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a16z Podcast | Who's Down with CPG, DTC? (And Micro-Brands Too?)

ecommerce#retail#O2O#Grocery#CPG#DTC#microbrands#direct to consumer#performance marketing#consumer packaged goods#innovation#brand
1K views|5 years ago
💫 Short Summary

The video discusses consumer tech trends in the consumer packaged goods sector, emphasizing the challenges of bringing tech to CPG and the importance of differentiation in e-commerce. It highlights the rise of direct-to-consumer brands, acquisitions by larger corporations, and the need for constant innovation to meet changing consumer demands. The impact of technology on the grocery sector, the future of grocery stores, and the struggle of CPG companies in leveraging data for decision-making are also covered. Additionally, the discussion touches on the shift towards data-driven decision-making and the challenges faced by large CPG companies in adapting to new market dynamics.

✨ Highlights
📊 Transcript
Consumer tech trends in the CPG sector, including DTC and emerging brands.
Tech VC firms prioritize investing in marketing over product innovation in the CPG industry.
Differentiation from Amazon is crucial for success in e-commerce for CPG brands.
Unique offerings are essential to stand out in the marketplace for consumer tech products in the CPG sector.
Challenges faced by direct-to-consumer companies in competing with Amazon.
High customer acquisition costs from heavy marketing spending hinder profits.
Some successful DTC companies, like Native Deodorant, acquired by larger corporations.
Traditional CPG companies struggle with innovation and rely on acquisitions to stay competitive.
Example of Unilever's acquisition of Dollar Shave Club to maintain competitiveness.
Impact of Consumer Behavior Shift on Large Consumer Goods Companies.
Historically, large consumer goods companies have relied on established brands for success.
Smaller emerging brands focus on innovation to meet changing consumer demands.
Consumer behavior shift towards unique and personalized products has driven the need for constant innovation.
Direct-to-consumer (DTC) models enabled by the internet have disrupted traditional distribution channels, allowing brands to reach customers directly.
Importance of the internet in enabling the longtail and making everything discoverable.
Direct-to-consumer (DTC) challenges include the constant need to iterate and test products.
Online retail allows for quick adjustments based on consumer feedback, unlike offline retail.
Companies are turning to offline retail for growth, despite it seeming counterintuitive.
Growing a business, particularly in consumer packaged goods (CPG), is a slow process that requires significant investment and time.
Challenges in Consumer Data Insights for CPG Company
Credit card data only shows retailer sales, not individual purchases.
Instacart's revenue-sharing model provides valuable consumer data for targeted marketing.
Emphasis on personalized marketing and feedback loops to improve consumer behavior.
Ability to digitally manipulate product placement for better sales is highlighted.
Impact of technology on grocery sector.
Grocery stores predicted to remain relevant despite e-commerce rise.
Challenges of achieving profitability due to low margins emphasized.
Innovation and cost reduction emphasized for competitiveness.
Importance of local delivery and potential future trends in grocery retail highlighted.
Fred Smith predicts an increase in FedEx deliveries due to the internet, except for groceries.
Grocery chains must compete on assortment, convenience, pricing, and experience.
Pricing competition with Amazon and Walmart is challenging due to low margins.
Grocery shopping is viewed as an experience, with Chinese stores offering restaurants inside.
Integrating restaurants into supermarkets is being explored as a potential differentiator for success.
The future of grocery stores may involve dark stores with lower costs, higher efficiency, and local distribution.
Delivery may become more prevalent, but physical grocery stores are unlikely to disappear due to customer habits and the experience they offer.
Convenience is becoming a key factor in grocery competition, along with assortment, price, and experience.
Brands and products meeting unique consumer needs are essential for success in the evolving grocery market.
Companies like Coke, General Mills, Unilever, and Procter & Gamble are adapting to consumer preferences.
Retailers often rely on personal preference rather than data when selecting products, leading to challenges with emerging brands.
Fortune 500 retailers lack sufficient data to optimize product assortment, with only a small percentage of products being tracked.
Online sales can provide insights for offline sales for grocers, indicating potential breakout hits.
Consumer packaged goods (CPG) companies struggle to stand out among a plethora of online products, necessitating effective advertising strategies.
Loyalty cards offer a skewed sample of consumer behavior, limiting insights into untapped market potential.
Importance of data-driven decision-making in optimizing product assortment and introducing new items in consideration of diverse consumer demographics and regional preferences.
Data plays a crucial role in tracking product sales, company SKU count, and user feedback to inform business decisions.
Predictive value of data in determining the success of a business and the challenges of consolidating data from different unstructured sources.
Potential for AI solutions to help in consolidating and analyzing data for better decision-making.
Companies are making efforts to gather data through various methods such as incentivizing consumers to submit receipts and sending individuals to capture shelf information for competitive analysis.
Discussion on micro brands in consumer product companies with revenue under $15 million.
Debate on whether the term represents size rather than channel, with concerns about its connotations among entrepreneurs.
Highlight of the impact of innovative companies, such as those producing healthier ice cream options.
Recognition that emerging brands can be sold both offline and online, contributing to market diversity.
Potential for significant influence of micro brands in the consumer product industry.
Emerging brands gaining market share over large brands.
Consumer preference for personalized products contributing to the shift.
Offline retailers reducing slotting fees to collaborate with smaller brands.
Accessibility of marketing costs aiding in growth for emerging brands.
Transition to variable costs empowering smaller brands to compete effectively.
The future of successful brands in the consumer space involves more competition at a smaller scale.
The growth of the grocery market impacts potential revenue per brand.
The debate on choice and personalization focuses on presenting the right choices rather than limiting options.
Data is crucial for understanding consumer behavior, both online and offline.
Despite the vast amount of available data, there is still a demand for more comprehensive and accurate data in the world of consumer packaged goods.
Challenges in Data Gathering in the Industry.
Gathering data on product uniqueness, distribution, and consumer sentiment is difficult due to lack of transparency.
Small brands face challenges in aggregating and normalizing unstructured data.
Entity resolution and product classification add to the complexities of data gathering.
Grocery chains and CPG companies lack the capability to effectively handle this data, creating an opportunity for technology companies to provide and sell data.
Challenges faced by CPG companies in competing due to limited data usage and lack of data-driven decision-making.
Need for access to a broader universe of data is emphasized, but companies struggle to leverage it effectively.
Potential solutions include outsourcing data analysis to tech providers or bringing technology in-house.
Comparison made to traditional car companies transitioning to autonomous vehicles.
Walmart's innovative approach in utilizing technology and acquiring smaller companies is highlighted, despite challenges in hiring expensive engineers for technological advancement.
Challenges faced by large CPG companies and grocery chains in adapting to new market dynamics.
CEOs are finding it difficult to retool their companies for software-driven changes due to limited resources and pressure for short-term results.
Financial institutions like 3G are impacting the industry by focusing on cost-cutting measures, hindering innovation.
CPG companies allocate only around 2% of sales to R&D, much lower than the 14% allocated by tech companies, posing long-term risks for competitiveness and innovation.
Overview of innovation and data trends in CPG industry compared to Big Pharma.
Rise of quantitative VC firms and systemic quant funds in CPG sector for data-driven decision-making.
Contrasting data availability in consumer companies with tech companies, emphasizing the use of private financials for predictive analytics.
Importance of ground truth for accurate predictions and feasibility of comparing success metrics across industry sectors.
Analysis of CPG and SAS industries based on publicly available information.
One company expanded from one Whole Foods store to four hundred and acquired three hundred targets.
Success metrics in SAS may involve developer heat and adoption rate.
Tech companies are potentially overlooking outlier winners.
Key elements of success in CPG include brand intensity and product uniqueness, with Kind bar highlighted as a successful example.
Innovation behind Kind bars was creating a product that looks like real food, with see-through packaging and jagged edges.
Success in the consumer packaged goods (CPG) industry relies on distribution gains, including breadth and quality of doors.
Understanding how a product wins involves aggregating information on where it is being sold, analyzing price points, and SKU counts.
Leveraging data in decision-making processes is crucial, with tech companies offering unique solutions in SAS, open source, social, and e-commerce.
Major winners often arise unexpectedly, such as Facebook in the realm of social networks.
Discussion on eBay and Airbnb as online platforms influenced by network effects and tipping points.
Comparison of early social networks like Facebook and challenges of pattern recognition with limited examples.
Exploring ability to compare different industries for patterns and insights, focusing on ice cream companies vs. snack bars.
Emphasis on understanding network effects and company dynamics for success in online platforms.