April 18, 2021

A chance for SMEs

John Stapleton, the entrepreneur who invented not one but two new grocery categories – fresh soup and chilled toddler’s food – when he created New Covent Garden Soup Co. and Little Dish, outlines how FMCG and food & drink SMEs (Small Food) are overhauling the corporates (Big Food) and why.

There has never been a better time for go-ahead, innovative SMEs to succeed at the expense of large corporates.

Sectors where this opportunity to overhaul the big boys is particularly marked are FMCG and food & drink.

Here, after many years of causing consumer frustration, ‘Big Food’ – typified by industrial scale agricultural and manufacturing companies – is desperate to appear ‘Small Food’ – niche, often local players, perceived as high quality with top-notch welfare and environmental standards.

The recent explosion of food and drink start-ups and alternative brands answers shoppers’ demands for honesty, transparency and traceability and the delivery of values that align with their own. It means that Small Food producers are grabbing a bigger slice of households’ attention, confidence – and spending.

The core advantages of SMEs are their agility and the ability to get really close to their consumer base – because, typically, they come from the same area.

The challenger brands can pivot very quickly and turn rapid changes in market demand into competitive advantage by adapting readily to them. This contrasts sharply with large organisations that aren’t fleet-footed enough to short-circuit labyrinthine processes and systems to respond swiftly.

Today’s trading conditions are defined by uncertainty (e.g. Brexit and threats to the global order). This tilts the pitch in SMEs’ favour, while jaded customers do not need much of an excuse to abandon a corporate or an established brand. Many actively seek out ‘authentic’ alternatives that better ‘speak their language’.

Ultimately and ironically, though, by exerting their mergers and acquisitions muscle, corporates can add to their armoury the very weapon that SMEs used to outcompete them – one that could allow them to compete with other flexible, fast-moving upstarts in the market.

This means that many smaller players will be inundated by offers from cash-rich suitors. If the cheque is big enough, many succumb, surrendering their brand and the dynamic point of difference that built their business.

Would this be a mistake, given the apparently ethical motives that made them successful in the first place? Well, not if the intention all along was to secure a huge pay-out.

In fact, the only one who may feel hard done by is the consumer.