Despite the benefits scale provides when it comes to production and distribution efficiencies, market fragmentation has become increasingly pronounced in the food and beverage business. Consumer demand for products with specific attributes and sold in convenient venues is driving change throughout the food and beverage supply chain.

Two reports published in the past few months highlight the challenges companies face. The first, an annual collaboration between Information Resources, Inc., and the Boston Consulting Group, shows small companies, those with less than $1 billion in sales, and mid-size companies, those with sales between $1 billion to $5 billion, accounted for 46.4% of total C.P.G. sales in 2015, a 2.7% gain since 2011. The gain translates into an $18 billion shift in the $670 billion C.P.G. market during the past four years, I.R.I. said. The shift has taken place as more niche companies are establishing themselves in specific categories as viable competitors to some of the largest C.P.G. companies.

The findings in the report titled “How healthy, protein-rich foods are nourishing growth in the consumer packaged goods industry” are based on the growth track records of more than 400 C.P.G. companies with annual U.S. retail sales of more than $100 million. The study includes both public and private C.P.G. companies and focuses on what consumers actually bought in measured channels as opposed to what manufacturers shipped.

Key reasons for the increased fragmentation include low barriers to entry into the market, particularly easier access to capital, a pool of available industry talent, primarily former employees of food and beverage companies that have downsized in the past few years, and a greater interest among retailers and food service operators seeking differentiated products that stand out on retail shelves and restaurant menus.

A second study, published by The Nielsen Co. and titled “Think smaller for growth: How to thrive in the new retail landscape,” highlights the fragmentation taking place at retail. While modern retail has been driven by scale in the past, supply chain process improvements have made it possible for smaller stores to achieve similar to or even higher levels of profitability with smaller retail stores paving the way for smaller retail chains to expand and take share from larger competitors. Shoppers who are able to match their preferred store format more precisely to their shopping needs and preferences have benefited from the increase in store formats, according to the study.

Adding to the challenges facing retailers is the competition from restaurants and such new entrants as meal delivery services. These trends are forcing retailers to review operations, most notably concentrating on the in-store shopping experience, pricing, product assortment and a need for locations near where consumers want to shop.

“Perhaps the new retail mantra should be ‘Go small or go home,’ as the ‘Bigger is better’ paradigm has been challenged virtually everywhere,” said Steve Matthesen, president, Nielsen Retail Vertical. “Hyper-localization and specialization are fueling today’s retail growth. As lifestyle and consumption habits change, we’re seeing a structural shift in where consumers shop and what they buy, and some small formats are driving big growth. Mass-market strategies are also losing relevance as consumers look for unique experiences that meet their personal demands.”

It may be assumed the market fragmentation trend will become more pronounced in food and beverage as more C.P.G. and retail businesses adopt models that revolve around e-commerce and greater customer personalization. In other consumer goods categories customers have been conditioned to expect greater levels of personalization and it is not far-fetched to believe such expectations will reach the manufacturers and marketers of food and beverages as well. Scale will continue to contribute to greater efficiencies, but it is clear those companies that have a better understanding of what their customers want will benefit in the future.