Small Brands, Big Decisions

  • zest

    As many of you may know, for the past year or so Field Agent has been based in St. John’s, NL. As a “virtual” company we have been able to move to Newfoundland and not miss a beat running our national network of over 50,000 Agents from coast-to-coast.

    Over the past 10 days, there have been a large number of news stories in the local media (see Supplier section below) about the decision by Smucker Foods of Canada to discontinue two small brands of mustard pickles, namely the Zest and Habitant brands and replace them with a new product to be introduced under the much bigger Bick’s brand, also owned by Smucker.

    To be clear, mustard pickles are the definition of a regional product. They are steeped in tradition as a burst of flavor in the startchy and salty Sunday boiled dinner affectionately known as “Jiggs Dinner”. However, the fact that Newfoundland’s population is a mere 500,000 souls makes products like Zest mustard pickles a very small brand on the national level.

    The Zest product appears to be a staple in Newfoundland homes, at least gauging by the level of social media activity since the discontinuation of the brand has been announced. What started as a local interest story on CBC actually burst onto the national scene with appearances on national news broadcasts.

    In the past, news about this type of decision may have never been heard on the mainland, but social media is the new platform for all issues both important and unimportant and the squeaky wheel gets the attention of the media.

    As a “Come From Away” and a CPG professional, it has been interesting to live between the local population who are passionate about a brand that has been part of local heritage and the realities of many CPG manufacturers in the Canadian market who need to run efficient businesses fuelled by big brands.

    During my career in CPG I have seen many small brands (and some not so small brands) that have been designated as “non-core” brands by big CPG companies. Many of these brands have been sold-off to companies specifically set up to manage these small brands and milk them for their steady revenue and solid profitability. Many of those companies are actually owned / operated by former executives in those big CPG companies selling off these brands in the first place.

    Many of these small brands have been collected as large companies have made strategic acquisitions. A few examples include Salon Selectives, which was part of the Unilever acquisition of Helene Curtis and Duracell batteries, which was part of P&Gs purchase of Gillette. Both of these brands and many others have been spun-off to new owners over the past decade.

    Make no mistake, the decision to unload smaller brands is usually a smart business decision. Specializaton and focus have helped companies grow faster and become more profitable businesses. In addition, the decision to spin off or sell is also a good one for the brand itself, as it goes from being a small cash cow lingering in the background behind big brands that get all the attention and investment, to being a core part of a new portfolio of smaller brands.

    The alternative to divesting smaller brands is to integrate them as part of larger masterbrands. We now live in a world of global master brands as CPG companies decide to focus on fewer and fewer brands. Even private labels have followed this model with Canada’s two biggest brands, President’s Choice and “no name” benefitting from an umbrella approach to marketing in categories ranging from diapers to cereal to avocados.

    In the case of Zest mustard pickles, Smuckers decision to transition the product to the Bick’s brand is following a path that is also tried and tested. Unilever also did this in Newfoundland, when it transitioned its local Eversweet margarine brand to the Imperial masterbrand, and on a national scale when it transitioned its Sidekicks brand from the Lipton beverage brand to the global savoury brand, Knorr.

    As the Canadian CPG industry continues to consolidate, develop masterbrands and become more North American in scope, we will continue to see smaller brands come to the tipping point of either divestiture or integration. In fact, brands that are large brands in Canada but small on the North American or global scale may also face the same fate in the very near future.

    At the end of the day, the decision will be cast by the democracy of the free market. Shoppers need to continue to put these products in their carts if they want to save the brand from extinction and CPG companies will continue to invest their limited resources behind the brands that offer them the best growth and profit opportunities.  

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