How challenger brands can win the market

In the fast-paced world of retail, consumer needs and values are constantly evolving. This creates opportunities for emerging brands to grow and compete with leading CPG organizations. However, in order to succeed, these brands need to adopt the mindset of a challenger brand and prove their unique value. 

In this guide, we’ll define what it means to be a challenger brand in CPG, and offer a guide for these emerging companies to win on the shelf.

What is a challenger brand?

Challenger brands are small to medium-sized companies that compete with larger, more established brands in the consumer packaged goods (CPG) industry. They do so by offering innovative products and brand experiences that ‘challenge’ the status quo set by larger organizations. Challenger brands have been known to disrupt their categories and take market share away from big players by meeting the evolving needs and values of consumers in a new way.  

Challenger brands usually have fewer resources than big companies, so they must operate nimbly and find unique ways to grow within the competitive retail landscape. 

How challenger brands compete with leading CPGs

In CPG, a challenger brand typically starts out as a much smaller company than the leading CPGs in their category. What makes them competitive is their ambition to shake things up and change the way people think about their product or category. Some of the brands we know best today were once challenger brands that offered something different. This is the nature of competition, and it is what drives innovation in CPG.

Unlike large CPG organizations that maintain entire portfolios of consumer brands, challenger brands typically have a more focused product offering, with a clearer vision and willingness to take risks. This focus allows them to be more agile in responding to the needs of consumers and building deeper customer relationships.

A CPG challenger brand's commitment to innovation can be seen in their formulas, ingredients, means of production, ethos, packaging, and more.

Unlike large CPG organizations that maintain entire portfolios of consumer brands, challenger brands typically have a more focused product offering, with a clearer vision and willingness to take risks.

Types of challenger brands in CPG

CPG Challenger brands may disrupt the food industry by offering healthier, more sustainable, and/or more delicious alternatives to the traditional products in their category. 

Challenger brands can achieve success by developing a unique positioning, driving communications that resonate with the consumers they are aiming to reach. Challenger brands communicate their values through their packaging design, certifications, means of production, digital presence, and more. 

Since the products in each CPG retail category have different business models, and face different challenges and opportunities, challenger brands will vary across industries. Here are some examples:

• In the dairy category, companies like NotCo have emerged as a challenger brand, offering plant-based milks that are specially formulated to taste like real dairy milk. The use of technology to rapidly develop their plant-based alternatives to typical dairy products has helped NoCo achieve growth across 7,000 stores nationwide since 2020.

• Mid-Day Squares has focused on product innovation with a “sweets craving-satisfying” chocolate bar packed with protein, fiber and superfood ingredients. The functional product helped to forge a new category spanning across protein bars, chocolate, and snack foods. 

In order to build awareness of this new product, Mid-Day Squares has focused on building a strong, omnichannel brand presence that documents every step of their journey in CPG. The combination of their product development, powerful messaging and strategic use of data to disrupt their category has made them a standout challenger brand — and helped them grow into over 700 US stores in 18 months. 

Misconceptions

One common misconception is that challenger brands are so driven to be different that they don’t pay attention to trends or shopper preferences. In reality, challenger brands are often shaped by a deep understanding of their market, and have identified opportunities to resonate with consumers. What makes them competitive is their ability to go to market with a new solution before other brands. 

Another misconception about challenger brands is that they are independently owned companies. While each company may start out a true underdog, larger CPG organizations have increasingly come to acquire these differentiated brands as part of their own growth strategy. By acquiring the companies, the larger organizations gain access to the innovative products, marketing expertise and customer base. 

Ideally, this is a mutually beneficial deal — as the original owners are awarded for their efforts to build the brand, and the bigger company has the resources to maintain the original vision in a big way. 

One common misconception is that challenger brands are so driven to be different that they don’t pay attention to trends or shopper preferences. In reality, challenger brands are often shaped by a deep understanding of their market, and have identified opportunities to resonate with consumers.

How to succeed as a challenger brand

In order to succeed as a challenger brand, an emerging CPG will need to identify a market opportunity, successfully develop a product that meets the need, and reach audiences in new and compelling ways to gain their loyalty over leading competitors. They will also need to build successful supplier relationships to keep products on shelves and grow into new retailers.

Here are some steps to build a strategy and become a challenger brand in the consumer packaged goods (CPG) industry:

• Identify a unique selling proposition: It’s important to stand out from competition in a meaningful way. Identify a market need that resonates with target customers and generates their loyalty to continue to grow and challenge leading brands.

• Define a target audience: Challenger brands have a deep understanding of their target market. Start by conducting research to identify your brand’s  target audience, and then research their values, desires, and the type of media to best speak to them.

• Create a strong brand identity: Challenger brands are defined by their mission, and desire to create a real change within an industry. In order to have this level of impact, a company will need to forge a strong, omnichannel brand presence that is memorable, and which audiences will admire. 

• Be data-driven: Developing a product is only half the battle for challenger brands. In order to truly compete with leading CPG organizations and gain market share, these companies will need to form strong retailer relationships, and grow distribution to reach new markets. 

Using data to achieve greater growth

One of the best ways to scale a brand to becoming a true disruptor, is by using data to build a compelling sales story. This is how challenger brands win retail shelf space alongside leading competitors. 

For example, allergen-friendly disruptor brand Sunbutter uses Crisp dashboards to analyze their sales data, and present points of success to retail buyers to drive production adoption and grow shelf space. This has enabled them to become more prominent in their category.

In order to maintain retailer relationships, challenger brands also use data to responsibly fill orders, and stay ahead of stock-outs. With limited resources, this means working smarter, not harder. Fast growing seltzer water brand Aura Bora uses Crisp inventory dashboards to have a high level view of their product distribution, and plan where to allocate their inventory across retailers and distribution centers. This has helped the innovative challenger brand save tens of thousands in revenue to-date. 

Finally, let’s revisit Mid-Day Squares — a challenger brand that has developed a line of functional chocolate bars. While the product is innovative, it is also a new type of product, which means that the company needs to find ways to break into new markets. One way that the company does this is by using their retailer data reports to prove high sales velocity and therefore customer demand in their existing store locations. This data can be used to show potential new retailers that there is a market for Mid-Day Squares, and that they are likely to be successful.

One of the best ways to scale a brand to becoming a true disruptor, is by using data to build a compelling sales story. This is how challenger brands win retail shelf space alongside leading competitors. 

Conclusion

Challenger brands succeed by meeting the needs of their industries in a new and meaningful way. They do this by understanding the needs of their audience and developing products that meet them in a scalable way. They also use data to build strong supplier relationships with retailers — which helps the distribution of their products flourish.

In conclusion, these companies are a force to be reckoned with. By adopting the mindset of a challenger brand, ambitious, mission-driven companies can be more strategic and achieve greater growth.