3 CPG Companies Embracing DTC and Customer Data
Covid-19 forced some businesses to close their doors, but it also acted as a catalyst of creativity for others. With so many people staying home, consumer packaged goods (CPG) companies—who typically rely on grocery stores, mass merchants, and even theater concessions for distribution—have had to figure out new ways to move their product.
What is a CPG company?
In spite of significant hurdles for CPG companies to go direct to consumers—such as limitations with their supply chain and distribution models as well as friction with wholesale and retail partners—interest has been steadily growing. Even before we were knee-deep in a global pandemic, CPG companies recognized the appeal of selling directly to consumers.
In theory, the direct-to-consumer (DTC) channel makes products more affordable for the consumer by cutting out “the middleman,” third-party retail distributors, and wholesalers. Consumers can buy the products directly from the company rather than via brick-and-mortar retailers such as big box stores. Of course, a larger reason to sell direct is for first-party research purposes. CPG companies can move more quickly and agilely, bringing various products to market quickly in order to gather data.
Companies who sell all kinds of products—from razors to mattresses—have gotten into the DTC game. In recent months, with shoppers avoiding supermarkets and drugstores, large brands like PepsiCo, Coca-Cola, and Clorox stepped up their direct-to-consumer sales. Let’s explore how some of these household brands are wading into the DTC waters and see why this might help them brave the new economy.
Coca-Cola: Early to the Game
Coca-Cola broke into DTC in 2011 with its Share a Coke initiative, offering personalized bottles for sale online. Beginning in Australia and eventually expanding globally, today Cokestore.com includes personalized bottles of Coca-Cola, Diet Coke, and Coke Zero Sugar (for $5 apiece), as well as apparel, stuffed animals, and gifts.
Cokestore.com is just one sign that the global beverage giant keeps a close watch on its consumer. In the words of Chief Financial Officer John Murphy, “It’s important to remain consumer-centric, to remain close to the consumer and understand how the consumer is adapting and behaving through the crisis, and what behaviors are short-term versus those that may stick.”
The company has certainly reacted to changing consumer sentiment on sugar and health. With sugar’s swift decline, Coca-Cola has responded by continuing to innovate in its products. In 2018, the company announced that it had reduced sugar in more than 400 of its products, and more than 250 are low- or no-sugar—including popular drinks like Coca-Cola Zero Sugar, Diet Coke, Sprite Zero, Fresca, Powerade Zero, vitaminwater zero, and smartwater.
Coca-Cola has also been paying attention to changing consumer tastes and trends emerging in the Covid-19 era and innovating accordingly. To support the increase in ecommerce, the company has modified its packaging to optimize for online sales while increasing its investment in digital promotions and fulfillment models.
PepsiCo Makes a Splash
In an initiative that is rumored to have taken only 30 days, PepsiCo introduced its DTC websites Snacks.com and PantryShop.com in May 2020. Snacks.com urges visitors to “shop your favorite snacks and beverages from the comfort of your home,” offering more than 100 products from brands such as Lay’s, Tostitos, Cheetos, and Ruffles.
PantryShop.com sells “pantry kits” (like a meal kit you don’t have to cook!) in categories such as “Rise & Shine,” “Snacking,” and “Workout & Recovery.” While it may be a bit of a stretch for many people to consider granola and Tropicana orange juice a meal kit, it certainly represents a clever strategy on the company’s behalf. With its DTC websites, PepsiCo can stay top of mind with its customers while they are sheltering in place and making fewer purchases in grocery stores, restaurants, and entertainment venues like theaters and sports concession stands.
While the DTC sales likely represent a drop in the bucket for a large brand such as PepsiCo, it is clear that the new channels offer excellent opportunities for consumer research. Data collected can highlight consumer preferences and habits, and inform new product development. As consumer expert Jenny Zegler said on the Mintel blog, “If out-of-stocks on Snacks.com as of May 15 are any indication, we could see more Flamin’ Hot flavored snacks in the future.”
Clorox Expands Its Footprint
A 106-year-old company, Clorox is one of the globe’s CPG giants—with a wide variety of household brands such as Liquid-Plumr, Brita, Pine-Sol, and Kingsford. Originally making its name in household cleaning products—such as laundry bleach and disinfecting wipes—Clorox has expanded into nutrition and dietary supplements in recent years.
In 2018, Clorox acquired Nutranext, a wellness company consisting of six consumer-facing brands—including RenewLife, a popular probiotic. In October 2019, the company launched its Objective Wellness brand with a line of dietary supplements, the first truly digitally native, mobile-first brand for the company.
With photos of blackberries, cranberries, turmeric, and pumpkin seeds on its website, Objective Wellness’ best-selling products have names like “Everything Armor,” “Immune + Wellness,” “Fast Asleep,” and “Focus + Clarity.”
The company knew that launching a supplements brand meant a sharpening of its focus on data—as prospective consumers were educated about the health benefits associated with its products. “Our main ethos going into it was that data is going to be foundational,” VP of Growth Vivian Chang said in a panel session organized by the Mobile Marketing Association (MMA). “Building that relationship with consumers is going to be critical to how we go to market … porting data back and forth from our marketing vendors into our internal data warehouse system so that we can ultimately … have this ongoing dialogue and conversation that’s two-way with consumers.”
Chang and the Nutranext team launched the product quickly to gather feedback and test it out with consumers. “Our approach on the direct-to-consumer side is to get something live as fast as possible, be agile to consumer feedback and let data guide that decision of what are the next iterations and tweaks that we need to make,” she said.
Benefits of DTC to CPG
Strategies such as the exploration of the DTC channel represent new ways of thinking for CPG companies, who must deal with wholesalers and retailers and are constantly forced to put up with delays in data. This data latency slows down their ability to react through changes to product assortment, pricing, or discounts. Digitally native brands are simply more nimble, able to change these things on the fly.
The past decade has seen changes in all aspects of how large consumer brands operate. Interactive Advertising Bureau CEO Randall Rothenberg says that DTC brands have to find creative ways to connect with consumers via “continuously replenished first-party data. Ownership of the data gives these brands much more knowledge about consumer needs and desires and greater ability to reach consumers quickly.”
A direct path to the consumer allows companies to use first-party data to respond more quickly to changing tastes and behaviors, enhancing product development as well as sales forecasting. With DTC, companies benefit from learning directly from their consumers—instead of having to go through multiple channels to find out things such as:
- Which segments of consumers are buying this product?
- How do sales vary by geographic location?
- Does buying behavior change with the season?
- What do consumers like?
- What don’t they like?
Customer Data Platform Technology Helps
Consumers generate vast quantities of data daily—email opens, clicks, purchases. By 2025, it’s estimated that 463 exabytes of data will be created each day globally (the equivalent of 212,765,957 DVDs per day). Each piece of data holds clues to understanding consumer intent and behavior.
A customer data platform (CDP) can help DTC companies make sense of all their data, collecting and unifying multiple sources for a single, actionable view of your consumer. It can help you create and manage complex data sets that represent every detail needed to map a consumer’s brand experience and create one source of truth for every consumer profile. These profiles can then be shared with other marketing systems for personalization and predictive analytics.
Treasure Data is an enterprise-grade CDP designed to unify, analyze, and activate data—so you can build consumer experiences and learn from each interaction. CPG companies can start with the consumer data they already have: such as purchase histories, demographic information, as well as mobile app data and device location data from location service partners. They can efficiently harness their data—personalized consumer journey data, advertising/retargeting data, as well as web personalization and recommendation engine data—to gain a deeper understanding of buying behavior, intent, habits, and preferences and to get their consumers to engage and purchase.
As Clorox CMO Stacey Grier told Digiday, “We’re doing some really interesting work on our Kingsford brand right now with Walmart’s media group and trying to actually understand when is the best time to reach them and how do we reach them in more interesting ways. For example, they know when somebody just bought a grill in a Walmart. The ability to actually serve content to people when they’re learning how to grill is amazing.”
Need a DTC Roadmap?
Is your brand exploring a direct-to-consumer model? Register for free to attend the Digital Food & Beverage Virtual Event—Legacy and Online Brands: Strategies for Engaging the Digital Marketplace—on August 18 and 19. Don’t miss Treasure Data’s David McCarty as he discusses “The Hidden Value in the Direct-to-Consumer Model,” scheduled for 12:30 p.m. ET August 18.