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By Diane Toops, News & Trends Editor | 04/15/2010
To say that 2009 was a difficult year in the consumer packaged goods business is a tremendous understatement. Perhaps the most challenged component may have been new product introductions. There's a very low success rate in the best of times, so 2009, a year of recession and change, did not bode well for new product launches.
Cash-strapped consumers were not as willing to take a chance on a new food or beverage product, and many were forced to trade in their brand favorites for private label substitutes.
Sensing consumer sentiment correctly, it is no surprise that 93 percent of new products launched by the industry were brand extensions (often just tweaks to existing offerings), according to the 15th annual Pacesetters report from Chicago-based SymphonyIRI Group (which in March changed its name from Information Resources Inc., as it expands into innovative new value solutions for its clients).
Pacesetters are those 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 in year-one sales across food, drug and mass merchandise channels (excluding Wal-Mart). So for this year's report, these Pacesetters were launched between February 2008 and January 2009.
Even in good times, less than one-quarter of products achieve this benchmark. Successful launches that do not complete a full year of sales between those dates are considered Rising Stars for the following year.
In good times and bad, new product innovation is a key driver of CPG growth. Over the past 15 years, less than 3 percent of new products achieved mega-hit status, or more than $50 million in one-year sales.
"Until a few years ago, a 'successful' launch was typically one that earned more than $50 million in first year revenue," explains Thom Blischok, president of global innovation and strategy at SymphonyIRI. "As CPG manufacturers and retailers become increasingly sophisticated in segmenting and targeting consumers, down to literally the household level, they are also executing much more focused product launches. In the future, it is very possible a successful launch may be one that earns significantly below the historic $50 million first-year revenue benchmark. As a result of successful targeting, though, there may be many more of these successes."
In 2009, new food & beverage product activity dropped to 659 products compared to 859 in 2008. Despite consumers' conservative attitudes, year-one sales trends for 2009 New Product Pacesetters were quite similar to those spanning the last decade. For the year, about 80 percent of new product launches achieved less than $7.5 million in year one sales. But, from a dollar sales perspective, 2009 food and beverage introductions outperformed non-food products, and the top five new brands each achieved more than $80 million in year-one sales.
New brands vs. extensions
History shows that food & beverage marketers frequently choose brand extension as a means of bringing new products to market, and this trend continued in 2009. After all, they bring fresh news and vitality to core brands with less investment and shorter lead times versus new brand innovation. New food brands usually outperform brand extensions, but in 2009 food and beverage extensions garnered substantially higher year-one sales, on average, versus new brand introductions.
Marketers who have established strong brand equity are working to maintain relevance by "tweaking" existing lines. Campbell's Select Harvest soups, the top-selling food and beverage introduction of 2009, is an example of this type of product evolution. That's particularly important, since SymphonyIRI's 2009 Economic Update survey found 46 percent of consumers are trying fewer new products these days.
To combat this reality, new product introductions are becoming increasingly targeted. Bud Light Lime, for instance, is a successful new launch with niche-market focus on those who like the taste of lime in their beer. Kellogg's FiberPlus bars make eating healthy enjoyable. A high-fiber snack with antioxidants, vitamin E and zinc, the bars help consumers achieve their wellness goals without sacrificing indulgence.
More than 80 percent of successful new food and beverage products over the past year bring added variety to the marketplace. In an industry that serves consumers with shrinking pantries, this is a startling trend, and it is not expected to change in the near future. It speaks volumes to the need for consumer-centric marketing – from new product innovation to package design to distribution/assortment to communication across marketing platforms.
Key benefits centered on health and wellness, convenience and excitement. As technology evolves, CPG marketers have successfully brought these benefits to market across a variety of products.
The year's most successful food and beverage innovations deftly capitalized on consumers' drive for at-home and from-home meal and snack solutions that provide a mixture of nutrition, convenience and indulgence.
Products with wellness benefits dominated the most successful new product launches, and of those the themes were potency and efficacy. But today's consumer is driven by value. Consumers are planning carefully to get the most from their money.
High fiber and whole grain product attributes continue to be in high demand, and CPG marketers are feverishly working to capitalize on this opportunity. In 2009, products touting grain claims accounted for 4 percent of CPG sales, and are increasing in number. Unit sales of products with grain claims climbed 3.4 percent for the year, and 22 percent of the Pacesetters tout high fiber or whole grain claims. In it's first year, Yoplait Fiber One yogurt garnered $26.6 million in sales despite a difficult economy.