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