This time last year, the future did not look very promising for small brands in America. When the U.S. went into pandemic lockdown, families reached for the familiarity of house-name brands like Campbell’s, Kraft Heinz, and Nestlé to provide both comfort and utility. But as incumbent brands struggled to keep up with demand, challenger brands regained share on grocery shelves and with it, a surer foothold in the mainstream market.

Now, with Covid-19 continuing to put pressure on supply chains that must keep up with the surge in CPG spending, the American food system is experiencing an age of transformation that uniquely positions challenger brands to lead the charge.

Equipped with information, consumers drive the change

Developed in the post-World War II era of convenience, affordability, and consistency, the so-called “modern” American food system has remained relatively untouched over the last 75 years. But our current age of information has many Americans demanding greater transparency and variety from suppliers. Coupled with a rising interest in seasonality — first found in restaurants as the “farm-to-table” movement before spreading to fast-casual eateries like Sweetgreen and Dig Inn — consumers are asking more questions about where and how their food is made. And with most meals eaten at home due to remote work and social distancing constraints, households are expecting more from the products in their fridges and pantries.

Brands that stand behind their ingredients and are transparent with fair trade sourcing such as Raaka Chocolate and Creminelli Fine Meats are gaining popularity with consumers looking for higher quality products that lack the corn syrups, preservatives, stabilizers, and hydrogenated oils running rampant in major CPG products. As we all become increasingly more informed of the impact certain foods have on personal health and that of the planet, details around a brand’s ingredients, process, and its social or environmental impact are playing a bigger role in how we shop the grocery aisle.

Edging ahead through innovation and consumer engagement

Satisfied with portfolios full of processed-yet-profitable products, most major CPG brands spent the better part of our last decade focused on cutting costs and improving margins rather than the innovation and development of new offerings attuned to healthier, cleaner food trends. Consequently, the newcomers devoted to doing just that have been able to grow market share and brand awareness, establishing a strong position next to stalwarts that aren’t innovating fast enough.

Take for instance Siete Family Foods, the grain-free tortilla chip brand currently disrupting the snack aisle. Founded only six years ago, the family-run company — which now offers eight different products and a multitude of flavors — is on track to become a billion-dollar business, according to Forbes, in its expansion to over 13,000 stores nationwide including Target, Kroger, Walmart, and Whole Foods. Alternatively, long-time chip leader Tostitos lacks any grain-free option, touting instead ‘Multigrain’ and ‘Baked’ varieties that feel, well, stale compared to today’s healthy alternatives.

It may be some time before Tostitos is replaced by Siete as America’s party chip of choice, but the newcomer’s devoted customer following makes a strong case for such an uncrowning. With four times the followers on social media compared to Tostitos, Siete keeps consumer engagement fun by using crowd-sourced content and partnerships with chefs and musicians. In fact, the brand’s loyalty is so strong that Siete successfully launched direct-to-consumer (D2C) shipping to reach their audience through a new channel and bypass distributors altogether. Siete fans can now order their favorites directly from the website, plus exclusive, limited-edition products and flavors that aren’t available in stores.

Incumbent brands boxed out of new markets

Lifestyle trends have replaced brand loyalty as the main driver in product discovery and adoption. Upcycled, Keto, Paleo, Whole30, Vegan, Dairy-free — consumers are embracing new and healthier routines faster than major CPGs can keep up. Instead, they are turning to smaller, trend-aligned brands that offer a variety of products and flavors to support their new diet or wellness routine.

Accelerating these changes are the increasingly popular food subscription boxes exploding on the scene. Thrive Market, Vitacost and Misfits Markets are just three of the many subscription services championing smaller, healthier brands through D2C grocery shipments tailored to diet and household size. While each company offers its own spin on a subscription service, one constant remains the same across the entire buying channel: major CPGs are nowhere to be found.

But the transformation needs retailer buy-in

If Covid-19 proved anything to the food industry, it’s that we were already in a food revolution before the pandemic started. But now, with consumer spending shifting towards healthy lifestyle trends that emphasize health, transparency, and variety, smaller brands have an opportunity to disrupt the market and refocus the value chain to champion wholesome, nutritious products that benefit more than just stakeholders.

Of course, the challenge still remains how to manage the double-edged sword of accessibility and affordability. These two factors are easily the biggest drivers of American spending habits and the biggest obstacles for emerging brands today. But to deliver competitive pricing without compromising product integrity, small CPGs need retailers’ help.

A strong buyer network can offer the stability and structure necessary for small CPGs to survive incumbent competition. If retailers band together and commit to building a support network that uplifts the underdogs in CPG, the current innovations in consumer shopping plus a general trajectory towards better foods for us and the planet can kickstart a flywheel effect that will carry them the rest of the way and give us a food system that once more works.