Share is dead...long live Share.

Long has “share” been the defining characteristic of CPG success - if a company can gain share, especially with a major brand, it shows the company can win in the market by ultimately knowing what the shoppers/consumers want. Share is a battle cry, yelled from the rooftops for all to hear, so competitors and investors know just how well the brand is performing. As we continue to comp pandemic behaviors, we should all recognize this metric is, and has always been, bulls*** (see last week's beer supplier earnings calls that touted Q2 growth over 2020's debacle, or massive sub-category growth with half of the brands having $0 comps).

Last summer I sent an internal white paper regarding the pandemic's impact on our category's purchase behavior. In it, I talked about a hypothetical vacation town. You see, vacation towns experience an interesting dynamic. During the busy season, there’s an influx of shopping behavior that’s drastically different than that of the locals - I highly doubt the beach towns along Lake Michigan sell as much Avocado Toast in the winter as they do when the Chicago crowd heads north in the Summer.?

My point was that early quarantine created a situation that was the equivalent of summer travel crowds in late January for a Michigan beach town.?Most categories learned what it was like to see just how big "occasional" shoppers were to their business. The idea that "all shoppers came back to their trusted brands" was more "this is the brand I go to when I randomly feel like the category".?This insight has long been buried in average purchase frequency metrics, but more on that later.

The result of this behavior led to a mosaic of feelings from brands. Many big name food & beverage brands were saying, "They love me…they really love me!" Who knew all those shoppers would come running once a stay at home order was in place? The truth..."Occasion Compression" created a scenario that pulled up purchase behaviors to the same 3-4 week time period. The occasional shoppers, once masked by the guise of weekly behavior, showed their hand in droves. They all went to the lake in the offseason.

Share is dead.

In many monarchies, the proclamation "The King is dead, long live the King (or Queen)" has been used to define the transfer of power resulting in the passing of one leader and the appointment of the next. It seems most fitting to this discussion as the measurement of a business based on share is not much different than the iron fist some monarchies controlled with. For no reason other than "this is the way it is done" many monarchies destroyed their empire in pursuit of maintaining the perception their was no one bigger or better. This is happening with big brands today: by measuring performance with YOY, point of sale, share change; companies are negatively impacting their brands' future by focusing on the past while new brands convert their shoppers in the present.

At face value, share does measure brand performance, relative to its category or competitors, in a given time period v. the prior year. Realistically, however, there are too many variable changes in a time period to actually access the true cause of a change. Not to mention, share is currently being measured by an archaic, flawed set of point of sale data sets that are part representative, part projection model, and part "this isn't completely accurate but trust us". Some of the industry leading CPG's relying on these measurements have been like frogs in a pot of water on the stove. The temp keeps rising...the earnings call boiling point will come for all of them by the end of 2022.

With that, regardless of how you or your organization measures share (of dollars/volume/units), here are two of the biggest problems with the approach:

Market Dynamics: When you pump money into, and set commercial targets against, any size brand, its performance will do better than if that focus wasn't there. However, brand performance alone is a single variable in a measured time period. It doesn't recognize category growth, competitive focus/spend, competitive innovation (big or small), potential disruptions in route to market, and so-on and so-on. It also doesn't recognize what trade publications and stock analysts have been saying to industry leaders, guiding their talk tracks and subsequently nudging categories, via retail performance targets, to the trends (see everything about Boston Beer's hard seltzer earnings debacle - specifically Goldman's response).

All of these, and I haven't even mentioned the shopper/consumer, are dynamics that can absolutely destroy great brand execution and performance by subjecting it to major share declines. Further, since these dynamics are so challenging to predict, there isn't always a good estimate for "where would we be if we don't spend against the brand".

Cycles: Let's say I sell two types of widgets: red and blue. A consultant informed me blue is more profitable, but has a lower market penetration, so I should focus on that. They also said products priced like the blue widgets are growing at a much faster rate, but they're only 35% of the total market. Right now, my mix is 80/20 red to blue...we set our KPI to gain share of blue widgets! Fast forward to the end of the year, blue widgets are up a full share point! We increased blended margin, but our stock gets crushed because our focus on blue took away investment on red (down 25bps) and we netted flat share change. See, YOY share is just as much a product of a companies evolving focus as it is a brand's performance. Companies re-prioritize annually for a variety of reasons, and by doing so they move their own goalposts. When you take this, plus factors 1 & 2 into consideration, how is this an accurate representation of performance? All of this and I didn't even mention time period comps!

It’s easy to make an argument why none of these shortcomings matter because performance is performance. My counter is that if you can manipulate share year over year, is that really a performance metric? Imagine I have $50 million to spend against my portfolio.? In year 1, I focus 70% of that spend on half of my key retailer or brand base that over indexes in part of my portfolio, and then follow that with the inverse a year later - and I only spend on retailer/channels tracked by my POS data supplier.? Sure, I might get destroyed on share for a brand every other year, but there’s a good chance if I’m targeting brand/account correctly that I’ll offset for net portfolio gains.? And remember…I’m not really competing against other brands, I’m competing against my performance last year (cycle)….that means after year one I’m comping sh** numbers. Should multi-billion dollar businesses really be measured by metrics that can hypothetically be manufactured?

I’m not a brand builder, but I know that’s not how you build, or maintain, a brand. Sure, market trends might make it challenging for some big brands to stay positive, but those brands have been through so many ups and downs already...they've proven they have the power with the right position. Additionally, isn't that the point of a portfolio? To adapt as a major brand transitions out of trend to ubiquity?

This is why the constant miss with your current share metrics is a measurement of people and their behaviors. Today, purchases represent the performance metrics companies base their decisions on, but people perform those purchases. And just like all of you reading this, people are different...but also predictable.

Long live share.

To change, companies must shift to a more blended form of share tracking. This new normal will be one that won’t rely on them to fix the wrongs of those that went before them, but will require them to focus on value that they may not always be able to immediately realize. That value, once established, will change the way everyone from a merchandiser to the C-Suite thinks about the business.? Most importantly, it will change the shopper/consumer experience for their brands and the retailers that support them.?

What measures success of a brand is not how much shoppers buy in a time frame, it’s what shoppers are buying. Not "what" as in a demo target, but an organizationally defined value, derived from panel assessments that showcase LTR (long-term risk) and STG (short-term gain) cohorts.? As an easy example, something like above-average trip frequency shoppers and “occasionals” (i.e. all other) would do the trick. However, there may be another overarching breakout more relevant to your business, such as channel focused, price tier, etc.

It’s the share of interactions between these types of shopper bases, on an extended period rolling time frame, that can determine what’s truly happening with a brand. LTR’s are expensive to keep or convert (trade dollars, etc), but their long term value is usually a factor beyond 2.5x the STG’s. This latter cohort is why marketing gurus and agency leads talk about “always on spend”. You don’t know when 70%+ of the shopper base (not uncommon for STG’s) will engage in the category and you want them to remember your brand.?

Regardless, this is not about performance - it’s about behaviors. This measure of behavior share (i.e. brand or category interaction) is a long-term target, with limited impact from the nuances of activation but with the value of generating a high ROI from assessing that activation's impact. Want to know if a CPG will be able to keep up over the next 5 years? It’s the behaviors of these cohorts that will define it, not the growth of the most recent trend - no matter how influential it may be.

Until recently, dollar/volume share performance was the only acceptable solution because it was the only, and therefore most trusted, data set. More robust behavior data now tells us we’ve been served a watered down mocktail. I don’t have all the answers today, and I’m sure many will think it’s nuts, but let me give you three more reasons traditional POS share has found its heir to the throne:

Channel Shifted Brand Building: Every category is being disrupted by eCommerce retail, but market disruption isn’t new. Walmart did it to Grocery, Costco and Sam's have done it, Trader Joe’s and Aldi have done it….every category has been through craziness. What’s different now is that small brands?have a much easier path via a DTC model (and deep pocket investors!). This is a momentum builder that wasn’t around in the past. I recently commented on a post from the?Dude Wipes CEO. In it, I equated startup growth as removing the door/barrier to entry that big CPG deals with in new item sell-ins. If a company like Dude Wipes takes a long-run DTC growth product to Walmart, it’s a lot harder for them to say no vs closing the door after seeing a presentation from a major CPG rep talking about the "category opportunity".

The risk of retail placement in this scenario isn't the problem for CPG, it's the reactive refocus of efforts in the next year to try and beat the disruptive channel/brands on their own turf (i.e. over-invest in eComm). So I propose a thought on a situation like this: what happens if your LTR’s are laggards to eComm, and the shifted funds now generate a 0.5x LTR and 2.0x STG ROI values?? Congrats on your eComm growth…good luck on explaining your losses (half an LTR is likely worth a 1+ multiple of the STG). Segmented behaviors can/do predict this impact, and they profile an opportunity to capitalize in both channels.

Evolving Expectation of Data: I’ve been in one too many meetings where we were talking about the quality of the data (as both a data supplier and in CPG - which in Alcohol, this problem is worse than any other category given state laws). This is exactly why small brands can eat big brands lunch…they’re not concerned with “perfect data", nor should they (or anyone) be. Aggregate POS is hardly represented of true market behaviors - it's best representation is retailer specific...full stop. Within aggregate POS, regionality, shopper priorities within those markets, product exposure via distribution; all of these elements are hidden in the results and make things look a lot better (or worse) than what they might actually be.

Measuring behaviors would move the right products and trends to the right locations at the right place. I mentioned earlier lack of POS share would be better for shoppers and consumers. The reason I said this is because every shopper should be able to get what they need at the shelf, and they should not have to deal with an out of stock because a “super premium” offering gets more space than it deserves because of the "trends". When you look at shoppers' behaviors, you understand how important it is to respect shoppers and let trends organically transition throughout the marketplace.

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But, Mitch, this is "interesting", but you can only measure this in panel so what about sample sizes?? This is easy: if you can’t get sample for a brand family in panel, you should be focusing on growing its distribution and maintaining strong same store sales. Why are you even talking about share of anything unless the brand is part of a portfolio?

Anyway, why this why now? Mostly because the volatility in the marketplace, primarily due to COVID, tells me we need a change. The past week of earnings alone should tell us YOY performance is simply a pawn in the bigger game, and investors should expect plans that generate ROI beyond 52wks. Instead today's short term expectation lead to drastic change; the bigger the company, the broader the change and the more challenging to course correct when it misses.

Unfortunately, it’s often the fact that 80% of the headlines driving short term change are maybe 10% of the market value. Why would companies follow the talk? Ultimately because there's not enough good data in POS to accurately predict behaviors, and while they're really smart at building models, outside consultants/analysts won't give you a good projection if they don't know enough about the behaviors influencing many of those results.

At a minimum, long-term shopper cohort behaviors need to be a part of the performance equation. They are the one element, from innovation to post promotion analysis, that can define a brand's performance. How many other metrics can you say have that potential? And if you've made it this far, I'd bet you have some sense of agreement that traditional share has already done its damage to the industry - what’s a new perspective going to hurt?

I've been working on this for a few years, no matter your category, feel free to reach out to discuss.