What Coca-Cola, L'Oreal Are Doing to Curb Share Loss to the Little Guys

Big Players Find Success in Acquiring and Expanding Smaller Players

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Coca-Cola Co. is one of the few giants tracked by IRI and Boston Consulting Group that gained U.S. share in 2012. It did so in part with contributions from small brands like Fuze, Nos, Zico and Honest Tea. According to IRI, Honest Tea had sales of $76 million, while Zico reported sales of $36 million for the year ended Sept. 8. They're part of the company's Venturing and Emerging Brands group. Part investor, part incubator, the group is charged with identifying and developing the next billion-dollar brand.

Honest Tea
Honest Tea

None of those brands has gotten there yet, and only 3% of the more than 3,000 beverage brands worldwide ever reach the $20 million in sales Coca-Cola refers to as "proof of concept." Still, the group, formed in 2007 several years after acquisitions of small brands Planet Java and Mad River fizzled, does appear to be helping Coca-Cola gain share as big peers mostly aren't.

Similarly, L'Oréal, which also gained share in the U.S. last year, has battled incursions by smaller players in part by acquiring and successfully expanding them -- or by mimicking their approach.

L'Oréal acquired hot nail-polish brand Essie in 2010 and in 2011 rolled it into mass, tapping into one of CPG's fastest-growing categories in time to go from a minor player to a strong third behind Coty and Revlon (which similarly acquired another hot brand in O.P.I.).

L'Oréal tapped into e-commerce by launching Em Cosmetics, to be sold almost entirely via that channel in partnership with video blogger Michelle Phan; it will also use e-commerce to expand recently acquired men's personal-care brand Baxter of California.

Reckitt Benckiser, though it has more than $15 billion sales globally, falls into the $1 billion to $5 billion midsize sales range for U.S. companies, which have been gaining share in U.S. market, if more slowly than smaller peers. With Nielsen-measured sales up 7% for the 52 weeks ended Aug. 31, RB's grew more than triple the pace of its industry.

CMO-North America Laurent Faracci sees RB as a challenger company with challenger brands. One of its burgeoning areas has been disinfectants, where Lysol Power & Free used a combination of paid and earned social media through a joint-planning arrangement via Facebook as a cornerstone of its rollout.

"We favor speed over perfection, making bold choices and trusting the teams," Mr. Faracci said. "When the consumer is changing so fast, that may help us vs. being bigger."

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