April 29, 2009
New Products Trickle Out in ’09
The
pace of
new products hitting grocery stores in the first quarter of 2009 was roughly
half the number for the same period last year, according to the Mintel
Global New Products Database.
"Faced
with low consumer confidence and reduced spending, many food and beverage
manufacturers cut back on product development and new product launches,"
Lynn Dornblaser, drector,
CPG trend insight at Mintel, said in
a press release. "Many companies face internal budget cuts that affect
everything from new product ideation to development and marketing."
A
number of categories have been pronounced in the fewer number of rollouts.
Mintel identified non-alcoholic beverages, chocolate, dairy products, and
gum/confectionery as categories that saw some of the largest percentage
drop-offs year over year.
Mintel’s
Dornblaser is looking for the pace of new item launches to pick up. The
number of rollouts grew in March over the previous two months. "Consumer
confidence has leveled off for the time being, which marks an opportunity
for manufacturers. Now is the time for ideation and innovation for products
that answer shoppers’ desires for value, quality, and pleasure," she
said.
Discussion Questions:
How do you think the slower rate of new item launches has affected food
retailers year-to-date? What trends do you think we will see from new products
(price positioning, packaging, etc.) launched over the rest of the year?
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Discussion Questions
Poll
It’s no surprise that companies are reducing their initiatives for developing new products. Now the question is can the marketers improve their rate of success?
Wouldn’t it be an incredibly valuable lesson to learn how to increase the ratio of success to failed new product introductions? Can marketers get over the 80/20 barrier? Fewer dollars spent more effectively would be a win for the retailer as well.
In the meantime, the retailer has fewer new products to contend with and this probably creates some advantages regarding FSIs, stocking (sorry about the lost fees) and fewer worries in general.
As for consumers, I don’t think they’re aware of the fewer introductions. But here is the opportunity to bring out something unique with a selling proposition that can make a difference.
Less clutter in the new introduction space means more opportunity to stand out from the crowd with a winner. I hope someone is keeping score. This is the game to watch, with lessons that can endure.
As a businessman, I don’t believe that the lack of new products has hurt grocery retailers. The downturn has sent more consumers into grocery stores, as they try to save money by preparing food at home, rather than dining out.
As a consumer, the lack of new products (primarily line extensions) is welcome. Maybe the recession will even kill off some of the sillier extensions we have seen over the past few years.
Consumers crave simplicity, especially in tough economic times. Packaged goods companies have taken the opposite point of view and flooded the aisles with endless products extensions. Perhaps the recession will allow the pendulum to swing back the other way.
For those on a diet that includes healthy portions of slotting and such, this hurts profitability. And of course there’s less excitement on the shelf, but that doesn’t benefit one retailer over another since it’s universal.
With SKU rationalization and limited assortment still going strong, seems like new products have less of a chance for survival than before. Smaller pack sizes to achieve a price point are already a fact of life, especially among pricier items. And no surprise that many of the new launches I’m seeing are geared to price. Considering the economy, and some of the new product debacles of the past year or two, maybe it’s just as well that some folk are taking a breather.
Retailers are relying on themselves for new product offerings. Grocers are really pushing the ‘meals to go’ category. We don’t need a new flavor of Crest to make margin and profit. These bundles are the way to go….
Isn’t this going to hurt the retailers that love slotting fees? I hope that manufacturers are attempting to improve their new product success rate by better thought out introductions. Taking a break from some of the previous mania of line extensions and poorly planned and executed new products should be a good thing for everyone.
New products are much like light bulbs. They both need lots of electricity to function properly and shine brightly. When the economy loses its (electrical) oomph, it slows down new product development, reduces the number of new shelf allocations in stores, and consumers tend to stick with the “tried and true” items. Manufacturers and retailers, who are concurrently dealing with internal cost containments, deal with the situation as best they can. Meanwhile, the world goes on.
New product proliferation has been so over-the-top for the past couple decades that this slowdown may feel like a let down for some. Yes, retailers miss out on some slotting and introduction fees, but they also gain from the “intelligent loss of work” in their stores.
With new product failure rates typically in the high 90-percent range, it seems to me that we’d be better off if a goodly proportion of those items were stillborn anyway. Then re-deploy the saved resources into better pre-market research and In-Store Implementation disciplines.
A final thought: Remember the most salient question here is “What serves the shopper best?” New flavors of prepared packaged foods, line extensions and flankers add a bit of artificial novelty, but I doubt they create anything resembling loyalty. Indeed, they may contribute to a chaotic shopping experience. If only we did the research to understand this better.
A study conducted for a GMA MSM conference, revealed that, from a retailer’s perspective, the bottom quartile of products across 6 categories lost money. Many of these items moved only a case or two per year, and, with few exceptions, there was little impact on shopper satisfaction or behavior. Even with slotting and intro allowance factored in, the results were consistent, suggesting SKU proliferation is costly.
From a manufacturer’s perspective, an ongoing challenge is understanding trade-offs between the cost of complexity and value of simplicity. In our experience, manufacturers use average cost for items in a promoted group. But the 5th flavor in a product range will have more manufacturing, inventory, obsolescence/stales, and promotion cost as a percentage of sales than will the leading item. Understanding true item profitability will likely accelerate the move to SKU rationalization…to shareholder’s benefit.
With only 6% of new products exceeding $20MM in sales and about 1% reaching $100MM, there is certainly room to improve innovation processes (as opposed to line extensions). Innovation success will likely require new levels of collaboration between retailers and manufacturers to understand the intersection of that retail’s customer needs, the unique value proposition of the retailer and the product development capabilities and brand power of the manufacturer. It will also require new levels of trust…something that has proven a challenge in the past.
It all boils down to this: consumers in tough economic times are less likely to be risk takers. They won’t try unfamiliar products. They want “known” commodities.
Retailers should–and some have been–taking advantage of this by offering more loss leaders plus price reductions and couponing for standard items. Manufacturers have cut budgets and personnel so they also have less resources for development. Maybe this is a lesson for us all on the need to cut back to a simpler way of dealing with the product mix that is really necessary.
A couple numbers to keep in mind: First, 90+% of all new product introductions are failures; and second, 20,000 of the 40,000 items in a typical supermarket contribute less than 4% of total store sales–many of those may not sell a single item in an entire year!!!
Given these facts, other than generally looking for the new blockbuster item, there are two good reasons to continue to pursue SKU proliferation: Many shoppers love to see new items, and trying something new is a “small pleasure” in the humdrum of life; The competitive imperative means that the battle for shelf-space and seeking dominance over competitors, or at least equivalence, can’t let up.
Everyone obviously seeks to develop new items that can play a role in the “big head,” top third of store sales; when in reality the vast majority of new products will end up in the dust bin, or far reaches of the long tail. There are typically serious failures in managing the existing big head/long tail relationship. A more intelligent focus on what is already working very well will deliver more immediate sales and profits, than looking for magic additions to lines already poorly managed.
The slowdown in new product introductions will help simplify shopping, and provide more added value for loyal shoppers.
At the recent Western Michigan Food Marketing Conference, these rather eye opening statistics were discussed in a joint presentation by Patrick Walsh of FMI and Jim Flannery of P&G. The number of new SKUs registered jumped from just over 10,000 in 2005 to over 85,000 in 2007. The new products were described as primarily line extensions.
The focus has to be on providing products that consumers want in their lives today, and reducing the amount of slower-moving, less-profitable items from the shelves.
CPGers are not slowing down the development of new products, they are simply getting smarter about their introductions. Fewer new products makes sense. We have all known this for years. Whereas history has shown 95% of all new CPG products are withdrawn before 18 months of existence, CPG companies are now focusing on effective New Product Development and Introduction (NPDI) more than ever. The twenty largest CPG companies typically have myriad internal projects to refine the NPDI process.
What are they spending time on?
- NPDI Process improvement
– Global & regional standardization
– Reduction in complexity (specifications, materials)
– Improve speed and reduce non-value add
- Re-organization to reduce R &D headcount and focus on core competences
- Relocation of design and development to Eastern Europe, Asia and Latin America
- Building on legacy application expenditure primarily though application innovation in
– Portfolio management
– Project and resource management
– ISA 88 recipe & specification management
– Secure collaboration with 3rd parties
– Global product master data aligned to GS1
– Optimisation of process, pack and product
– Safety, environmental and regulatory compliance
Retailers will only reap benefits from all of this work. They will hopefully see more compelling, on-target new products, with more effective launch campaigns and less planogram fluctuation at store level. Life will certainly get better from here on. Stay tuned.
My company tracks new products in the US for HBC. Interestingly enough, we are tracking new products 14% higher, thus far this year, versus last year. It seems to me that HBC manufacturers are continuing to introduce new items at a rapid rate in order to attract new consumers and create interest in a down sales period.
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It’s no surprise that companies are reducing their initiatives for developing new products. Now the question is can the marketers improve their rate of success?
Wouldn’t it be an incredibly valuable lesson to learn how to increase the ratio of success to failed new product introductions? Can marketers get over the 80/20 barrier? Fewer dollars spent more effectively would be a win for the retailer as well.
In the meantime, the retailer has fewer new products to contend with and this probably creates some advantages regarding FSIs, stocking (sorry about the lost fees) and fewer worries in general.
As for consumers, I don’t think they’re aware of the fewer introductions. But here is the opportunity to bring out something unique with a selling proposition that can make a difference.
Less clutter in the new introduction space means more opportunity to stand out from the crowd with a winner. I hope someone is keeping score. This is the game to watch, with lessons that can endure.
As a businessman, I don’t believe that the lack of new products has hurt grocery retailers. The downturn has sent more consumers into grocery stores, as they try to save money by preparing food at home, rather than dining out.
As a consumer, the lack of new products (primarily line extensions) is welcome. Maybe the recession will even kill off some of the sillier extensions we have seen over the past few years.
Consumers crave simplicity, especially in tough economic times. Packaged goods companies have taken the opposite point of view and flooded the aisles with endless products extensions. Perhaps the recession will allow the pendulum to swing back the other way.
For those on a diet that includes healthy portions of slotting and such, this hurts profitability. And of course there’s less excitement on the shelf, but that doesn’t benefit one retailer over another since it’s universal.
With SKU rationalization and limited assortment still going strong, seems like new products have less of a chance for survival than before. Smaller pack sizes to achieve a price point are already a fact of life, especially among pricier items. And no surprise that many of the new launches I’m seeing are geared to price. Considering the economy, and some of the new product debacles of the past year or two, maybe it’s just as well that some folk are taking a breather.
Retailers are relying on themselves for new product offerings. Grocers are really pushing the ‘meals to go’ category. We don’t need a new flavor of Crest to make margin and profit. These bundles are the way to go….
Isn’t this going to hurt the retailers that love slotting fees? I hope that manufacturers are attempting to improve their new product success rate by better thought out introductions. Taking a break from some of the previous mania of line extensions and poorly planned and executed new products should be a good thing for everyone.
New products are much like light bulbs. They both need lots of electricity to function properly and shine brightly. When the economy loses its (electrical) oomph, it slows down new product development, reduces the number of new shelf allocations in stores, and consumers tend to stick with the “tried and true” items. Manufacturers and retailers, who are concurrently dealing with internal cost containments, deal with the situation as best they can. Meanwhile, the world goes on.
New product proliferation has been so over-the-top for the past couple decades that this slowdown may feel like a let down for some. Yes, retailers miss out on some slotting and introduction fees, but they also gain from the “intelligent loss of work” in their stores.
With new product failure rates typically in the high 90-percent range, it seems to me that we’d be better off if a goodly proportion of those items were stillborn anyway. Then re-deploy the saved resources into better pre-market research and In-Store Implementation disciplines.
A final thought: Remember the most salient question here is “What serves the shopper best?” New flavors of prepared packaged foods, line extensions and flankers add a bit of artificial novelty, but I doubt they create anything resembling loyalty. Indeed, they may contribute to a chaotic shopping experience. If only we did the research to understand this better.
A study conducted for a GMA MSM conference, revealed that, from a retailer’s perspective, the bottom quartile of products across 6 categories lost money. Many of these items moved only a case or two per year, and, with few exceptions, there was little impact on shopper satisfaction or behavior. Even with slotting and intro allowance factored in, the results were consistent, suggesting SKU proliferation is costly.
From a manufacturer’s perspective, an ongoing challenge is understanding trade-offs between the cost of complexity and value of simplicity. In our experience, manufacturers use average cost for items in a promoted group. But the 5th flavor in a product range will have more manufacturing, inventory, obsolescence/stales, and promotion cost as a percentage of sales than will the leading item. Understanding true item profitability will likely accelerate the move to SKU rationalization…to shareholder’s benefit.
With only 6% of new products exceeding $20MM in sales and about 1% reaching $100MM, there is certainly room to improve innovation processes (as opposed to line extensions). Innovation success will likely require new levels of collaboration between retailers and manufacturers to understand the intersection of that retail’s customer needs, the unique value proposition of the retailer and the product development capabilities and brand power of the manufacturer. It will also require new levels of trust…something that has proven a challenge in the past.
It all boils down to this: consumers in tough economic times are less likely to be risk takers. They won’t try unfamiliar products. They want “known” commodities.
Retailers should–and some have been–taking advantage of this by offering more loss leaders plus price reductions and couponing for standard items. Manufacturers have cut budgets and personnel so they also have less resources for development. Maybe this is a lesson for us all on the need to cut back to a simpler way of dealing with the product mix that is really necessary.
A couple numbers to keep in mind: First, 90+% of all new product introductions are failures; and second, 20,000 of the 40,000 items in a typical supermarket contribute less than 4% of total store sales–many of those may not sell a single item in an entire year!!!
Given these facts, other than generally looking for the new blockbuster item, there are two good reasons to continue to pursue SKU proliferation: Many shoppers love to see new items, and trying something new is a “small pleasure” in the humdrum of life; The competitive imperative means that the battle for shelf-space and seeking dominance over competitors, or at least equivalence, can’t let up.
Everyone obviously seeks to develop new items that can play a role in the “big head,” top third of store sales; when in reality the vast majority of new products will end up in the dust bin, or far reaches of the long tail. There are typically serious failures in managing the existing big head/long tail relationship. A more intelligent focus on what is already working very well will deliver more immediate sales and profits, than looking for magic additions to lines already poorly managed.
The slowdown in new product introductions will help simplify shopping, and provide more added value for loyal shoppers.
At the recent Western Michigan Food Marketing Conference, these rather eye opening statistics were discussed in a joint presentation by Patrick Walsh of FMI and Jim Flannery of P&G. The number of new SKUs registered jumped from just over 10,000 in 2005 to over 85,000 in 2007. The new products were described as primarily line extensions.
The focus has to be on providing products that consumers want in their lives today, and reducing the amount of slower-moving, less-profitable items from the shelves.
CPGers are not slowing down the development of new products, they are simply getting smarter about their introductions. Fewer new products makes sense. We have all known this for years. Whereas history has shown 95% of all new CPG products are withdrawn before 18 months of existence, CPG companies are now focusing on effective New Product Development and Introduction (NPDI) more than ever. The twenty largest CPG companies typically have myriad internal projects to refine the NPDI process.
What are they spending time on?
– Global & regional standardization
– Reduction in complexity (specifications, materials)
– Improve speed and reduce non-value add
– Portfolio management
– Project and resource management
– ISA 88 recipe & specification management
– Secure collaboration with 3rd parties
– Global product master data aligned to GS1
– Optimisation of process, pack and product
– Safety, environmental and regulatory compliance
Retailers will only reap benefits from all of this work. They will hopefully see more compelling, on-target new products, with more effective launch campaigns and less planogram fluctuation at store level. Life will certainly get better from here on. Stay tuned.
My company tracks new products in the US for HBC. Interestingly enough, we are tracking new products 14% higher, thus far this year, versus last year. It seems to me that HBC manufacturers are continuing to introduce new items at a rapid rate in order to attract new consumers and create interest in a down sales period.