Top Food Products for 2006

Last year's top new products focused on healthy dieting, less fat and digestive health.

By Diane Toops, News and Trends Editor

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Although an estimated 95 percent of new products fail, some come out of the box with incredible buzz and phenomenal sales success. Heavy first-year advertising support doesn't hurt, either.

Chicago-based Information Resources Inc. has followed the path of consumer packaged goods (CPG) product introductions for 12 years via its New Product Pacesetters report, which ranks each year's most successful new brands.

Kraft Foods' South Beach Diet line, which consists of 56 products, was the top-selling new brand of the past year. At $231 million in total sales, the multi-category line barely edged out Dreyer's/Edy's Slow Churned ice cream, which had $229 million in sales. (The slow-churn or double-churned processes apparently remove significant fat and calories.) No other new brand was above $135 million.

Related Pacesetter Content

Pacesetters, as IRI defines them, are products launched between February of one year and January of the next that reach two milestones: 30 percent national distribution and retail sales of at least $7.5 million. Once those milestones are reached, IRI begins tracking them in earnest over the next 12 months to determine the most successful new products in their first year of true "national" sales in food, drug and mass merchandising channels, excluding Wal-Mart.

"These brands truly beat the odds, since less than one-quarter of new brands exceed the $7.5 million hurdle for year-one sales that is required to earn Pacesetter status," explains Sunny Garga, president of IRI Business and Consumer Insights. "The Pacesetter report provides a detailed assessment of this year's winners to reveal the product benefits that resonated with consumers, the trends to watch for future new product opportunities and sales benchmarks to consider when evaluating new product introductions."
This past year was one of the most active in recent history for CPG new product introductions. Success rates, however, have changed little during the past decade, with less than 5 percent of new brands reaching $50 million or more in year-one sales, according to IRI.

CPG industry growth returned to a more historic norm in 2006, climbing 2.5 percent vs. 1.6 percent in 2005, the data-gathering company reports. In the face of rising distribution and production costs, CPG manufacturers and retailers stepped up price increases an average 4 percent, which contributed significantly to industry growth.

"After a lull in the number of new products offering convenience benefits over the past few years, convenience really made a comeback this year," says Sheila McCusker, editor of IRI Times & Trends. "A much higher proportion of new products offered added convenience in the form of easy preparation or take-it-with-me packaging compared to what we saw last year. This is great news for consumers, whose demand for convenience is as strong as ever."

Beverages continued to be growth leaders in 2006. New diet cola Coke Zero rang up $121 million in sales, and Gatorade Rain sports drink was just $1 million behind. Black Cherry Vanilla Coke sold $83 million.

Consumers embraced products, such as energy drinks and ready-to-drink coffees and teas, that offer health and wellness benefits, according to IRI. Aseptic juices and shelf-stable juice/drink concentrates lost ground as they are perceived to be more processed and less healthful, says IRI.

Without sacrificing taste and convenience, this year's leading new food and beverage brands reflect consumers' evolving health focus from pure weight management to total health and wellness, with several making it easier to eat healthier. While the blockbuster Kraft South Beach diet line offers weight management benefits, there is also a heavy focus on nutrition, including whole grains and "good fats" in the brand marketing.

"While health and wellness has been an increasingly important driver of consumer purchases over the past several years, the pace of change accelerated this year, with consumers rallying around new products offering nutrition and weight management benefits," says McCuster. "Particularly exciting is the movement into functional foods, which offer health benefits beyond basic nutrition. The success of Dannon Activia yogurt, for instance, has opened the door for other functional foods and beverages, and we will see more activity within this space."

Can they keep it up?

Of course, new product introductions usually are accompanied by heavy advertising and marketing support. As that support tails off in year two, so can sales.

Table 2 shows how last year's Pacesetters did in their second years. Unilever has two winners. The Slim-Fast Optima diet line seems to have caught on, as has Bertolli's Dinner for Two. But the passing of the low-carb fad meant precipitous sales drops for Kraft's Carb Well line and Coke C2, both of which are now off the market.

Despite concerns regarding obesity and a long-standing fixation on weight among American consumers, "light" food and beverage products posted slow growth in 2006, according to IRI. There is still a significant upside for lower-calorie and lower-fat products among select categories, such as indulgent snack and dessert categories, where light products are relatively undeveloped and light brands are enjoying strong growth.

Future growth potential in the better-for-you space will likely be strongest among organics, products offering specific health benefits, convenient nutrition, and healthy products targeting kids. Sales of natural and organic products have been quite strong during the past several years, and the segment is expected to continue to enjoy double-digit to high single-digit growth through the end of the decade.

"Clearly, a number of trends will impact new product development focus and opportunity next year, ranging from a rising number of gourmet consumers to a growing demand for eco-friendly packaging," adds Garga. "However, consumers' drive to incorporate more nutritious food and beverages into their diets will be the dominant force by far. The multiple dimensions of nutrition that are likely to drive significant opportunity for the next several years include convenient nutrition, kids' nutrition, functional nutrition that provides specific health benefits, such as protection from cancer and heart disease, and nutrition that delivers beauty benefits from the inside out."

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