Issue #92: What Happened To Large CPG Companies?

What were you doing in April 2016? I don’t really remember much about that time. I think I was getting ready for the ACT and SAT, as well as playing tennis frequently. If you haven’t seen it trending yet, 2016 is making a comeback, when earlier this year, people were styling themselves and throwing 2016-themed parties. A very random trend in my opinion, but this is a retail newsletter, not a culture newsletter! Recently, I was chatting with someone about the struggles of large CPG companies, and hence, the genesis of this issue was born, diving into how CPG and retailers have shifted over the past ten years. Hint: power is shifting to the retailers.

In order to analyze this hypothesis, I went ahead and compiled the Top 10 stocks by market cap, for both retail and CPG, in 2016. Who knew it would be so hard to find market cap rankings for a certain time period (the rankings for 2016 may be a little off, but the actual market cap is correct). Then, I repeated the same exercise for 2026, comparing the differences as well. Here are the summarized findings - pretty wild to look at (full data here):

The top retailers have almost 5x’d growth of the top CPGs. You may be thinking, a lot of that is Amazon, which is signifigantly propelled by its non-retail business, like AWS. That is partially true, but look at Walmart (+376%) and Costco (+575%). Not to forget TJX Companies (Marshalls, TJ Maxx), which was not even on the top ten list ten years ago, and now look at it! Oftentimes, people say startups are the leading indicators, but in this case, maybe that was flipped. In 2016, despite the cries that retail is dead, retailers were starting to recover, and CPG was not. Finally, another theme throughout the retailer list is delivering value and a clear value proposition. All these retailers do that, which customers resonate with, and it is paying off for those retailers.

On the flip side, let’s look at the CPG companies. What is going wrong with them? Part of it, which I will touch on later in this issue, is that private label is growing in penetration. Both Costco and Walmart are notorious for having very strong private-label brands, and in the past ten years, customers have shown increased interest in store brands. Both those companies sell more significantly private label than they did ten years ago. Additionally, many of these CPG conglomerates spread themselves too thin across unsynergistic business lines. Take Unilever, which fell three spots in the rankings. I would argue that they are in a stronger position compared to 2016 by divesting ice cream and seasonings/condiments to focus on personal care. Unlike retailers, whose main value proposition is giving all types of consumer goods, it is much harder for CPG brands to sell a frozen good and an ambient good, unlike a retailer that is built for that.

Going forward, I expect this trend to continue. CPG will continue to fragment, and the top retailers will continue to consolidate power. I do not believe the total pie will grow or shrink for each business type, or if it does, it will be a very similar pattern. Instead, we will see different mechanics because that is what is best for each type of business.

My apartment in NYC is not too far from one of Bleeker Trading’s retail stores, which sells everything a person interested in collectibles would want to purchase. Each day, there are generally two shifts of people who go to it. Right after school gets out, the place is packed with kids. Then later, once people stop working, it is packed with adults. Collectibles are exploding, and it’s not just kids driving the interest. According to Google Trends, searches for Pokémon are up 75%, and Baseball Cards are up 30% (searches for baseball are actually down 1%), to name a few. It is not just kids driving this interest, too. According to one market research report, adults make up 67% of total market participation and 75% of online transactions. However, Bleeker Trading is not the only one in this market. Toys' R ' Us Asia, which is owned and operated by Fung Retailing, just revampled their entire strategy. It is opening stores that are much smaller, around 1,600 square feet, and focused not just on kids, but young adults / Gen Z as well. A big part of these stores is collectibles, which people have a strong affinity for from their childhood that they carry into adulthood. I love this strategy, and it will be interesting to see if the separate Toys ‘R’ Us United States business, or other retailers, follow this model.

In Issue #89, I dove deep into how Michael’s has turned it around despite tough headwinds. Hint: it relies on getting back to basics, focusing on assortment and pricing. On the assortment side, a big development has been expanding into the party business, like balloons, since Party City closed just over a year ago. It has clearly been very good for business.

Fast forward to this week, roughly a year and a half since Party City announced its intended closure, Staples and Party City formally launched their partnership (despite starting to test in August). In select, undetermined amounts of Staples, there is now a store within a store that is Party City branded and carries that party assortment. The plan is to eventually launch in 700 of the 900 Staples locations, but there does not seem to be much in the way of a timeline for that.

From a retail POV, I love the move. I think it makes a ton of sense for both parties. However, speed is of the essence, and Michael’s is already out to an early lead. If Staples does not launch this fast, it is going to be hard to catch up to Michael’s.

Almost two years ago, Walmart launched Bettergoods, a private label brand focused on food that was affordable, restaurant-style, bolder flavors, and better for you. This was the largest private label launch for Walmart in twenty years at the time. In addition to a new genre of private label, the branding was very refreshed, very yassified (for a quick refresher on Yassification, check out Issue #45). Clearly, that branding worked well for them, because they just announced rebranding the entire Great Value line. The new branding is more modern, clean, and yassified. In addition, the new branding makes value propositions, like nutrition and benefits, way clearer to the customer. This trend of making key value propositions clearer to the customer is pervasive across CPG.

One interesting note, in the article, Walmart claims Great Value is “the largest food and consumables consumer packaged goods (CPG) brand in the U.S.“ Maybe there is a caveat there I am missing, but I thought that went to Costco’s Kirkland brand. What do you think?

They say everyone is an AI company now. I did not realize every company took this so literally. For a while now, athleisure/wool clothing brand Allbirds has been struggling. In Issue #85, I talked at length about their current issues. Unfortunately, the issues have caught up with them, and they have gone out of business. The path forward, however, is very random. They sold off the clothing business to American Exchange Group (makes sense) and are transforming the core business to an AI business that focuses on AI compute infrastructure (????). The new company has raised $50M in some sort of capital, unclear what type and terms. What AI expertise does a shoe company have? Who knows, but I will definitely be following along closely.

However, for those worried about what this means for retail or eCommerce, fear not, both are in great places.

Let’s start with retail. Many emerging retailers are in a strong place. In 2024, shopping center vacancy was 5.4%, which is the lowest in 20 years, and Gen Z frequents malls at strong rates. With Allbirds, the core problem was that it never got the value proposition to consumers right, and compounded that by investing a ton of money in marketing, which didn’t hold up long-term. When that money dried up, Allbirds had no scalable and profitable way to acquire customers, which led to excessive discounts, which led to lower margins, which led to less working capital, and then the cycle repeated again.

In a similar vein, eCommerce is in a healthy place, when paired with the right retail elements. According to some estimates, two-thirds of eCommerce orders touch the stores, whether that is to return, exchange, or resell. In many ways, you need both to be bullet #3, which Allbirds was trying to do. So what is working in eCommerce? I would bucket in three areas:

Regardless of where you sell a consumer a good or service, in today’s world, typically nailing the value proposition is the most important part, not how you get it to them.

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