The Risks and Rewards of Large Brands Acquiring Small Brands

By William Grand, Co-founder and CEO, NutriFusion

Key Takeaways: 

• Large brands are increasingly interested in small brands for their innovation, fresh talent, and agility in adapting to market trends.
• However, risks such as cultural misalignment, loss of brand identity, and diminished creativity can arise from acquisitions of small brands.
• Successful acquisitions require clear communication, respect for the small brand’s core values, and a strategy to preserve both identities while leveraging each other’s strengths.

As the landscape of business changes, especially in the “better for you” space, large brands have begun to recognize their folly in clinging to stodgy ways. Instead, they appear to be acknowledging the power of small brands, who have wielded a power that is still so unknown to them. With a focus on innovation, a fresh take on consumer engagement, and more, the small brand “way” is becoming increasingly interesting for large brands.

But despite this interest and the clear pros, there are various risks that must be considered before making these acquisitions — in the face of such a dichotomy in the business model, there may be a rough road ahead.

Attractive qualities of small brands

Small brands present a very unique business opportunity to today’s larger brands in multiple ways. One of these is the way in which they approach product development, leaning on the latest technologies and insights to help shape and guide their processes. In this way, they are able to shake the tired ways of product development they may have proven to be less effective in the modern business landscape. 

Small brands also dedicate more time to tracking market trends to better understand the industry to make sure they pivot as needed, which helps with effective business decisions. With this, small brands are natural innovators, keeping an eye on industry changes to ensure they align with the ever-changing market’s needs. Larger brands struggle with innovation in many ways due to the simple constraints of their size, requiring a massive amount of buy-in before making innovation moves, and can cause less of a focus on watching shifts in the industry. 

Fresh talent with new ideas and points of view can make a huge difference in business approach, considering the new landscape of the modern consumer with a new set of wants and needs (e.g., sustainability as a brand value). Small brands carry with them the fresh talent that large brands need to “shake things up” and position them high above competitors. With this talent comes an embracing and knowledge of other ways to both promote products — such as through social media, which is an effective way to engage with the modern consumer — as well as in distribution, opening up additional channels for revenue growth. 

What’s more, a level of enthusiastic entrepreneurship often underlines the culture of smaller brands, attributed to an openness to change and entertaining new ideas that big brands may not be as comfortable with or have trouble embracing due to established methods of operations.

Potential risks on both sides of the coin

While there are clearly benefits to acquiring smaller brands, there are various risks for big brands when making the acquisition. One of these involves culture integration. With big brands often comes more rigid corporate structures, and when trying to absorb a smaller brand, there may be a serious misalignment with the potential for a disruptive environment, leaving employees at both organizations uncomfortable.

With acquisition can come the smothering of the unique identity of the smaller brand that made it so appealing in the first place, leaving big brands questioning why they put forth the effort and the dollars in the end. Loyal customers of the larger brand may not understand what the change could mean for the brand they’ve come to know and rely upon. They may question if the change will cause an upset in what they’ve come to trust. 

But risks also exist on the side of small brands. With acquisitions, small brands are subject to the squashing of the unique identity they’ve begun to cultivate, which affects the loyalty of their customers, who may begin to question the brand’s product integrity. Will key ingredients be altered or eliminated? This is especially possible when a brand includes in its messaging the focus on being small, keeping it targeted. Authenticity is at risk, and there is fear of weakening transparency.

Small brands are also subject to losing the autonomy and openness to new ideas that may not be available in a big brand’s culture. When feeling stifled, creativity can suffer, and in some cases, even productivity. Ultimately, this will affect the success of the acquisition business and pull down revenue, as well as develop a negative perception of both brands and the acquisition.

Strategies to ensure acquisition success

For large brands, it’s important to lead the process by acknowledging the uniqueness of the brand, communicating to all parties — especially employees who may be understandably concerned about the ramifications of changes — that the acquisition is harmonious, and the integrity of the brand and culture will remain important. It’s also important to introduce the value of the larger brand to the smaller brand so there is a clear understanding of what the large brand brings to the table as more than just an acquirer.

Externally, big brands should proactively communicate messaging around the acquisition so they can control the narrative and ensure understanding of the transition, negating any issues of speculation about the development. It’s important to ensure that employees, executives, and customers for each brand, as well as the general public as a whole, see the real picture behind the acquisition and receive it without negativity.

For small brands, it’s essential to make sure their voices are still heard and that they communicate their core values, especially in the face of potential identity dilution. There is always the possibility that a small brand will be swallowed up by a larger brand. Allow assertive communication to be a small brand’s guide in maintaining its own sense of autonomy. Executives from both large brands and small brands need to make a concerted effort to keep the name alive and ensure that it maintains its integrity and values. This is crucial to maintaining customer loyalty on both sides. 

A relationship built to last

While acquisitions can be daunting and perhaps whisper fears of serious disruption to come, big brands and small brands can leverage their respective strengths — big brands have substantial industry clout and small brands lead in innovation — to come together for a powerful partnership and substantial revenue. Ultimately, both consumer bases will join together and deliver a new level of revenue that will benefit both large brands and small brands. Over time, by implementing some basic key strategies, an acquisition has the possibility to be rather seamless and completed in a way that satisfies everyone. 

With over 35 years of experience in corporate management, sales and marketing, William Grand serves as the co-founder and CEO of NutriFusion®, a company dedicated to elevating everyday food products with the nutrient-rich benefits of fruits and vegetables. In this position, Grand exercises his expertise in food retail, distribution, product development, logistics and administration, drawing on previous roles that involved supporting international product launches and start-ups, overseeing international logistics and fulfillment centers, and supporting and hiring local managers, leaders, and distributors. He has worked closely with companies from Asia, Europe, and Canada. 

Grand previously held the role of CEO for Earth Eco Research LLC and President at Mackay Specialties. He attended Carleton University (HBA, Law, Psychology) and Upper Canada College.