A peek into an ever-changing industry
Photo by Sujith Devanagari on Unsplash
Circana, a leading advisor on consumer complexity and formerly IRI and The NPD Group, launched its Race for Resilience: Innovation Pacesetters report for Europe. Covering the six largest markets in Europe (France, Italy, Germany, Spain, UK, and Netherlands), the report reveals declining product innovations across the last two years, particularly across larger brand manufacturers – revealing a growing adversity to the perceived gamble of new products, as sales in FMCG products decline.
144,432 new products were launched across Europe in 2022 compared to 172,997 in 2021 (-16.5%). The largest drop was seen in France where new product launches fell from 27,317 to 19,843 (-27.4%). Fewer innovations reflected both manufacturers and retailers prioritising their existing core ranges to maintain availability on shelves to protect volume and share, and perhaps declining confidence in commanding a premium price typically associated with new products – as businesses continue to grapple with inflation.
It should come as no surprise that SMEs account for 75% of all new products launched, contributing 68% of total value sales from new products. While just one in four new product launches were brought to market by large brand manufacturers over the period, they delivered greater share value (32% of new product value sales) due to their distribution and supply chain advantages, Circana finds.
This is an industry required to change with technology to consistently provide value. How are companies responding? One of the key findings from the report indicates that consumer attitudes and behaviours that determine the success of new product launches have changed – for example, shoppers expect new products to add value (eg have new features – 77%, be versatile by combining benefits – 72%), to be sustainable (71% expect it to be better for them and 68% says the same for the environment), to be trusted (65%), and must now fit with their lifestyle (73%) and help them to achieve their goals (67%).
Food and drink producers will have to continue to adapt their offerings to meet the needs of consumers to keep moving forward. New product launches in the chilled and fresh category delivered the most value despite fewer products being launched. Here manufacturers and producers tapped into healthy eating trends such as plant based and natural. Value share from innovations in the sector increased and now represents 22% of total FMCG innovation value share, some €4.8bn.
Frozen food saw product value up by 40% on the previous year, driven by consumers choosing frozen instead of chilled and fresh to meet new food planning behaviours and avoid waste.
Brewers had a reduced thirst for new product launches focusing instead on the growth of segments of low/no alcohol and ready to drink. Alcohol volume sales overall are showing a significant decline. This action resulted in 15% less value share derived from new products.
Ananda Roy, global SVP, strategic growth insights, Circana, notes that the evidence from the analysis means innovation continues to be a sustainable source of organic growth, despite difficult trading conditions and the cost of living crisis.
“While the ability to command a significant premium is constrained, new product launches continue to deliver the volumes that brand manufacturers need to maintain growth and market share,” Roy adds.
“New product launches can feel like a gamble when there is increasing competition for shelf space, especially at a time when the industry is experiencing declines in sales volumes of FMCG products, however there is no doubt that it can add immense value too, giving brands the opportunity to expand an existing portfolio or even create an entirely new one. Innovations continue to be resilient and help to drive demand despite inflationary headwinds.”
Circana analysis shows that shoppers are more likely to try new products that are at a lower price (59%), readily available (50%), easy to shop & use (both 56%), fits the shopper’s routine (46%). Recommendations from family and friends and a large well-known company also play important roles (both at 47%). Celebrity or influencer recommendations or endorsements convince just nine per cent of shoppers to try new products, despite their ability to attract awareness.
Of course, range rationalisation makes it harder for new products to survive – with continued range rationalisation from retailers who want to maximise the return on shelf space by axing slower selling items, it is harder than ever for new products to survive. Of all of the new products launched in 2021, just 74% remained on shelves in their second year. Although approx. 90% of launches still contribute less than €500k per SKU in their first year of launch, 23% flourished, doubling their sales value in the second year.
Roy concludes that to remain competitive, brands need to make the benefit of the innovation relevant to evolving consumer needs.
“They need to tap into and market the transformation, not just the product feature,” the global SVP says. “A targeted innovation strategy can help address the relentless search for growth in 2023 and beyond, especially as we continue to see the rules of the consumer goods category being re-written. This evolving innovation eco-system will be the driving force for change across an industry struggling to cope with the changing consumer landscape.”
To stay on top of the game, companies must be able to adapt and conform to new industry trends to continue the cycle of innovation. Understanding the needs of the customer is key to this transformation for producers to remain at the forefront of technological advancement.
- Rodney Jack, editor, Food & Drink Technology.
Keep in touch via email: rodney@bellpublishing.com Twitter: @foodanddrinktec or LinkedIn: Food & Drink Technology magazine.
