What is driving the success of challenger brands?

By Katy Askew

- Last updated on GMT

What is driving the success of challenger brands?

Related tags Brand

The disruptive influence of challenger brands continues to shake up the food sector, not least because agile companies have proven skilled at responding to – and sitting at the forefront of – emerging consumer demands. FoodNavigator looks at how and why challenger brands have proven so adept at stealing share from their larger and better-funded rivals.

Eatbigfish founder Alan Morgan first coined the term “challenger brand”​ in 1999. Since then, the influence that challenger brands have on the food sector has grown. Category disruptors have fundamentally altered the relationship between consumers and brands, putting large CPGs on notice. But what is it about challenger brands that makes them so effective?

If you can’t beat ‘em join 'em

Many large corporations have established venture capital arms to invest in promising food start-ups, including the likes of Nestlé, Unilever and Danone. Executives claim that these investments act as learning platform and an extension to their own R&D initiatives.

As Laurent Marcel, general manager of Danone Manifesto Ventures, told FoodNavigator: “[DMV’s] goal is to invest early in high-growth potential start-ups in the F&B space, providing interactions between Danone’s teams… and younger disruptive businesses that will inspire Danone’s employees to accelerate the generation of new ideas and practices.”

Challenger mindset

According to Morgan, being a challenger brand isn’t about a company's size or impact on the market. It is about an attitude.

“More than ever, being a challenger is not about a state of market… it is a mindset. Being a challenger is partly about having business ambitions that are bigger than your resources and being willing to do something bold to fill that gap,”​ he said last week at UK food founders’ festival Bread & Jam.

It isn’t the ‘who’, it’s the ‘what’

Being a challenger does not reflect your position in the marketplace, nor is it indicative of who you are competing against. Successful challenger brands do not define themselves by which companies they are taking market share from but, rather, what concepts they are challenging, Morgan suggested.

“Being a challenger today isn’t about challenging who – it is about challenging what. Challengers take on something on behalf of the consumer that they feel should be different.”

There are typically four areas challengers target for change, according to the branding expert. “A fundamental aspect of the category, how the consumer experiences or buys our product, the culture surrounding the category, or some broader aspect of cultural commentary.”

Lead with values

Planet Organic now operates 7 stores with a turnover of more than £30m ©iStock

Renée Elliott, who founded the UK’s first organic supermarket, Planet Organic, in 1995 believes that the mission is key for challenger success.

Commenting on her own experience more than 20 years ago, Elliott recalled: “We dared to do what didn’t seem possible. We led with values… We wanted to change food retailing in the UK. I set the highest product standards in the market.”

Noting that this was a “very long time ago”​ and attitudes have shifted significantly, Elliott said Planet Organic was the first UK retailer to sell only sustainable fish and non-GMO cornstarch, its products were also free from hydrogenated fats and artificial colours. “I knew there was a better way to do business. But it wasn't just about values in the product, it was about the values in Planet Organic.”

Today, Elliott said brands that deliver on values match the mood of modern consumers. “What will set you apart? It is your values and your mission… There is an idea, a passion, a product, a desire to change how something is done…. There is this millennial movement. We are in a time that is about the why and the who.”

Pick your opportunity

While a challenger brand may target a social outcome, it is also important to select the right opportunity, Pip & Nut founder Pippa Murray suggested.

Sharing her experience of launching a successful challenger brand, Murray chalked the success of her business up to spotting a good niche in the market. Rather than founding a new category, Murray realised there was an opportunity on shelf to deliver a different kind of nut butter.

“Peanut butter was in growth, on trend and scalable from a production point of view,”​ she said. “From a trends point of view, there were lifestyle brands in the US bringing almond butters, nut butters, to market. But there was nothing similar in the UK.”

Demand for healthier, more authentic food is often cited as an important trend supporting the growth of smaller brands in the space. And, certainly, this is something Murray sees playing out now and in the future. “The health trend, the protein trend, as people get more educated on the benefits of proteins and fats I don’t see it going backwards. The health space is such a great one to play in.”

Marketing that leverages your differences

Social media means that challenger brands are able to connect with their consumers in personal and engaging ways that don’t require a massive marketing budget. This has broken down the walls between ‘big brands’ who can afford large marketing expenditures and start-up companies, giving smaller brands a voice.

“You can punch above your weight with a marketing budget of zero,”​ Morgan suggested.

This can be achieved by marketing that is both dramatic and fun. “Give people something to talk about,”​ he advised. “There is a thirst for drama as a social currency and this is an opportunity for challenger brands.

“It is not about having a social media strategy it is about being interesting on the inside.”

Innocent Drinks head of brand Dan Germain has worked at the company since 1999

In the year to end-December, Cocoa Cola-owned Innocent saw its sales surpass £300m. The company now generates more than half its sales outside the UK and the business is the fastest-growing soft drinks brand in Europe. 

Founded in 1999, smoothie brand Innocent was a groundbreaker in delivering a voice that connected with its consumers. The company started out before channels like Twitter and Facebook reinvested brand communications and it communicated to consumers on a tight budget largely through messages printed on-pack.

Dan Germain, head of brand at Innocent, recalls that this was largely done without a specific marketing strategy. The company’s “voice”​ was simply a reflection of the small team working there, he recalled.

“The things you think we did, we didn’t do… I like hippies… I love space… Kids TV has totally influenced the way I think and act… Then growing a bit older, reading the music press. Raving. That spirit lived on without the accelerants.”

The risks of raising money

For businesses where values are central and the “challenger mindset”​ is a path to success, Elliott warns that people should be careful when they attract interest from investors.

“Don’t raise money if you don’t have to. It changes the game and raises the stakes… If the values are gone then we lose our point of difference. Only take investment from people who believe in what you are doing because that will be extremely important going forward.”

While Innocent was acquired by Coke in 2013, the business has continued to be run independently from its headquarters at Fruit Towers in London. Germain believes that maintaining its independent identity is crucial for the smoothie-to-juice maker. “If you lose all those other things – spirit, tone, purpose – you are just a bunch of people crushing fruit.”

Big money can be good

This said, investment from large corporates can also be a force for good if it means advancing your mission, Elliott conceded.

For example, when the Nestlé-owned Libby’s brand entered the organic sector, Elliott said Planet Organic was happy to stock its products. “If it gets more organic food out and available to more people that is a good thing to me,”​ she told her audience in London.

Likewise, Elliott believes Amazon’s acquisition of US organic retailer Whole Foods is a positive for the organic sector. “When I started Planet my goal was to promote the organic community and grow the organic market… I knew there would be competition but it was never about that. It was about growing the market, supporting organic agriculture.”

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