New product innovation is the lifeblood of the consumer packaged goods industry. New products not only breathe new life into core brands, they bring fresh news to the CPG environment.
Even in the best of times, bringing new products to market is not an easy task, but the challenge is greater during prolonged economic instability. Maybe that's why total food & beverage launches slowed to 647 in 2010 versus 859 in 2008, according to Chicago-based SymphonyIRI Group, formerly Information Resources Inc.
Although sales improved in 2010, CPG companies were challenged by the Great Recession and significant changes in consumer spending habits, which may last a long time or possibly forever. People now consume products differently, and this tectonic shift in shopper behavior creates the need for manufacturers and retailers to rethink how they develop, package, price, merchandise and display products.
Some products amazingly beat the odds and make a splash. These products become SymphonyIRI's annual New Product Pacesetters. Only about one-quarter of new products meet Pacesetters criteria: products launched between February of one year and January of the next year (in this case, February 2009 through January 2010) that reach two milestones -- a minimum of $7.5 million sales in the first year across food, drug and mass channels (excluding Wal-Mart) and 30 percent national distribution. Then sales of these new products are tracked throughout the subsequent year with the best-selling of them announced each spring at SymphonyIRI's annual summit.
As for blockbuster status, only 3 percent of new products achieve year-one sales of more than $50 million (see table), with Coca-Cola's Powerade Ion4 (which helps athletes perform better with replenished electrolytes) landing the No. 1 spot. It's worth noting this is the first year in at least five that rival Gatorade did not land a product in the Top 10; also the first year Coca-Cola or PepsiCo did not place a carbonated soft drink.
Four of the top 10 products were beverages, with Glaceau Vitaminwater Zero, Tropicana Trop50 and Budweiser Select 55 rounding out that list. Just missing the top 10 list but an interesting product (with $50 million in sales) was Monster Nitrous, the first and only energy drink to feature nitrous oxide gas technology for added buzz.
"Innovating growth in a down economy," this year's theme, underscores the successful brands that raised the bar on consumer expectations. The most successful new food & beverage launches in 2010 served consumers' heightened emphasis on in-home consumption and health and wellness, and delivered on taste, variety, convenience and a bit of indulgence, according to SymphonyIRI's New Products Pacesetters 2011 report, the market research firm's 15th annual report on successful products and trends.
"These Pacesetter products are forever changing the CPG landscape," said Larry Levin, executive vice president of consumer insights at SymphonyIRI. "In spite of ongoing economic and market challenges, the manufacturers of these brands showed their grit in 2010. They invested to understand the roles their products could play in helping consumers navigate difficult financial waters. And they used that knowledge to develop and deliver powerful new products that are filling those roles quite nicely."
Breakfast solutions represented 34 percent of Pacesetters dollars, and salty snacks accounted for 22 percent; together representing more than half of new food dollars. Also on a successful rollout were juices, milks, waters (up 41 percent) and coffee and tea beverages (up 14 percent), outperforming sales of the past several years. In contrast, carbonated beverages share of Pacesetters fell 32 percent, and beer and wine dropped 13 percent.
Pacesetter brands bring new technology and ingredients to the table to excite consumers. Equally important, they demonstrate that, even in difficult times, taking risks can reap substantial rewards. New products coming to market without the support of established brand equity returned an average 57 percent higher year-one sales than imitative launches, according to SymphonyIRI.
Bringing more attributes to the table
Tropicana Trop50 juice and Budweiser Select 55 beer bring flavor with fewer calories to the marketplace. Trident brings flavor and texture excitement to the sugarless chewing gum category and is marketed as a "gumwich," a soft fruit flavored center layer sandwiched between two layers of fruit flavored gum.
Consumer passion for all-natural foods spurred sales. Wonderful Pistachios are all natural, Nature's Pride bread and Chobani Greek yogurt also fit into that category. Thomas' Better Start contains fiber and protein, less salt and fewer calories.
New brands – if they're successful -- historically outperform brand extensions. In 2010, new brands reaped much higher-than-average year-one returns ($42.4 billion), outperforming brand extensions ($26.4 billion) by 61 percent, primarily because of a few blockbuster launches. Nevertheless, brand extensions accounted for 88 percent of new foods and beverages last year.
Consumer trends within the food & beverage sector indicate consumers are shifting toward products that encompass convenient indulgence and wellness. Many consumers tried to eat healthier, trading soda for sports drinks or waters, and replaced junk food with healthier options, so the most powerful products were those connected with health and wellness. According to SymphonyIRI's 2011 Consumer Snacking Study, 71 percent of consumers are trying to eat healthier, and prefer more nutrients in their new products, and fewer less desirable attributes.
On the wellness front, 30 percent of Pacesetters launches (including Chobani, Wonderful Pistachios and Nature's Pride bread) offer natural and/or organic ingredients. Other popular benefits in these new products:
- 27 percent offer added vitamins/nutrients and high fiber/whole-grain benefits
- 25 percent are reduced calorie and lower fat/fat-free launches
- 12 percent provide energy/protein benefits
- 11 percent include antioxidants
- 10 percent offer no trans fat
- 6 percent are low salt/sodium.
Not surprisingly, many 2010 Pacesetters offer two or more of those benefits.
Buitoni Riserva pasta, Alouette Natural Crumbled cheese and Healthy Choice All Naturals are examples of successful products sticking close to nature. Also capturing the wellness dollars were Dannon Activia, a low-fat yogurt with fiber and cereal; Wheaties Fuel, with whole grains, B vitamins and fiber to curb hunger; and Progresso High Fiber Ready to Serve, with fiber in a reduced-calorie, low-fat soup.
Breakfast solutions represent one-third of Pacesetter dollars in 2010, up from a historical trend of 23 percent, including a strong performance by yogurt (seven of 32 products). Salty snacks innovation accounts for nearly 25 percent, more than doubling its historical trend of 9 percent, and capitalizes on growth opportunities in satiety, health and wellness, value and sustainability.
Four of the 12 new launches in the juices, milks & water segment were healthier-for-you milks, including Silk Almond Milk. Also doing well were products such as Apple & Eve Fruitables, a fruit and veggie juice targeting the youth market; Yoplait Smoothie, a quick and easy frozen yogurt drink; and YoCrunch 100 Calorie Cup, which takes the guesswork out of calorie counting. As for indulgent beverages, Kool-Aid Fun Fizz, fruit-flavored tablets that fizz in water, is an innovation. Home-based indulgences such as single-cup coffees by Newman's Own and Green Mountain are hot.
Convenience is a long-standing and well-entrenched trend; in fact, an expectation, often playing a secondary role to newer and/or evolving desires. One-third of consumers eat snacks in place of meals today, and 30 percent seek snacks that can be eaten on the go.
Innovation around bite-sized and hand-held foods and beverages escalated sharply last year, accounting for one-quarter of new successful launches. In the gum/candy category, bite-sized products, such as Hershey's Pieces and Skittles Crazy Cores, offer convenience and excitement to the snack occasion. Del Monte Fruit Chillers and Dove Bar Miniatures address healthier and more indulgent. Hot Pocket SideShots and DiGiorno Flatbread Melts add convenience in both snacks and meals for the on-the-go consumer.
Innovation in taste and variety is very hot, bringing fun and excitement to everyday eating occasions. Stouffer's Easy Express line includes a wide range of meals. Doritos Late Night tortilla chips offers great crunch and fun for snackers, Special K Fruit Crisps satisfy your sweet tooth without derailing healthier eating efforts. Texture innovation – ranging from thick and creamy to crispy and crunchy -- was apparent in nearly one-quarter of new products.
Old is new again with the launch of Pepsi Throwback and Mountain Dew Throwback. Smashing successes, these products are made with real sugar, and the packaging and taste appeal to consumers' nostalgic side and capture their "taste for the past."
Although consumers tightened their belts on indulgent products, those options certainly have not gone away. In fact, consumers still are willing to purchase treats occasionally, and candy and gum launches represent 11 percent of Pacesetter dollars, versus a 6 percent average in prior years.
But consumers are still quite cautious. They do not want to waste money on an unknown new product that may disappoint. It's notable that in 2010, pantries held fewer products (369 SKUs versus 404 in 2007), which underscores the urgency for products with maximum relevancy for impact.
So congratulations to the 2010 Pacesetters. And don't forget to let Rollout know when you have a new product coming out – e-mail me at email@example.com.