The startups, corporations, and emerging technologies transforming consumer packaged goods - a deck from a CB Insights Podcast.

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The startups, corporations, and emerging technologies
transforming consumer packaged goods.
Disrupting CPG

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@zoe_leavitt
#CPGinsights
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Zoe Leavitt
Zoe Leavitt is a senior intelligence analyst at CB Insights covering consumer goods
and retail technology. Zoe's research has been featured in the New York Times, Wall
Street Journal, Good Morning America, and more, and Zoe was named the #1 voice in
retail for 2018 by LinkedIn. Along with her data-driven reports, she leads the weekly
newsletter CPG Insights.
Prior to joining CB Insights, Zoe worked in equity research at Cowen and drove
consumer analytics efforts at the consumer finance group of the Bank of China in
Shanghai. Zoe graduated from Stanford University with a degree in International
Relations.
@zoe_leavitt zleavitt@cbinsights.com
Senior Intelligence Analyst
A B O U T T H E A N A L Y S T

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Contents
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CPG: an industry in flux
Vertical integration
The post-storefront world
Betting on wellness
The race toward personalization
Looking forward: personalized
distribution

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The CPG industry faces major challenges
Activist investors Changing consumer
tastes
New entrants Dispersed points of
sale
TIME

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Pinnacle Foods Targeted by Activist
Investor Jana Partners
April 20, 2018
Activist investors reshape company roadmaps
Sources: NYTimes, Food Dive, New York Post, WSJ, CNBC
A C T I V I S T I N V E S T O R S

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CEOs face new pressures
Since the start of 2017, we’ve seen CEO turnover at CPG companies including:
*Nestle CEO Mark Schneider took office on Jan. 1, 2017
A C T I V I S T I N V E S T O R S

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CPG leaders kill their darlings
A C T I V I S T I N V E S T O R S / C H A N G I N G T A S T E S
On a mission to kill “zombie
brands,” targeting 125+
eliminations by year end
Sold US candy business,
prioritizing pet care, water,
coffee, frozen food, and baby
food
Shifting focus toward pet care,
which drove revenue growth in
Q1’18
Launching major portfolio
revamp focused on pet care and
pet services
On Aug. 30 Campbell’s announced
plan to sell its Fresh and
International divisions
In 2016 P&G transferred 41 beauty
brands to Coty and has since
focused on reducing SKUs and
adding natural ingredients

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Consumers demand more out of food…
Long-term benefits Visually appealing Experiential Lifestyle-oriented
C H A N G I N G T A S T E S
• High-protein, plant-
based products
with beneficial
ingredients
• Focus on mental
and physical health
• Vegan, gluten-free
options
• Bold colors in
products and on
packaging
• Primed for social
media
• Farm-to-table or
sustainably
sourced products
• Products bundled
with services
• Memorable points
of sale
• Personalized
products
• Brand emphasizes
convenience
• Promotes energy,
sleep quality, and
other lifestyle
benefits

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…and expect more out of beauty products
Promising long-
term benefits
Visually appealing Experiential Lifestyle-oriented
C H A N G I N G T A S T E S
• Beneficial
ingredients
• Plant-based
products
• Chemical-free
formulas
• Bold colors on both
products and
packaging
• Focus on social
media
• Farm-to-face
products
• Products bundled
with services
• Memorable points
of sale
• Personalized
products
• Emphasis on
convenience
• Suited for exercise,
travel, and more

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Meanwhile, startups pose new threats…
Disclosed funding: $750M
Select investors:
Healthcare of Ontario
Pension Plan (HOOPP)
Disclosed funding: N/A
Select investors: CircleUp
Disclosed funding: $104M
Select investors: Kleiner
Perkins Caufield & Byers,
Tyson Ventures
Disclosed funding: $506M
Select investors: Bill Gates,
Temasek Holdings, Khosla
Ventures
N E W E N T R A N T S

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… with more on the way
N E W E N T R A N T S

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Weakening incumbents & hot M&A environment
attracts specialized investors
N E W E N T R A N T S

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Tech leaders blur industry lines
*Table is illustrative, not meant to be fully inclusive of company efforts
N E W E N T R A N T S / C H A N G I N G P O I N T S O F S A L E
Controlling CPG points of
sale
Making CPG-related
equity investments
Shaping industry trends Using data to launch
private labels
N/A
N/A
Hema grocery
stores
Ele.me

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The great dispersal: points of sale multiply
C H A N G I N G P O I N T S O F S A L E
Smart homes
Public venues
Voice commerce
Brick-and-mortar
retail
Mobile commerce
E-commerce Virtual reality
On-demand services
Automated
storefronts

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CPG leaders look to startups, incubator partners
S H I F T I N G F R O M R E A C T I V E T O P R O A C T I V E
Acquiring companies Directly investing in startups Managing internal VC fund
Launching externally-managed VC fund
Supporting internal innovation studios
Working with incubator/accelerator programs

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I N C U M B E N T S F I G H T B A C K
Vertical
integration

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Vertical integration: why now?
In the face of new competition, retailers can no
longer rely on being middlemen; private labels
can become valuable differentiators
CPG manufacturers hope that controlling their
own points of sale can help them build loyalty
and capture shopper data
Quote sources: Walmart, Covergirl

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Facing increased competition, retailers turn to
private labels
Albertsons is on track
to launch 1,400 new
private label products
in 2018, more than
double its 2017 rate.
Its O Organics brand
hit $1B in Jan’18.
Kroger’s Simple Truth
brand hit $2B in annual
sales this year, and
Kroger just partnered
with Alibaba to sell its
private labels in China.
Target plans to expand
its private label
offerings and in
Jun’2018 rolled out
new home goods label
Made By Design.
Walmart aims to boost
loyalty through private
label growth; in
Jun’2018 it launched
wine private label
Winemakers Selection.
Sources: Albertsons, Kroger, Target, Walmart

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Who’s done it best?
Read more: How Sephora Built a Beauty Empire to Survive the Retail Apocalypse
R O L E M O D E L S

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Marketplaces capture data; private labels turn
data into sales
“We’ll keep adding selection.”
- Four words on Amazon’s private labels (from its Q4’17 earnings call) that should strike fear into brands’ hearts
Amazon knows your customers
better than you do
Source: Amazon Patents Always-On Video Streams Of Friends And Relatives’ Homes
Amazon owns the points of sale

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Big CPG moves into physical retail through new
flagships…
These stores focus on providing memorable experiences and encouraging social media sharing.

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… and M&A
$500M$5.1B

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Legacy companies use M&A to move online
4/18/17
9/20/17
2/15/18
3/15/18
5/23/18
4/30/18
1/10/18
11/15/17
$300M
$3.35B
$100M
$200-700M

29. 29Source: Quartz
In CPG, online
shoppers need
extra comfort.

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Transparency: it’s time to take packaging out of
online product listings
So far, CPG companies have tended to show
products online as they would in stores — by
putting up photos of packages.
Online, brands have more freedom to highlight
the products within the packages, using photos
to make their products more appealing to new
shoppers.
Read more: The 4 Trends Driving Packaging Industry Disruption

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Transparency: brands invest in online reviews
Through investments… …internal initiatives… …and paid relationships
Read more: [Client Only] 60+ Startups in Influencer Marketing

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Visualization: augmented reality enables
product testing
Modiface enables virtual makeup try-ons on websites,
mobile apps, and in-store screens for L’Oreal, Sephora, Estee
Lauder, and other clients. The platform gathers visual
shopper data, offers personalized suggestions, and supports
sales. L’Oreal acquired Modiface in March 2018.
Online CPG marketplace Boxed piloted augmented reality in
December 2017 to let people test whether bulk packages
would fit inside their cabinets. While it hasn’t yet gained
traction, the experiment shows how AR/VR could support
sales of even low-margin items.
Boxed photo source: Business Insider

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Walmart considers visual strategies online
Recent Walmart patent applications show a focus on helping online shoppers gain a better view of products.
Live streaming in-store produce sections
Read more: Walmart Patent Aims to Solve the Biggest Obstacle to Online Grocery Shopping; Walmart Patent Wants You to Shop at Home Using Virtual Reality
Showcasing products in virtual reality

34. 34Source: The Brick-and-Mortar Food Space Goes Driverless [client only]
Speed supports
convenience

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N E W O F F L I N E C H A N N E L S
The post-
storefront
world

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New offline channels: why now?
People are less likely to
visit centralized retail
locations
Increased competition from
retailers’ private labels
(online and offline)
Brands’ desire to capture
shopper attention in
fragmented media landscape
Source: Business Insider
US mall
visits fell by
50% from
2010-2013,
according to
Cushman &
Wakefield

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The great dispersal: new points of sale
integrate with daily experiences
Smart homes
Gyms
School campuses
Office buildings
CarsTravel
Public venues

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WeWork turns offices into sales channels
Office management giant WeWork has been a major
distributor of coffee, beer, and snacks to its tenants
for years.
In July, it launched WeMRKT, a new retail space
inside WeWork buildings that will stock CPG
products made by WeWork member startups.
Participants so far include Barnana and Sunniva
Super Coffee.
A D D I T I O N A L P L A Y E R S I N O F F I C E C P G S A L E S :S E L E C T B R A N D P A R T N E R S :

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Cargo markets to Uber riders
NY-based Cargo installs mobile-operated kiosks
inside ride-sharing vehicles, selling snacks, beauty
products, and other items.
So far, it partners with Uber in the US and Grab in
Asia. It focuses on gathering user data through its
mobile app for CPG brands.
Looking forward, Cargo’s model could support
consumption by riders in self-driving vehicles.
A D D I T I O N A L R I D E - H A I L I N G P L A Y E R S :S E L E C T B R A N D P A R T N E R S :

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Vengo stocks products in gyms
Vengo recently partnered with Blink Fitness to install
its cashless vending machines with interactive digital
screens in gyms nationwide.
In its gym locations, Vengo will sell headphones,
shower products, phone chargers, and other relevant
items. Vengo also operates in hotels, university
campuses, and other high-traffic areas.
A D D I T I O N A L G Y M - B A S E D M A R K E T P L A C E S :S E L E C T B R A N D P A R T N E R S :

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Hotels offer immersive shopping experiences…
While many hotel chains sell products, brands have begun to connect with consumers by opening
their own hotels.
Yves St. Laurent showcases
beauty products in its YSL
Beauty Hotel, which will open
in NY in Sept’2018.
Japanese retailer Muji opened its
first two hotels this year in China
to promote its home goods and
personal care products.
AccorHotels partnered with
fragrance maker Lola James
Harper to open a hotel in Paris
in late 2018.

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… while airplanes help startups get off the
ground
The strategy helps airlines seem more innovative and better serve passengers, while handing
startups a captive audience.

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Appear Here helps drive pop-up retail economy
CPG leaders from Unilever to Coca Cola, which don’t tend to operate their own stores, have
experimented with pop-ups to attract shoppers and gather data.

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H E A L T H Y S T R A T E G I E S
Betting on
wellness

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Wellness: why now?
Post-recession, healthy
lifestyles and fitness
routines became the new
luxury status symbols
Social media creates
“always on” pressure for
users and turns wellness
into aspirational lifestyle
People are seeking
alterative strategies for
controlling their own health
Source: NYTimes
“In 1966, more than three-fourths
of Americans had great confidence
in medical leaders; today, only 34
percent do.”
- New York Times, Jan. 23, 2018

46. 46Read more: 150+ Startups Cultivating The Wellness Industry
Wellness takes
off across
verticals

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Startups, VCs, and corporates tackle wellness
from different angles
Read more: The Rise Of The Wellness Economy
[INTERACTIVE DEMO]

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Wellness funding takes off, acquisitions multiply
Read more: The Rise Of The Wellness Economy
[INTERACTIVE DEMO]

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Leading alcohol players shift priorities
“The broader beer trends are concerning to me and … we’re going to be playing outside the traditional
definition of beer.”
— Andy Thomas, CEO of Craft Brew Alliance
Read More: Beyond Beer: Major Brewers Are Investing In Cannabis, Kombucha, And More
AB InBev created a new
role, Chief Non-Alcoholic
Beverage Officer, and aims
to grow its non-alcoholic
revenue from 10% of the
total today to 20% by 2025.

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Big food companies turn toward water
In August 2018, PepsiCo acquired SodaStream for $3.2B. On the smaller side, Danone’s Danone
Manifesto Ventures led a $10.6M investment into personalized at-home mineral water maker Mitte.

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Wellness startups promise retailers a win-win
Read more: A Wellness Win-win-win

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M A R K E T S O F O N E
The race
toward
personalization

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Personalization: why now?
Shoppers have long sought personalized
products and services…
…and new technologies are making the strategy
more viable today, including:
Source: U.S. News & World Report
Big data
Enhanced manufacturing capabilities
DNA testing and microbiome analysis
Machine learning

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Step 1: framing products within lifestyle needs
“People don't want to buy a quarter-inch drill. They want a quarter-inch hole.”
- Theodore Levitt, Harvard Business School
Through product labels… …and e-commerce taxonomies

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Step 2: offering personal product guidance
“When you talk to users, everyone says, ‘I’m very different, I’m an outlier.’ Everyone says that.”
– Christina Bognet, CEO, Platejoy

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Companies expand product selections,
targeting a wider range of shoppers
Source: Racked

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Step 3: fully personalized products
“The future of beauty will be very linked to personalization and precision.”
- Guive Balooch, Global VP Tech Incubator, L’Oreal
Total funding: $7.5M
Select investors: Lerer Hippeau,
Maveron , Forerunner Ventures
Total funding: $19M
Select investors: Forerunner
Ventures, Sherpa Capital
Total funding: $9M
Select investors: Y Combinator, GGV
Capital

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Personalization vs. standardization: reducing
the burden of choice
Along with the rise of personalized products, we see a parallel trend in startups offering limited
selections of one-size-fits-all products. Both strategies solve for the same pain point: too many choices.

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Personalization platforms collect new data
streams for brands
… and observing.By asking…

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Can science support DNA-based diets?
“People search for things, they don’t pick the brand. When people talk about brand marketing, I’m
just thinking, ‘What’s that?’”
- Kozo Takaoka, head of Nestle Japan
In 2016, Campbell’s invested in DNA-based meal
plan startup Habit, but it has failed to gain much
traction so far.
Last week, Nestle began piloting a DNA-based
nutrition service in Japan, offering users
personally formulated beverage capsules.

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Looking
forward:
personalized
distribution

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Consumer leaders consider IoT-based
personalized subscriptions: from Walmart…
T H E F U T U R E O F C O M M E R C E ?
Walmart recently patented methods of using connected appliances — including a smart trash can — to
track shoppers’ consumption in the home and automatically reorder depleted products.

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…to Procter & Gamble…
S E N S O R - F I L L E D H O M E S

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…to Pernod Ricard
“Connected [glassware] isn’t a gimmick…the bottles gibe us insights into how people drink our
brands at home.”
- Pierre-Yves Calloc’h, Global Digital Acceleration Director, Pernod Ricard
Source: Digiday
S M A R T E R C O C K T A I L S

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Will self-driving cars host the kitchens of the future?

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Using IoT to
set up in-
home stores
Walmart recently applied
for a patent for an
“unattended retail
storefront” that would
showcase unsold
products in consumers’
homes, and charge them
upon use.
The kiosks could be
restocked by drone.

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Questions?
Twitter: @zoe_leavitt
zleavitt@cbinsights.com

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Zoe Leavitt
@zoe_leavitt
zleavitt@cbinsights.com