These are all true, but there’s one other common factor: They were all founded during the Global Financial Crisis (GFC). In the US, it’s often called The Great Recession.
It takes courage to start any company at any time – especially one that will disrupt an entire industry. But sometimes disruption and innovation are easier in a crisis.
When things are going smoothly, customers are happy and don’t want to change, employees are secure in their jobs, leaders are measured by stock price and tiny slivers of additional market share, and innovation is more risky.
But in a crisis, all bets are off. Customers become desperate, employees fear for their livelihoods, leaders must step up to keep their businesses alive, and innovation becomes essential rather than optional.
That’s when an innovative startup business can thrive. It doesn’t have to disrupt the industry itself; the crisis has already done that. It’s dangerous to drive with a cracked windscreen because it doesn’t take much for it to shatter completely. In a crisis, when everything is more brittle, it’s easier for even a small disruptor to make its mark.
We’re seeing more of these disruptive startups than ever in the FMCG sector, and across all parts of the industry. Let’s consider six of the biggest trend areas in the sector:
- Sustainability: driven by consumer demand and government regulation
- Digitisation and AI: accelerated by the pandemic
- Blockchain: separate from the hype of cryptocurrency and NFTs
- Internet of Things (IoT): affordable internet-connected sensors
- Distribution channels: new ways of reaching specific customer groups
- Customer experience: personalisation, customisation, and enhancing the overall experience
We’ll explore a few innovative startups in each of these six areas. These and other nimble companies are trying to gain a foothold, looking for the cracks in our disrupted world and inserting themselves to provide value. Many will fail, some will co-exist peacefully with existing players, and a few might even transform the industry.
The global awareness of the climate crisis has thrust environmental sustainability into the limelight, and it affects the FMCG sector from all sides, including regulation, profitability, and consumer demand.
Many products themselves are becoming more environmentally friendly. Sustainable deodorant brand Fussy not only makes vegan, natural deodorants, but also provides a refillable case to minimise waste. Russian researchers at science and tech university MISIS are converting discarded Covid-19 face masks into batteries. And clothing care startup Frey offers laundry detergent in liquid-free (saving water) and biodegradable sheets.
Many startups are innovating in more sustainable packaging. Flexi-Hex replaces plastic packaging with paper-based biodegradable packaging using its patented honeycomb design for strength. Pushan Panda creates packaging for drink cartons that makes them more recyclable. And UK startup Notpla offers a range of biodegradable packaging made from seaweed and plants.
To serve the increasing consumer demand for sustainability − at all stages of the supply chain, not just in the final product − startup companies like Foodsteps (in the UK) and Dayrize (in the Netherlands) provide online platforms to calculate the carbon footprint of consumer products.
Digitisation and artificial Intelligence
KPMG’s annual Keeping Us Up At Night survey of Australian leaders has consistently identified digitisation as the No. 1 challenge for teams and organisations. Covid has only accelerated this trend, with some companies reporting 5-10 years of change compressed into the last two years.
Early in the pandemic, innovative companies focused on hygiene, social distancing, and safety. Now they are expanding into other areas of digitisation, automation, and AI.
In Singapore’s Nanyang Technological University, a research team has created an AI-powered ‘e-nose’ to rate the freshness of fish and meat.
For optimising shipping supply chains in turbulent APAC waters, logistics startup Portcast not only tracks global shipping movements, but uses AI to combine that with weather data to predict delays and assist downstream planning.
Indian-based Locus improves efficiency and transparency across supply chains by using machine learning AI to aid decision-making with real-time tracking, route optimisation, and analytics.
Although blockchain could be considered part of digitisation, it has gained enough traction now to be treated as a trend in its own right. Unfortunately, the blockchain concept is too often tainted with the highly speculative areas of cryptocurrency and NFTs, but it has other benefits in the FMCG sector.
German company TE-FOOD and US-based Greenfence offer blockchain-based platforms for supply-chain traceability, enabling auditing and transparency, and giving customers the ability to inspect every step of a product’s supply chain.
Singaporean startup Wabi provides a platform for blockchain-based loyalty programs with incentives for customers and insights for brands.
In the US, startup BurgerDAO is creating a decentralised franchise model, funded by the sale of crypto-tokens.
Internet of Things
As IoT continues to expand, it becomes increasingly automated and affordable, making it a high-ROI technology option for FMCG companies. IoT devices offer myriad solutions in diverse places, including warehouses, manufacturing facilities, transport, and retail spaces.
For temperature-sensitive products, Belgium-based startup Ethelco provides isothermal boxes with sensors for continuous monitoring. US-based startup ConnectedFresh takes this a step further, with plug-and-play sensors for monitoring entire warehouses and other storage facilities.
US-based Cloudleaf has built an inventory-management system that combines IoT and AI to provide real-time tracking and insights into the entire supply chain. Another US-based startup, Tive, improves supply-chain visibility with location tracking of goods, damage monitoring, port management, and more.
In the past, large established businesses with highly optimised distribution systems had a significant advantage over newer competitors. Now, in a highly connected world with diverse customer groups, that’s no longer the case, and many FMCG companies are exploring new ways to reach their customers.
Companies like German startup Vegshelf want to take over large parts of the supply chain, with their B2B platform connecting vegan FMCG brands with supermarkets and online stores.
Some startup companies provide platforms to enable FMCG companies to build new distribution models, such as Indian startup Merlin Tech Labs and Singaporean startup Ivy. Both offer Software-as-a-Service applications to manage sales channels, enterprise customer relationship management (CRM), supply-chain optimisation, and more.
Finally, for the many FMCG companies looking at customer experience as a key competitive advantage, there are many startups eager to help.
Voice-activated AI-powered intelligent assistants are one of the fastest-growing segments in customer interaction. Voysis (now acquired by Apple) was an early player in this space, offering natural language search and shopping for customers. Blutag, Instreamatic, and Disruptel also provide specialised services in this area.
For tracking and improving the in-person shopping experience, Chinese startup Zhimatech analyses traffic flow in shopping centres, and matches it with online data to provide detailed customer insights. And Australian startup RipenApps uses iBeacon technology to send customers contextual, personalised messages on their phone when in store.
For online shopping, many startups − such as Canadian Letmetalk and Australian HostedBots − provide AI-powered chatbots for customer engagement. And Italian startup Massive uses AI to monitor e-commerce websites to interpret customer feedback.
AI also enables more personalised experiences, and Indian startup Gladminds enables brands to optimise and personalise their marketing, communication, and brand loyalty.
And the startup Robomart takes convenience to a new level by bringing the shop to the customer. Customers request that the ‘supermarket on wheels’ come to them, and can then shop checkout-free, with their purchases charged automatically to their account.
The power of one
A few years ago, Accenture’s Technology Vision survey of Australian CEOs reported almost 90 per cent of businesses expected rapid or unprecedented technology change in the near future. That’s hardly surprising. But tellingly, only 18 per cent of them expected this disruption to come from startups outside their industry. That means their strategy would be based on protecting themselves from known forces, which makes them vulnerable to being side-swiped by external disruptors.
In 2000, video rental giant Blockbuster turned down a $50 million offer to buy a relatively unknown startup. Two decades later, Blockbuster has failed and that unknown startup, Netflix, is worth over $200 billion.
The best leaders know not to dismiss startups out of hand. Most will fail, but it only takes one to transform an industry.
This article was originally published in Inside FMCG quarterly magazine