More on the risks
Long-term market competition could be in peril, but CPGs run some shorter-term risks too. Yes, they’re enjoying economies of scale, synergies, and innovation that they’ve acquired—but it’s challenging to preserve the credibility and authenticity of the brands they buy. Take Nantucket Nectars, a craft beverage brand acquired by Ocean Spray in the 1990s. The appeal was in its identity, says Dubé. Company founders Tom First and Tom Scott originally sold drinks from their boat in Nantucket Harbor, Massachusetts, and in recycled bottles, and the story of the brand was unique, local, small, and fun. But it lost its luster as part of a larger company. Ocean Spray ended up selling it a few years later at a discount.
A judge in 2016 dismissed a potential class-action lawsuit against Molson Coors over its marketing of Blue Moon. Described on its website as a craft beer, Blue Moon was developed not in an independent craft brewery but at one owned by Molson Coors Brewing.
“A big part of these craft brands—whether it’s a beer, a pair of eyeglasses, or a pair of pants—is that people believe these products to be more natural, and that’s especially true of the food and beverage industry,” says Dubé. Consumers are increasingly tuned into locally sourced ingredients and similar considerations, and even if a company moves in that direction, shoppers are skeptical. “When things are mass produced, it’s hard to be credible about where ingredients are sourced. And this is a global trend, so the question becomes: Does the person who’s been managing Oreo cookies have the right expertise to market a cookie that is the ‘anti-Oreo cookie?’ A cookie made with no palm oil, or with natural sweeteners and sustainable packaging?”
It’s also hard to measure authenticity, until that’s necessary in court. There has been an upward trend in class-action consumer lawsuits in the US, with businesses from food and beverages, household cleaning products, cosmetics, personal-care products, and more coming under fire for alleged unethical marketing practices mostly related to the labeling of their products, for instance about a brand bestowing certain health benefits, deriving from a desirable origin, or being “all natural.” This trend hit an all-time high in 2021, when 325 class-action lawsuits were filed against food and beverage companies, according to law firm Perkins Coie.
And while choice may be good, it has costs for consumers, who might spend more time, effort, and in some cases money in order to find what they want. Companies run the risk of overwhelming consumers with too many options. University of California at Berkeley’s Olivia R. Natan (a graduate of Booth’s PhD Program) studied a restaurant delivery platform as more and more options were added. The additional variety was intriguing and brought more people to the platform for the first time, but they ended up ordering less often as sorting through options became more difficult.
“Choice overload is real—we just don’t fully understand when and why it happens yet,” says Chicago Booth’s Daniel Bartels, who explains that human beings have cognitive limitations that complicate decision-making. “Say we have to choose between two options, and each option has three salient attributes or characteristics, so there are six pieces of information that we will need to take into account. Now increase those options to five or more, and suddenly there are 15 or more pieces of information that need our attention. The chances are suddenly much higher that I will make a suboptimal decision, or that I simply fail to make one at all.”
There is no “magic number” with choice overload, so it’s unclear to a marketer whether that next new offering is the one that will end up frustrating the customer. “We don’t know for sure how many options are just enough or how many are too many,” says Bartels. “A lot, too, depends on the complexity of the choice facing us, that and the costs we incur in getting it wrong.”
The stakes are relatively low if you face too many options when choosing a bag of chips or a six-pack of soda—if the flavor turns out not to be for you, you haven’t wasted all that much time or money on it. But say you’re shopping for a laptop, a car, a health-insurance plan, or an investment fund for retirement savings. In these instances, you might find more choices to be intimidating, and making the wrong choice could be costly.
Tools can help make decisions simpler. Aggregators or screeners sort or filter options in terms of key features or characteristics. KAYAK, Booking.com, Autolist, LappyList, and other online platforms use algorithms to process large quantities of variables, whittling them down to just a few choices.
But these aggregators are themselves multiplying. “We may get to a point where we have too many tools,” says Bartels, listing Yelp, Thrillist, Eater, and Tripadvisor as only some of the sources of information people turn to. “It’s not just the choice options themselves, but the array of places to go for input into those choices that is also proliferating.” (See “Why more choice can be better, or not,” above.)
Offerings are set to keep on expanding, at least in the CPG industry. Pharma and tech aside, as long as the barriers to market entry for certain products and services remain low—or lower than they were in the 1990s—we are likely to see brands continue to fragment and variety proliferate even more, argues Dubé.
“Back in the ’90s, mass media was all we had. Today, CPG brands have alternative means of engaging with customers that are cheaper and more efficient. Marketers have all kinds of online and social tools at their disposal to create communities of engagement and loyalty around their products,” he says.
The resulting landscape may work for entrepreneurs, consumers, and CPG manufacturers—but it’s evolving. Many entrepreneurs get their start by circumventing stores, but consumers might get fed up with all the cardboard and packaging involved in getting products sent to their doorsteps. Regulation or taxes could emerge that change the current approach. Small brands could once again have to compete for shelf space in physical stores.
But consumers have become accustomed to having more choice, and the demand for variety is likely to remain robust, Dubé says. In that case, the question may not be whether there can be too many flavors of tortilla chips but whether your favorite flavor has yet been produced—and if it hasn’t been, whether the stars will remain aligned long enough for the market to deliver the exact product you didn’t even know