• If Labor returns to power we may see a spike in share buy-backs, should you participate? read here

The rise of the microbrand

People in the maze, finding a way out. The man in the maze. The concept of a business strategy, analytics, search for solutions, the search output. Labyrinth of colorful wooden blocks, tetris.

The rise of the microbrand

If you ask grandparents today what brands they consume, you will typically be answered with a litany of major, global brands that have very long histories. Think of Campbell’s soup, Gillette razor blades, Kraft Cheese, Energizer batteries or Kellogg’s corn flakes, to name just a few.

Now ask a millennial about the brands of everyday items they consume and you will hear about Casper mattresses, Kylie Cosmetics, Dollar Shave Club and Blue Bottle Coffee. These are relatively new brands that have successfully been concepted and grown into significant competitors to the gigantic incumbents that were otherwise used to unimpeded, global domination.

The Wall Street Journal recently published a piece titled: Why You’re Buying Products From Companies You’ve Never Heard Of. In the article, author Christopher Mims identifies the new “microbrand trend” that is taking the world by storm. As Mims puts it: “Everywhere you look, and especially on Instagram and Facebook, an explosion of different ‘microbrands’ for gadgets, apparel, cosmetics, furniture and food are now targeting us with uncanny precision.

Mims attributes the ability for new start-up brands to successfully compete and build highly-specific, niche followings to the new marketing technologies offered by the likes of Facebook. As this blog has articulated in the past, Facebook offers marketers the ability to target cohorts of members with advertising based on highly-specific parameters. Indeed, Facebook even offers AI-enabled offerings to marketers that will essentially guess what parameters will be the most successful, leveraging insights from the company’s enormous reservoir of historical data.

This trend further underscores the incredible assets that Facebook owns, including Instagram, WhatsApp and Messenger. It is the largest database of social user information in the world – which is an asset that is near impossible for a competitor to recreate.

At the same time, the power of this technology is enabling new highly-disruptive brands to build meaningful followings at very low costs. Said another way, Facebook’s marketing technology is effectively eroding the barriers to entry enjoyed by the world’s very largest brands for generations. It’s been a good run for the brands of our older generations. Unfortunately, that run could be slowly coming to an end.

INVEST WITH MONTGOMERY

Andrew Macken is the Chief Investment Officer of the Montaka funds and the Montgomery Global funds. He established MGIM in 2015 in partnership with Montgomery.

This post was contributed by a representative of Montgomery Investment Management Pty Limited (AFSL No. 354564). The principal purpose of this post is to provide factual information and not provide financial product advice. Additionally, the information provided is not intended to provide any recommendation or opinion about any financial product. Any commentary and statements of opinion however may contain general advice only that is prepared without taking into account your personal objectives, financial circumstances or needs. Because of this, before acting on any of the information provided, you should always consider its appropriateness in light of your personal objectives, financial circumstances and needs and should consider seeking independent advice from a financial advisor if necessary before making any decisions. This post specifically excludes personal advice.

Why every investor should read Roger’s book VALUE.ABLE

NOW FOR JUST $49.95

find out more

SUBSCRIBERS RECEIVE 20% OFF WHEN THEY SIGN UP


3 Comments

  1. Thanks for the article. What are your thoughts on millennials brand loyalty with these micro brands. How likely are they to jump from one to another and how could this behaviour affect these micro brands. And also how likely are these micro brands to be snatched up by major brands. Thanks.

    • Hi Dilan,
      While many microbrands may not enjoy the widespread and long-term loyalty once enjoyed by the major FMCG (for example) brands, their ability to disrupt, partly thanks to a constant supply of start ups is no less damaging.

  2. Okay

    .001 percent of boutique brands make it over the longer term in the market. They either are bought up by a big brand, become a small operation which is able to sustain itself or become a major brand competing with the majors (even rarer). I am not sure that this is a radical change – Campbells will I envision continue to be a major brand on the supermarket, maybe I can go to the health food shop and buy something else for three times the price that has some extra spice in it?

    I think Buffet is best on hang out in a shop and see what is actually being taken off the shelves.

Post your comments