Morning O’s, Revisited
In early 2021, amidst a ZIRP-induced consumer frenzy, we wrote here about IRI’s Growth Leaders report and the bifurcation they’d spotted in the market.
That report noted that while CPG growth accelerated to 10% YoY in 2020, it got there along two distinct paths: “Large CPG innovation and hyper-targeted small CPGs” are increasing premiums at the top-end of the market, while more value brands and private labels are capturing more of the rest of the market.
Since that time, IRI has reported CPG has reverted to pre-pandemic norms (though it’s yet to report its 2023 report).
Against that backdrop, it’s worth considering 2PM’s recent essay on America’s wealth bifurcation, which quoted a USA Today article stating America’s top 1% make more than the entire middle class combined.
Though the bifurcation is different than we discussed before, the takeaway is the same.
On its face, this appears to be a win for DTC brands as more develop retail strategies. But in a highly competitive market (like breakfast cereal, for example) there’s also a dangerous dynamic at play: If the market is truly bifurcating, brands following the traditional DTC playbook risk getting stuck in the middle.
A slightly-better-for-you version of something at not-quite-a-premium price is how the traditional DTC brand could be described. You could also describe this as attempting to blur the lines between value and high end. And based on the IRI insight, it sounds like that approach may end up being an uphill battle.
Whether it’s the consumer or the market, staying out of the middle seems important. Because, in both places, it’s shrinking.