Food and Beverage Manufacturers Increasing Number of New Products Developed

Oct. 23, 2013
The food and beverage industry shows signs its R&D engines are revving again.

The area of food marketing that fascinates me the most is new products. They are so important to the life of a company, but generally have a high failure rate. In many food companies more than 50 percent of the current revenue comes from products that were not in the product line five years earlier. New products are tied to the ability of a business to remain competitive and also to the longevity of such a business.

It is estimated that the failure rate for new products launched in the grocery sector is 70-80 percent. With smaller food businesses, the new product success rate is around 11 percent. These numbers represent significant lost resources in terms of both money and management time.

One of the areas I investigated in the past was "How are new products introduced?" After all, we all agree that we only get one chance to make a first impression. How do America's food companies make their first impression? Alternatively what are the various launch types used to introduce new food products? I also wondered whether the U.S. food industry introduced new products any differently than other parts of the world.

Using data from the Mintel Global New Product Database 2009 and 2011, I was able to identify the various types of new product launches used in the U.S. The launch types included:

  • New Product: This launch type is dependent on the brand. It is assigned when a new line of products is launched. An example is Goya making new frozen meals.
  • New Variety/Line Extension: It is used to create an extension to an existing range of products. An example is Healthy Choice frozen meals getting into vegetarian meals.
  • New Packaging: This is a launch type that has a New Look, New Packaging, or New Size written on pack. Example: Hellman's mayonnaise in a squeeze bottle, a pop top on a soup can, etc.
  • New Formulation: This launch type is determined when terms such as New Formula, Even Better, Tastier, Now Lower in Fat, New and Improved, or Great New Taste are indicated on pack.
  • Re-launch: This launch type depends entirely on secondary source information (trade shows, PR, websites, and press). It is using new media to get the same product to a new audience or the same audience via a new medium.

How frequently was each of these introduction methods used between 2009 and 2011? The most frequently used launch method for new products was New Product with 41 percent of all launches being basically new products. I think this is good news for the food industry because it implies that the R&D functions are working again, after years of relying primarily on line extensions to get new products into the market. My personal opinion is that some of our new product development has gotten a little stale as research budgets were cut, and simpler new product solutions were sought.

The second most popular launch method was the traditional brand extension, with 34 percent of the launches. I always think of this as the "lazy person's" route to new products. I am appropriately criticized for calling it this, because it's a lot of work to produce any new product, anyway you launch it. However in many cases this launch type is often a new variety of the same spaghetti sauce, a new flavor of a condiment, a new vegetable in a frozen meal, etc. The rush to put "new" on the package often leads a company to make the most modest changes to existing products.

New packaging is the third most frequently used launch method with 21 percent of the launches following that type. I believe that these new products are often more innovative and more focused on solving the customers' problems. I love the squeezable ketchup bottles, so that I no longer have my hands covered in the product as I reached the bottom of the bottle. I believe new packaging is a way to entice non-users into the brand family or to get existing users who use the product to use even more. I think we'll see new packaging become a more important launch type in the future as technology and new packaging materials make these more available.

You may find it interesting to know that most of the world also uses new products as the most frequent method of new product launches. The EU (48 percent ) and China (54 percent ) use the new product launch type even more frequently than we do in the U.S. Korea and Japan use the more traditional line extension (45 percent) as their primary new product launch method.

After years of having line extensions be the primary method of new product introduction with the highest failure rate of any method, the food industry has again focused its attention on R&D in an effort to create great new products for our great consumers. This means your competitors may be looking at new products and new packaging for the future. Maybe we all should be tooling up our R&D efforts.

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