Innovation Creates Opportunities for CPG Growth

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Innovation Creates Opportunities for CPG Growth

By Tom Pirovano - 01/04/2010
Throughout the recession, retailers and manufacturers have stepped up efforts to bring about innovation that seizes the moment and “drives the recession wave” rather than “rides the recession wave.” Winners in 2010 will continue to innovate in the form of new formats, service offerings and differentiated products — a list of best bets for 2010 is described below.

Winning Brands Will Innovate and Differentiate
Sales of store brands have grown by $12 billion (up 17 percent) vs. two years ago as shoppers focus on value. As the economy improves, value is still important, but smart marketers are differentiating brands through innovation — with new products, new flavors, new packaging, and with marketing/media campaigns with a heavy emphasis on social media to build rapid awareness and product trial. Brands that fail to innovate may also fail to win buyers back from store brands.

Product Assortment is a Point of Differentiation

Some retailers have followed the lead of Walmart’s “Project Impact” with cleaner aisles and limited assortment. Others have an opportunity to set themselves apart with a wider selection of products. Supermarkets that struggle to compete with Walmart’s prices will find an advantage with shoppers looking for variety. The trick is finding which categories require the broadest selection.

Healthy Eating is a Solid Measure of Consumer Confidence
As the economy improves, consumers will focus on health-and-wellness priorities. An increase in sales of foods labeled “organic,” “natural” and “high-fiber,” as well as diet aids and reduced-calorie/-fat frozen dinners and entrees, will be an indicator that consumer confidence is growing. Look for the first signs after the holidays, when consumers tend to start those New Year diets.

Manufacturers Get Stingy with Trade Promotion Spending
A whopping 50 million products each year — 43 percent of supermarket purchases — are sold with a feature ad, display or price reduction funded primarily by manufacturers. An increase in coupon activity and new advertising opportunities such as cell phone apps and in-store TV networks will stretch promotion budgets. Retailers need to demonstrate sales performance to get their fair share of trade funds.

Direct-to-Consumer Options Thrive

Online price wars and the squeeze on in-store assortment will fuel large and small manufacturers to give consumers options to buy direct from manufacturers or from online services from the likes of Amazon, Drugstore.com and Alice.com.