For the better part of the last century, America’s largest consumer packaged goods company has run an unbeatable business playbook. All the iconic consumer brands in our lives-Coca-colaLay’s, Cheerios, Oreos, and more–-built on a simple, three-part formula.

First, generate more demand by placing large national ad buys. Next, create ubiquity by stocking the brand on every imaginable grocery store shelf. Third, reap as much profit as possible through economies of scale created by giant production runs.

This model works especially well in America because this country is large, rich, and culturally homogenous. National TV ad campaigns can shape popular preferences to such an extent that, in turn, one formulation of a cereal, snack, or soda can satisfy tens of millions.

But that world is gone now, and it’s no longer the reliable engine of massive CPG company growth. The culprit? Social media.

The truth is that consumers no longer look to television and mass-market media for guidance on what to buy at the supermarket. A new one Survey of the International Food Information Council showed that half of the respondents tried a new recipe based on information from social media. Another 42% tried a new product and almost a third changed their eating habits.

This is the result of more and more people finding themselves drawn to one of the thousands of nutrition-themed micro-communities on TikTok, Instagramand the YouTube. Some avoid seed oils. Others only buy high protein or plastic-free products. Still others look for collagen, prebiotics, creatine, or adaptogens.

In response, hundreds of direct-to-consumer brands have emerged to serve these niche tastes, many growing faster than ever. And with the convenience of online shopping, discerning shoppers aren’t constrained by what they find in the store. These upstarts include brands such as Day Out, which sells protein-packed, plant-based snacks; Lucky Energy, focused on zero-sugar energy drinks; and Goodles, a line of better-for-you macaroni and cheese.

For incumbent CPG companies, the logical response to this trend is to acquire the largest brands emerging from these communities. But that approach is fundamentally not based on the formula they’ve relied on for 75 years.

The problem is scale. Because they are rooted in tightly defined micro-communities, even the best of these startups often top $50 million in annual sales. Those numbers don’t work for companies like The PepsiCowith over $90 billion in annual sales, or whatever General Millswith $20 billion. A $50 million startup, with little chance to grow further, is not worth the effort.

This led to a wider shift in the innovation pecking order. Ten years later, startups still serve as a source of innovation for food and household products. But the incumbent companies can reliably get it once they reach over $100 million in sales, improve their margins, and increase it by a factor of ten or more. This means they can quickly follow consumer trends to refresh their product lines and stay relevant. Private-label brands run by retailers—Target’s Good & Gather, Whole Foods’ 365, or Walmart’s Great Value—often move the slowest, happily focusing on tried-and-true staples.

But the retailers’ private label brands are ahead. Because retailers now control distribution, branding, and merchandising, they can identify a trend, create a product, and distribute it quickly through their own stores and websites. And they don’t need another $1 billion in sales to justify the effort. A $40 million product can make a significant impact, especially with the fatter private label margins.

Which now leaves the big CPG companies in the uncomfortable position of being at the dead end of innovation. Desperate for something new, they rely on so-called “line extensions,” meaning a new flavor of a legacy brand. In practice, that means creating hundreds of different variations of products like Oreos, some with flavors as intense as Swedish Fish and Fruit Punch. This means Flamin’ Hot Mountain Dew and Mac N’ Cheetos. Or Heinz Mayochup, a combination of mayonnaise and ketchup.

These stunty concoctions are great for a burst of PR and sales, but they’re not the stuff of a sustainable long-term strategy. Consumers aren’t looking for the 300th variation of Oreos. In fact, many have stopped eating cookies, and those who don’t often want something different, like high protein, sugar-free brands built for the values ​​of their micro-communities.

Taken as a whole, the CPG landscape is starting to look a lot like the movie industry used to Netflix changed everything. Major studios continue to duke it out with big blockbusters even as audiences are fragmented. Netflix wins by producing and buying thousands of different titles, catering to niche tastes at a speed the studio can’t match. Today, the brands owned by the retailer are Netflix and the big CPG is the studio system.

Other companies are starting to take note. Unilever withdrew its ad budget in favor of social media and influencer marketing, rather than large national campaigns. When Coca-Cola saw people putting Sprite tea bags on TikTok, they launched Sprite + Tea based on that grassroots demand. And almost every major CPG company has responded, if belatedly, to protein trend with products like Cheerios Protein, Pop-Tarts Protein, and new protein-rich drinks.

But these preliminary tests are not enough. Legacy CPG companies need to increase their speed of innovation and build new product lines based on actual consumer trends rather than gimmicky mashups. That means creating more new products more often and accepting smaller initial revenue targets. This means building for niche audiences rather than trying to flatten them into a homogenized national consumer. And this means reorganizing production around flexibility, not just volume.

Large CPG companies have many strengths: capital, reach, manufacturing excellence, and trusted brands. These companies can still win, but only if they stop trying to recreate the past and start building for the present.

The opinions expressed in Fortune.com commentary pieces are solely the views of their authors and do not necessarily reflect the opinions and beliefs of luck.

This story was originally featured on Fortune.com

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