Collaboration is a Catalyst in CPG
What’s driving the surge in collaborations across the food and beverage industry?
From the 1980s to the 2010s the CPG industry was riding high on an established recipe to drive growth. This changed when, along with major consolidations, consumer attention became more elusive (thanks to social media). When the pandemic hit and inflation drastically changed consumer spending, brands were forced to pivot, creating new recipes for success¹. Collaboration is a recipe CPG brands are utilizing to foster excitement and drive growth. Collaborations are launched as limited time offerings (LTOs) to create perceived scarcity which has a significant impact on purchasing behaviour². Perceived scarcity is also incredibly effective in highly competitive environments³, making LTOs a potent and replicable recipe. Given that limited edition food product launches have grown 14.8% annually in the last five years it’s no surprise that they outperform the rest of the market⁴.
I’ve identified three major ways brands are harnessing the power of partnerships to drive success in a post-pandemic world. I’ll discuss the benefits of each type and share examples of recent launches. I’ll also explain how I expect to see collaboration strategies take shape in the near future.
Here’s my cookbook of collaboration; Champions, Complimentary, and Category Crossover.
Champions: The Power of Celebrity Endorsement
In this category, brands benefit from the clout of celebrity endorsement to propel LTOs to success. Champions leverage a wide audience to drive engagement. The right endorsement can make even the most accessible products feel aspirational. These collaborations strengthen a brand’s emotional connection, driving a lift in sales. Celebrities lend credibility to a brand, while seasoned brands provide product development, supply chain efficiencies, and established routes to market that their Champions lack.
Paris Hilton & Nicole Richie x SONIC
Why this works: A great example of making an accessible product aspirational through endorsement.
Kid Cudi x Bisquick
Why this works: Kid Cudi grew up in the midwest and is a funnel cake aficionado. This partnership sparks an emotional connection to a commodity through nostalgia.
Ice Spice x Dunkin Donuts
Why this works: The social media virality of Ice Spice is a great way for Dunkin to grow connections with younger demographics hooked on these platforms. (Also, double endorsement with Ben Afleck!)
It should come as no surprise that I expect more collaborations with influencers, rather than traditional celebrities, in the near future. While brands are spending more than half their budgets on digital media⁵, engagement with brand content in TikTok dropped by half ⁶, signaling a need for a shift in strategy. Brands will have to switch focus to partnering with content creators, rather than developing branded content, to drive connection with younger demographics. 40% of Millennials and 44% of Gen Z would switch brands based on the recommendations of an influencer ⁷, making influencer partnerships the next go-to recipe to drive growth. As social media evolves, micro-influencers are emerging as leaders in the space because of their highly engaged niche audiences. In a market where authenticity drives purchasing decisions, micro-champions will help brands resonate with younger audiences, like Millennials and Gen Z, who value relatability and trust endorsements.
While Champions attract attention and build emotional connections, Complementary collaborations focus on strategic alignment to deliver new consumption experiences for customers.
Complementary: The Synergy of Compatibility
This category involves partnering with a compatible product within the food and beverage industry. This strategy offers brands a unique opportunity to create novel, memorable experiences for consumers. Brands can tap into a new audience to encourage trial, affinity, and maybe (if you’re doing it right) even brand loyalty.
If you select a partner who’s core market is too closely related to your own, you may lose out on growing your audience. On the other hand, if your selection isn’t harmonious with your brand’s mission and values, you risk alienating your primary purchasers. A delicate balance indeed.
Cinnabon x Warheads
Why this works: Although the two brands operate in the confectionary space, this pairing sparks curiosity about how the two can strike a balance between sugary and tart.
Hidden Valley Ranch x Van Leeuwen
Why this works: What’s a better way to incite customer trial than with fascinated disgust? Launching this LTO in Walmart, making it accessible to the masses.
Coca Cola x Oreo
Why this works: Two heavyweights in CPG combine to launch two products in their respective categories, doubling the fun for consumers.
The food and beverage industry saw a bump in mergers and acquisitions (M&A) in the beginning of 2024 ⁸. Even more recently, Mars announced one of the largest acquisitions in industry history, purchasing Kellanova (formerly Kellogg’s - the more you know!) for nearly $36B⁹. Brands will continue to seek the economies of scale, operational efficiencies, and portfolio diversification that come with M&A. This trend will likely streamline LTO creation by removing operational red tape associated with launches. This strategy expands reach by leveraging existing customers bases while increasing share of basket through co-created products. In a heavily saturated market, complementary collaborations address a critical business objective: building value through exciting, novel consumables.
While Complimentary collaborations focus on aligning synergies to develop original offerings, Category Crossovers take creativity one step further by breaking industry boundaries.
Category Crossover: Unconventional Alliances
Category Crossover refers to partnering with companies outside of the food and beverage industry entirely. This is my personal favourite way to see collaboration because, when done successfully, it delivers unmatched creativity and innovative products: and not just in CPG.
This type of partnership is difficult to perfect but good pairings feel like a no-brainer. Both brands need to have a clear vision of their target customers’ lifestyle to ensure their pairing with the perfect partner. This strategy in collaboration elevates CPG brands beyond consumables, positioning them as cultural touchpoints.
Mike’s Hot Honey x Ewing Athletics
Why this works: Mike’s Hot Honey’s humble beginnings in a Brooklyn pizzeria mirrors Ewing’s growth to NYC streetwear essential - the brand history alignment makes this an unexpectedly delightful pairing.
Balenciaga x Erewhon
Why this works: Creating a strange and subversive yet sophisticated experience with a black-coloured pressed juice launch, as well as a capsule collection.
Pringles x Crocs
Why this works: Innovating in both industries by creating a unique watermelon chili lime flavour Pringle and a quirky Crocs boot with custom Pringle can holder.
As the buying power of younger generations increases, I expect to see more of these collaborations executed in a way to position a brand’s values and communicate consumption experience. Gen Z and Millennials increasingly favour brands that reflect their environmental and social values. These generations are also investing in food and beverages that provide novel sensory experiences and enhance mood ¹⁰. As younger generations continue to prioritize experiential and value-driven purchases, category crossover will likely become the cornerstone of brand lifestyle differentiation.
What’s your favourite type of collaboration? Champions bringing celebrity influence and fan engagement, Complimentary synergies between like-minded brands, or Category Crossovers that extend a brand into new lifestyle territories.
As the CPG industry and consumer habits continue to evolve, brands will need to come up with new formulas to capture attention, incite trial, and create advocates.
Which collaboration strategies do you see as most impactful for driving growth?
Sources:
1: McKinsey and Company. June 11 2024. Rescuing the Decade: A Dual Agenda for the Consumer Goods Industry. https://www.mckinsey.com/industries/consumer-packaged-goods/our-insights/rescuing-the-decade-a-dual-agenda-for-the-consumer-goods-industry
2: Cialdini, Robert. Influence: The Psychology of Persuasion. Revised edition, Harper Business, 2001.
3: Mehta, R. & Zhu, M. October 1 2015. Creating When You Have Less: The Impact of Resource Scarcity on Product Use Creativity. https://academic.oup.com/jcr/article-abstract/42/5/767/1855952?redirectedFrom=fulltext
4: InnovaMarketInsights. April 2 2024. New Product Development in Food: Global Limited-Edition Products. https://www.innovamarketinsights.com/trends/new-product-development-in-food-global-limited-edition-product/
5: Deloitte. August 15 2023. Overall Marketing Budget Growth Slows, Digital Spending Increases. https://deloitte.wsj.com/cfo/overall-marketing-budget-growth-slows-digital-spending-increases-736fee69
6: RivalIQ. February 28 2024. 2024 Social Media Industry Benchmark Report. https://www.rivaliq.com/blog/social-media-industry-benchmark-report/
7: NielsenIQ. July 29 2024. How Gen Z Consumer Behaviour is Reshaping Retail. https://nielseniq.com/global/en/insights/analysis/2024/how-gen-z-consumer-behavior-is-reshaping-retail/
8: MNP Corporate Finance Inc. n.d. Food and Beverage Quarterly Update Q1 2024. https://www.mnp.ca/-/media/files/mnp/pdf/service/corporate-finance/middle-market-m-and-a-update/2024/food-beverage-quarterly-update--q1-2024.pdf
9: Kellanova. August 14 2024. Mars to Acquire Kellanova. https://investor.kellanova.com/news-events/news-details/2024/Mars-to-Acquire-Kellanova-de7e19f9d/default.aspx
10: InnovaMarketInsights. September 30 2024. Gen X, Gen Z, Millennials, and Boomers Trends in the Us and Canada. https://www.innovamarketinsights.com/trends/gen-z-gen-x-millennials-and-boomers-trends/
