CPG Firms Go Direct To Consumers

  • I have noticed an emerging trend of CPG suppliers in Canada starting to sell direct to consumers through their own websites – an interesting development.

    The first example is from Johnson & Johnson, who has launched Neutrogena Skin ID, a line of skin care products that are tailored specifically to each consumer based on a personalized on-line evaluation. The line-up is currently not available in Quebec.

    The second brand is Nescafe Dolce Gusto, which includes a selection of proprietary coffee pods and machines that can be delivered directly to home. However, Nestle has also made this product available to grocery and mass retailers.

    These two brands are breaking new ground and will no doubt face challenges. Building a critical mass of consumers will be Job #1 in order to improve brand profitability. Awareness will be driven almost exclusively through advertising in the absence of in-store display and promotion.

    Finally, what will be the retailer reaction to these types of initiatives? On one-hand, most CPG suppliers are dependant on retailers in order to reach consumers and risk the perception that they are taking category sales out of the store.  Could there be negative repercussions?

    On the other hand, retailers continued push on Private Label brands has created an environment in-store where it is very difficult for national brands to launch niche innovations that can build the brand such as Skin ID and Dolce Gusto. Is this CPG suppliers taking control of their destiny?

    I suspect that we will see more of these initiatives in the future as the retail space gets more cluttered and more focus is put on building private and exclusive labels. Watch this space.

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