Disrupting CPG

The startups, corporations, and emerging technologies

transforming consumer packaged goods.

1
WITHIN 24 HOURS

Briefing recording will be distributed

The presentation will also be sent to you.

Feel free to share with colleagues. The
resolution of some slides may be suboptimal
due to the webinar software. Those slides will
look fine in the presentation that we send you.

2
JOIN THE CONVERSATION ON TWITTER

@cbinsights
@zoe_leavitt
#CPGinsights

3
WHO WE ARE

The technology market

intelligence platform.
CB Insights software lets you predict, discuss,
and communicate emerging technology trends
using data in ways that are beyond human
cognition. We are a leader in the Expert Automation
& Augmentation Software (EAAS) space.

4
 TRUSTED BY THE WORLD’S LEADING COMPANIES

“We use CB Insights to find emerging trends

and interesting companies that might signal a shift in
technology or require us to reallocate resources.”
Beti Cung, Corporate Strategy, Microsoft

5
TRANSFORM draws on the experience
of successful executives from today's
JOIN US ON DEC.
top companies and the latest research 4 & 5 IN NYC
on technology, growth and innovation
to cut through the fog about the coming RSVP TODAY
digital revolution.
6
ABOUT THE ANALYST

Zoe Leavitt

Senior Intelligence Analyst

@zoe_leavitt zleavitt@cbinsights.com

Zoe Leavitt is a senior intelligence analyst at CB Insights covering consumer goods

and retail technology. Zoe's research has been featured in the New York Times, Wall
Street Journal, Good Morning America, and more, and Zoe was named the #1 voice in
retail for 2018 by LinkedIn. Along with her data-driven reports, she leads the weekly
newsletter CPG Insights.
Prior to joining CB Insights, Zoe worked in equity research at Cowen and drove
consumer analytics efforts at the consumer finance group of the Bank of China in
Shanghai. Zoe graduated from Stanford University with a degree in International
Relations.

7
Contents
9 CPG: an industry in flux

21 Vertical integration

35 The post-storefront world

44 Betting on wellness

52 The race toward personalization

61 Looking forward: personalized

distribution

8
The CPG industry faces major challenges
Activist investors Changing consumer New entrants Dispersed points of
tastes sale

TIME

9
ACTIVIST INVESTORS

Activist investors reshape company roadmaps

Pinnacle Foods Targeted by Activist

Investor Jana Partners
April 20, 2018

Sources: NYTimes, Food Dive, New York Post, WSJ, CNBC 10

ACTIVIST INVESTORS

CEOs face new pressures

Since the start of 2017, we’ve seen CEO turnover at CPG companies including:

*Nestle CEO Mark Schneider took office on Jan. 1, 2017 11

 ACTIVIST INVESTORS / CHANGING TASTES

CPG leaders kill their darlings

Sold US candy business, Shifting focus toward pet care, Launching major portfolio
prioritizing pet care, water, which drove revenue growth in revamp focused on pet care and
coffee, frozen food, and baby Q1’18 pet services
food

On a mission to kill “zombie In 2016 P&G transferred 41 beauty On Aug. 30 Campbell’s announced
brands,” targeting 125+ brands to Coty and has since plan to sell its Fresh and
eliminations by year end focused on reducing SKUs and International divisions
adding natural ingredients 12
CHANGING TASTES

Consumers demand more out of food…

Long-term benefits Visually appealing Experiential Lifestyle-oriented

• High-protein, plant- • Bold colors in • Farm-to-table or • Personalized

based products products and on sustainably products
with beneficial packaging sourced products
• Brand emphasizes
ingredients
• Primed for social • Products bundled convenience
• Focus on mental media with services
• Promotes energy,
and physical health
• Memorable points sleep quality, and
• Vegan, gluten-free of sale other lifestyle
options benefits

13
CHANGING TASTES

…and expect more out of beauty products

Promising long- Visually appealing Experiential Lifestyle-oriented
term benefits

• Beneficial • Bold colors on both • Farm-to-face • Personalized

ingredients products and products products
packaging
• Plant-based • Products bundled • Emphasis on
products • Focus on social with services convenience
media
• Chemical-free • Memorable points • Suited for exercise,
formulas of sale travel, and more

14
NEW ENTRANTS

Meanwhile, startups pose new threats…

Disclosed funding: $750M Disclosed funding: N/A Disclosed funding: $104M Disclosed funding: $506M
Select investors: Select investors: CircleUp Select investors: Kleiner Select investors: Bill Gates,
Healthcare of Ontario Perkins Caufield & Byers, Temasek Holdings, Khosla
Pension Plan (HOOPP) Tyson Ventures Ventures

15
NEW ENTRANTS

… with more on the way

16
NEW ENTRANTS

Weakening incumbents & hot M&A environment

attracts specialized investors

17
NEW ENTRANTS / CHANGING POINTS OF SALE

Tech leaders blur industry lines

Controlling CPG points of Making CPG-related Shaping industry trends Using data to launch
sale equity investments private labels

N/A

N/A

Ele.me
Hema grocery
stores

*Table is illustrative, not meant to be fully inclusive of company efforts 18

 CHANGING POINTS OF SALE

The great dispersal: points of sale multiply

Mobile commerce Automated Smart homes

storefronts

Brick-and-mortar
retail On-demand services Voice commerce

E-commerce Public venues Virtual reality 19

SHIFTING FROM REACTIVE TO PROACTIVE

CPG leaders look to startups, incubator partners

Acquiring companies Directly investing in startups Managing internal VC fund

Working with incubator/accelerator programs

Supporting internal innovation studios

Launching externally-managed VC fund

20
INCUMBENTS FIGHT BACK

Vertical
integration

21
Vertical integration: why now?

In the face of new competition, retailers can no CPG manufacturers hope that controlling their
longer rely on being middlemen; private labels own points of sale can help them build loyalty
can become valuable differentiators and capture shopper data

Quote sources: Walmart, Covergirl 22

Facing increased competition, retailers turn to
private labels

Albertsons is on track Kroger’s Simple Truth Target plans to expand Walmart aims to boost
to launch 1,400 new brand hit $2B in annual its private label loyalty through private
private label products sales this year, and offerings and in label growth; in
in 2018, more than Kroger just partnered Jun’2018 rolled out Jun’2018 it launched
double its 2017 rate. with Alibaba to sell its new home goods label wine private label
Its O Organics brand private labels in China. Made By Design. Winemakers Selection.
hit $1B in Jan’18.
Sources: Albertsons, Kroger, Target, Walmart 23
ROLE MODELS

Who’s done it best?

Read more: How Sephora Built a Beauty Empire to Survive the Retail Apocalypse 24
Marketplaces capture data; private labels turn
data into sales
“We’ll keep adding selection.”
- Four words on Amazon’s private labels (from its Q4’17 earnings call) that should strike fear into brands’ hearts

Amazon knows your customers Amazon owns the points of sale

better than you do

Source: Amazon Patents Always-On Video Streams Of Friends And Relatives’ Homes 25
Big CPG moves into physical retail through new
flagships…
These stores focus on providing memorable experiences and encouraging social media sharing.

26
… and M&A

$5.1B $500M
27
Legacy companies use M&A to move online
3/15/18
11/15/17
$100M

1/10/18 2/15/18

9/20/17
5/23/18 $300M
$200-700M

4/30/18 4/18/17

$3.35B

28
In CPG, online
shoppers need
extra comfort.

Source: Quartz 29
Transparency: it’s time to take packaging out of
online product listings
So far, CPG companies have tended to show
products online as they would in stores — by
putting up photos of packages.
Read more: The 4 Trends Driving Packaging Industry Disruption
Online, brands have more freedom to highlight
the products within the packages, using photos
to make their products more appealing to new
shoppers.
30
Transparency: brands invest in online reviews
Through investments… …internal initiatives… …and paid relationships

Read more: [Client Only] 60+ Startups in Influencer Marketing 31

Visualization: augmented reality enables
product testing
Modiface enables virtual makeup try-ons on websites,
mobile apps, and in-store screens for L’Oreal, Sephora, Estee
Lauder, and other clients. The platform gathers visual
shopper data, offers personalized suggestions, and supports
sales. L’Oreal acquired Modiface in March 2018.
Boxed photo source: Business Insider
Online CPG marketplace Boxed piloted augmented reality in
December 2017 to let people test whether bulk packages
would fit inside their cabinets. While it hasn’t yet gained
traction, the experiment shows how AR/VR could support
sales of even low-margin items.
32
Walmart considers visual strategies online
Recent Walmart patent applications show a focus on helping online shoppers gain a better view of products.

Live streaming in-store produce sections Showcasing products in virtual reality

Read more: Walmart Patent Aims to Solve the Biggest Obstacle to Online Grocery Shopping; Walmart Patent Wants You to Shop at Home Using Virtual Reality 33
Speed supports
convenience

Source: The Brick-and-Mortar Food Space Goes Driverless [client only] 34

NEW OFFLINE CHANNELS

The post-
storefront
world
35
New offline channels: why now?

US mall
visits fell by
50% from
2010-2013,
according to
Cushman &
Wakefield

People are less likely to Increased competition from Brands’ desire to capture
visit centralized retail retailers’ private labels shopper attention in
locations (online and offline) fragmented media landscape

Source: Business Insider 36

The great dispersal: new points of sale
integrate with daily experiences

Smart homes School campuses

Travel Cars

Gyms Office buildings

37
Public venues
WeWork turns offices into sales channels

Office management giant WeWork has been a major

distributor of coffee, beer, and snacks to its tenants
for years.
In July, it launched WeMRKT, a new retail space
inside WeWork buildings that will stock CPG
products made by WeWork member startups.
Participants so far include Barnana and Sunniva
Super Coffee.

SELECT BRAND PARTNERS: ADDITIONAL PLAYERS IN OFFICE CPG SALES:

38
Cargo markets to Uber riders

NY-based Cargo installs mobile-operated kiosks

inside ride-sharing vehicles, selling snacks, beauty
products, and other items.
So far, it partners with Uber in the US and Grab in
Asia. It focuses on gathering user data through its
mobile app for CPG brands.
Looking forward, Cargo’s model could support
consumption by riders in self-driving vehicles.

SELECT BRAND PARTNERS: ADDITIONAL RIDE-HAILING PLAYERS:

39
Vengo stocks products in gyms

Vengo recently partnered with Blink Fitness to install

its cashless vending machines with interactive digital
screens in gyms nationwide.
In its gym locations, Vengo will sell headphones,
shower products, phone chargers, and other relevant
items. Vengo also operates in hotels, university
campuses, and other high-traffic areas.

SELECT BRAND PARTNERS: ADDITIONAL GYM-BASED MARKETPLACES:

40
Hotels offer immersive shopping experiences…
While many hotel chains sell products, brands have begun to connect with consumers by opening
their own hotels.

Yves St. Laurent showcases
beauty products in its YSL
Beauty Hotel, which will open
in NY in Sept’2018.
Japanese retailer Muji opened its
first two hotels this year in China
to promote its home goods and
personal care products.
AccorHotels partnered with
fragrance maker Lola James
Harper to open a hotel in Paris
in late 2018.
41
… while airplanes help startups get off the
ground
The strategy helps airlines seem more innovative and better serve passengers, while handing
startups a captive audience.

42
Appear Here helps drive pop-up retail economy
CPG leaders from Unilever to Coca Cola, which don’t tend to operate their own stores, have
experimented with pop-ups to attract shoppers and gather data.

43
HEALTHY STRATEGIES

Betting on
wellness

44
Wellness: why now?

“In 1966, more than three-fourths

of Americans had great confidence
in medical leaders; today, only 34
percent do.”
- New York Times, Jan. 23, 2018

Post-recession, healthy Social media creates People are seeking

lifestyles and fitness “always on” pressure for alterative strategies for
routines became the new users and turns wellness controlling their own health
luxury status symbols into aspirational lifestyle

Source: NYTimes 45
Wellness takes
off across
verticals

Read more: 150+ Startups Cultivating The Wellness Industry 46

Startups, VCs, and corporates tackle wellness
from different angles
[INTERACTIVE DEMO]

Read more: The Rise Of The Wellness Economy 47

Wellness funding takes off, acquisitions multiply

[INTERACTIVE DEMO]

Read more: The Rise Of The Wellness Economy 48

Leading alcohol players shift priorities
“The broader beer trends are concerning to me and … we’re going to be playing outside the traditional
definition of beer.”
— Andy Thomas, CEO of Craft Brew Alliance

AB InBev created a new

role, Chief Non-Alcoholic
Beverage Officer, and aims
to grow its non-alcoholic
revenue from 10% of the
total today to 20% by 2025.

Read More: Beyond Beer: Major Brewers Are Investing In Cannabis, Kombucha, And More 49
Big food companies turn toward water
In August 2018, PepsiCo acquired SodaStream for $3.2B. On the smaller side, Danone’s Danone
Manifesto Ventures led a $10.6M investment into personalized at-home mineral water maker Mitte.

50
Wellness startups promise retailers a win-win

Read more: A Wellness Win-win-win 51

MARKETS OF ONE

The race
toward
personalization
52
Personalization: why now?
Shoppers have long sought personalized …and new technologies are making the strategy
products and services… more viable today, including:

Big data

Machine learning

DNA testing and microbiome analysis

Enhanced manufacturing capabilities

Source: U.S. News & World Report 53

Step 1: framing products within lifestyle needs
“People don't want to buy a quarter-inch drill. They want a quarter-inch hole.”
- Theodore Levitt, Harvard Business School

Through product labels… …and e-commerce taxonomies

54
Step 2: offering personal product guidance
“When you talk to users, everyone says, ‘I’m very different, I’m an outlier.’ Everyone says that.”
– Christina Bognet, CEO, Platejoy

55
Companies expand product selections,
targeting a wider range of shoppers

Source: Racked 56
Step 3: fully personalized products
“The future of beauty will be very linked to personalization and precision.”
- Guive Balooch, Global VP Tech Incubator, L’Oreal

Total funding: $9M Total funding: $19M Total funding: $7.5M

Select investors: Y Combinator, GGV Select investors: Forerunner Select investors: Lerer Hippeau,
Capital Ventures, Sherpa Capital Maveron , Forerunner Ventures
57
Personalization vs. standardization: reducing
the burden of choice
Along with the rise of personalized products, we see a parallel trend in startups offering limited
selections of one-size-fits-all products. Both strategies solve for the same pain point: too many choices.

58
Personalization platforms collect new data
streams for brands
By asking… … and observing.

59
Can science support DNA-based diets?
“People search for things, they don’t pick the brand. When people talk about brand marketing, I’m
just thinking, ‘What’s that?’”
- Kozo Takaoka, head of Nestle Japan

In 2016, Campbell’s invested in DNA-based meal Last week, Nestle began piloting a DNA-based
plan startup Habit, but it has failed to gain much nutrition service in Japan, offering users
traction so far. personally formulated beverage capsules.
60
Looking
forward:
personalized
distribution
61
THE FUTURE OF COMMERCE?

Consumer leaders consider IoT-based

personalized subscriptions: from Walmart…

Walmart recently patented methods of using connected appliances — including a smart trash can — to
track shoppers’ consumption in the home and automatically reorder depleted products.
62
SENSOR-FILLED HOMES

…to Procter & Gamble…

63
SMARTER COCKTAILS

…to Pernod Ricard

“Connected [glassware] isn’t a gimmick…the bottles gibe us insights into how people drink our
brands at home.”
- Pierre-Yves Calloc’h, Global Digital Acceleration Director, Pernod Ricard

Source: Digiday 64
Will self-driving cars host the kitchens of the future?

65
Using IoT to
set up in-
home stores
Walmart recently applied
for a patent for an
“unattended retail
storefront” that would
showcase unsold
products in consumers’
homes, and charge them
upon use.
The kiosks could be
restocked by drone.

66
Questions?
Twitter: @zoe_leavitt
zleavitt@cbinsights.com

67
WHERE IS ALL THIS DATA FROM?

The CB Insights platform has the

underlying data included in this report

CLICK HERE TO SIGN UP FOR FREE

68
cbinsights.com
@cbinsights

Zoe Leavitt

@zoe_leavitt
zleavitt@cbinsights.com

69