Easily transportable product (slim, 12 oz. can) with advertising campaigns that highlight consumption in a variety of occasions Personalized flavor Flavored with clean and simple fruit based flavors, available in variety packs to appeal to varied tastes and occasions Better-for-you Won drinkers from other alcohol categories with light, healthier alternative (100 calories only relative to beer); significant growth also coming from wine & spirits drinkers 57 20172016 2018 2019 10 194 834 +449% +241% +330% Distribution1 Velocity2 35 $31 45 $113 60 $277 76 $804 1 – Max ACV Wtd Distribution, 2 – Dollars per $MM ACV 4 Focused against consumer trends White Claw growth trajectory 2014-2019 retail sales, $M
  21. 21. 21 Protein on-the-go: Ready-to-eat and convenient offerings driving market growth 6% 5% 5% 7% 2% Nutritional Health Bars Frozen Breakfast Entrees Dried Meat Snacks Refrigerated Meat / Cheese / Snack Frozen Breakfast Handheld 2019 YOY growth (%) Source: IRI ILD POS database, MULOC. IRI Consulting and BCG analysis Growth leader examples: 4 Focused against consumer trends Exemplar set of growth driving brands by sub-category Snacking Breakfast Old trapper Growth Leader Brand YoY Growth % Hillshire snacking One Brands Jimmy Dean Delights Jimmy Dean Delights +24% +25% +57% +25% +27% Jimmy Dean +7% Jimmy Dean +4% Sub-category growth
  22. 22. 22 Premium on-the-go Protein rich breakfast experience driving 8% YoY growth Growth trajectory (2014-2019) Targeted Marketing Targeting a younger audience more flexible in their eating patterns with a "breakfast all day" campaign Innovative Product Product development fueled by "consumer pursuit of heartier breakfast solutions" that can be taken on the go Biscuit roll-ups: Eggs, meat, and cheese in "roll-up" Morning combos: pancakes and muffins in on- the-go bites 868 948 152Jimmy Dean Delights 2016 166 1,023 2017 174 2018 207 1,284 1,076 2019 Jimmy Dean 1,020 1,114 1,197 +8% $M Retail Sales 4 Focused against consumer trends 11.0% 7.4% $ CAGR Better For You Increased breakfast offerings in the "better for you" segment while still maintaining high protein
  23. 23. 23 Summary: Key takeaways 2.2% growth for CPGs in 2019 (slight acceleration vs. 2018) driven by • Price and mix: Volume declined for the first year (- 0.3% growth) even among large growth leaders • Smaller companies (<$1B) and Private Label: These players are growing at 3-4% and have taken $19B in sales from larger and midsized companies since '14 Four drivers of Growth Leaders success • Acquisitions supplemented by innovation • Surgical pricing across portfolio • eCommerce as a growth engine • Focused against emerging trends 1 2 3 4 Please reach out to discuss how these opportunities may apply
  24. 24. 24 Reach out for more information Peri Edelstein Aman Gupta Jeremy Kuriloff Dr. Krishnakumar (KK) Davey Managing Director and Partner, BCG Managing Director and Partner, BCG Principal, BCG President, Strategic Analytics, IRI Kuriloff.Jeremy@bcg.comGupta.Aman@bcg.comEdelstein.Peri@bcg.com Krishnakumar.Davey@iriworldwide.com
  25. 25. 25 Appendix
  26. 26. 26 Large winning companies switch positions, but several players are frequently in the top 10 2012 2013 2014 2015 2016 2017 2018 Large 2019 *Constellation Brands appears in mid-sized players prior to 2017 Note: Extra Small = <$100M, Small = <$1B Medium = $1B-$5.5B, Large >5.5B Source: IRI MULO+C POS data. IRI Consulting and BCG analysis 6 7 8 9 10 1 2 3 4 5 6 7 8 9 10 1 2 3 4 5 6 7 8 9 10 1 2 3 4 5 6 7 8 9 10 1 2 3 4 5 6 7 8 9 10 1 2 3 4 5 6 7 8 9 10 1 2 3 4 5 6 7 8 9 10 1 2 3 4 5 6 7 8 9 10 1 2 3 4 5 Large Growth Leaders – Historical Positioning #of times on list 6* 6 3 2 5 6 4 6 1 3
  27. 27. 27 Spectrum Many Mid-Sized Players also Consistently in the Top 2012 2013 2014 2015 2016 2017 2018 Mid-Sized 2019 Mid-sized Growth Leaders – Historical Positioning 1 3* 1 1 2 5 6 1 4 4 2 2 2 1 1 #of times on list *Juul appears in small-sized players for 2017 Note: Extra Small = <$100M, Small = <$1B Medium = $1B-$5.5B, Large >5.5B Source: IRI MULO+C POS data. IRI Consulting and BCG analysis 2 3 4 5 6 7 8 9 10 11 12 13 14 15 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 1
  28. 28. 28 Few Small Companies Have Consistently Led Small Growth Leaders – Historical Positioning 2012 2013 2014 2015 2016 2017 2018 Small 2019 Note: Extra Small = <$100M, Small = <$1B Medium = $1B-$5.5B, Large >5.5B Source: IRI MULO+C POS data. IRI Consulting and BCG analysis 2 3 4 5 6 7 8 9 10 11 12 13 14 15 1 Kind Kind All Market All Market Kind Kiss Kiss All Market Roll Kiss Completely Fresh Foods Icelandic Milk & Skyr Corp. Kiss 2 3 4 5 6 7 8 9 10 11 12 13 14 15 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 1 2 3 3 1 8 1 2 4 1 2 2 2 3 1 #of times on list 0
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