The world of consumer goods and retail has been heating up and has clearly become one of the fastest growing and most vibrant business sectors in Southern California. The landscape of managing such businesses has rapidly evolved as well – with laws, regulatory protocols, best practices, consumer and business needs and industry trends seemingly changing by the season.
To take a closer look at how the Consumer Goods & Retail landscape is shaping up in 2019, we asked Andrew Apfelberg, Co-Chair of the Branded Consumer Products Industry Practice Group at Greenberg Glusker to weigh in for a discussion.
What do you anticipate is ahead for retail in the US?
Apfelberg: We will continue to see an acceleration and expansion of the trends we have seen over the past few years. People will shop more and more on-line or in locally convenient plazas (rather than malls). Brick and mortar will need to become showrooms or provide something “extra” like personal shoppers or product specialists to advise or curate for customers. If the economy heads towards recession, the stronger brands will consolidate and even grow their position while the weaker brands or inferior products are at risk of dying out.
What sectors within consumer products are performing particularly well and why?
Apfelberg: Prestige and luxury brands, especially those that are social media savvy, have been performing well. By that I mean through sales, introduction of new products and enhancement of brand identity. Those that have effective celebrity endorsement campaigns have done even better. Additionally, companies getting products into stores like ULTA that are typically not located in traditional malls have been finding a very warm reception from numerous new audiences. Kylie Jenner Cosmetics has done that very effectively while maintaining its prior core audience.
Are there other sectors bubbling up under the surface that you think will see a surge in the near future?
Apfelberg: Functional products that cross category lines will continue to grow. A good example is what MoonJuice is doing through expansion of its food/beverage offerings into beauty. The concept of wellness from the inside-out really resonates. Another category that will do well is cannabis/CBD related food/beverage and health/beauty products. Aside from the changing legal landscape there is a significant growth of cultural acceptance and interest. I have had a huge increase in clients that are involved in or exploring this industry. Finally, auto care is another category that is on an up-swing. A strong player in that category is Smart Wax.
How have recent trends in consumer behavior and purchasing habits affected the consumer goods industry?
Apfelberg: Two trends stand out to me – (1) reach towards prestige and (2) celebrity/athlete association. With respect to the first, it seems that the consumer has more disposable income or is more “bullish” on the economy and is willing to spend more. Given the handful of more austere years after 2008 when this was not possible or advisable, consumers appear to be making up for it now. With respect to the second, the volume of celebrity/athlete endorsement, licensing and brand ambassador deals I have worked on has grown exponentially. Consumers increasingly want to directly associate with their favorite public figure or to emulate in this way the life led by such public figure. Companies increasingly want to co-opt the image and loyal following of the public figure to build goodwill and drive almost immediate sales. Interestingly, many of the deals with public figures have included them making financial or other investments, which has further closely tied their interests with that of the manufacturer.
What are we seeing on the M&A front in consumer products?
Apfelberg: The major multi-nationals are doing a very effective job of buying up innovative brands to build out new categories of their portfolio and bolster existing categories. Unilever did this recently with Hourglass. There seems to be a recognition that the entrepreneur led companies are doing an excellent (and perhaps better) job of product innovation. These acquisitions are supporting a “buy instead of build” model. Private Equity funds have been even more active than before and been quite aggressive in reaching out to smaller/up-and-coming companies that have high quality products and strong brands.
Why do open and transparent brands tend to be more successful when it comes to consumer products?
Apfelberg: The consumer today gains a significant part of their self-worth and personal identity through the products that they use. It has become more than just thinking that a product is of good quality, a value for the price or that it works well for your desired purpose. Instead, people increasingly want a product to make them “feel” a certain way or to signify to others who they are (or want to be). The brands that are open and transparent have a leg up in this regard because it is quite clear what they stand for and, by extension, what those who associate with them stand for. It also makes the consumer feel more invested in the product and management team or founder which will ideally make them a long time repeat customer.
What are some of the best ways for a retailer to build its brand and elevate itself from the competition?
Apfelberg: Using a public figure for a license, endorsement or brand ambassador is an incredibly powerful way to differentiate a brand. The company immediately announces to the world who it’s demographic is and what it stands for. If done right, there is instant credibility with a significant sector of the buying community and a sense that the purchase will help the admired celebrity or athlete. It also can give the product increased exposure into aspirational demographics through the personal promotional efforts of the celebrity. Just as important, due to the exclusivity provisions contained in these agreements, it is one of the very few times there are real barriers to competition. During the exclusivity period, none of the competitors can get the brand association with such public figure.
What are some of the best practices for a branding or endorsement campaign promoting a consumer product?
Apfelberg: The single most important thing is having true alignment between the public figure and the product/manufacturer. Unless the association is authentic and about more than money, it will not resonate with the public. In fact, it will likely backfire. The second more important thing is for both sides to be clear in their expectations and desires over the length of the campaign and take into account all the different ways that such expectations could get frustrated. If the public figure and the manufacturer have a close working relationship and goals of mutual benefit, you can overcome almost any obstacle and, in fact, will find opportunities that were not apparent at the time of signing the contract. A last thing to consider is for the company and the celebrity to be open and transparent with one another and bring the other “inside the tent.” By so doing, each side will better understand the others objectives, concerns and ways of doing things and be able to adapt or encourage innovation or additional partnership opportunities.
Andrew Apfelberg is Co-Chair of the Branded Consumer
Products Practice Group for Greenberg Glusker.