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Making The Grade


Battling an 86 percent failure rate, successful grocery products must fill unmet needs and improve on what's available.

If supermarket products were university students, the U.S. educational system would be in shambles. Every year, more than 10,000 CPG items are introduced but fewer than 16 percent succeed—a bit more or less depending on the category and which expert is talking. ■ Like parents paying tuition, manufacturers pump billions of dollars into research and development. But a new product cannot thrive unless it improves upon current offerings. It must also meet a consumer need, deliver on what is promised and be relevant to the brand it stands for. And, it should be appropriately priced and promoted.

"It must be better than 99 percent of what's out there," says Kevin Price, president of Market Performance Group Inc., Fairfield, Conn. "Then, the consumer will reach into their pocket, hand over money, and the retailer and supplier will be happy. If it isn't better, it's just a dog fight. But before all that happens, you must understand what 'better' means. While this is absurdly obvious, few companies do it."

According to Information Resources Inc. (IRI), Chicago, 84 percent of non-food items and 77 percent of food and beverage products generate less than $7.5 million annually. Fewer than 3 percent achieve year-one sales of more than $50 million.

Still, traditional supermarkets are the preferred channel for introductions. Upscale fresh and discount food stores are growing faster and do not charge slotting fees. But assortments are limited, particularly in center store. "Supermarkets have always been the target and still are due to market share," says John Rand, senior vice president at Kantar Retail, Cambridge, Mass. "Even with all the new formats, 55 percent of CPG and edible grocery is sold in supermarkets. People shape new items for this channel, even though there is so much competition."

Most new products are not revolutionary. They are line extensions involving mild changes to the original (e.g., a new flavor, size or package). Others are "me-too" responses to competitors' introductions. While the first strategy is okay, it will not transform a category. The second can work if the new item is priced lower than the original.

Both tactics are often defensive. "It's the emperor's new flavor in toothpaste," Rand says. "They're doing it to establish a shelf presence, block other brands and gain better visibility."

These tactics are less risky than introducing a drastically different item into a mature channel. CPG sales in food, drug and mass (excluding Wal-Mart) grew just 2.57 percent to $365.5 billion between 2003 and 2011, according to IRI. Units grew 0.27 percent to 31.5 billion.

Much of the growth of CPG—along with dairy— depends on increasing dollar volume more than unit volume. While risky, true innovation is the only way to accomplish this. Additional toothpaste flavors, for example, will not make people brush more. But when whitening products were introduced a few years ago, a whole subcategory was born.

Dairy has seen the introduction of heart-healthy, lactose-free and non-dairy beverages made from soy, coconut and rice. These command higher prices than regular milk but occupy equal square footage. "With dairy in particular, you're dealing with fixed space," says Neil Stern, partner at McMillian Doolittle, Chicago. "If an item goes in, one must go out. Many supermarkets were built 30 years ago with 32 feet of dairy. Look at the category then and today and you see the problem. The same with eggs. There were three kinds, now there's a dozen."

Spreading the Wealth

Once a supplier creates a winner, the next step is to maintain the excitement through additional items. This is the case with Procter & Gamble's Swiffer line, which now includes other successful floor-cleaning items—despite overall consolidation and shrinkage of the stick-goods category. "It started as an electrostatic mop, then went to Swiffer wet, then hard floor, linoleum and lemon-flavored products," Stern says. "The product was innovative and it sells at a pretty high price."

Innovation has also driven craft beer, with Sam Adams and myriad small companies constantly introducing products. "Sam Adams comes out with all sorts of beers," says Gary Stibel, founder and CEO of the New England Consulting Group, Norwalk, Conn. "Many aren't intended to last forever, like seasonals. They know craft beer drinkers want change, so they keep the brand novel."

Some CPG brands can be extended into new categories. But the brand has to translate and perform as well as the core item. "If you put your label all over it and it's a label of trust, you could hurt yourself," says Manny Picciola, vice president at L.E.K. Consulting, Deerfield, Ill.

Sometimes, a good idea does not carry over. Israel Rodriguez, principal at Edgewood Consulting, Parsippany, N.J, pointed to the failure of A1 Poultry Sauce. Shoppers could not think beyond steak. "A1 was a good idea that morphed into a bad one," he says. He also notes the wide-ranging success of Dole, which appears in fresh produce, canned goods, frozen popsicles and other areas. But everything there relates to fruit.

New introductions or line extensions must also be what Ray Jones, managing director at Dechert-Hampe & Co., Northbrook, Ill., labels "experiential." In this case, an item's meaning goes beyond the product and its intended use. It makes the consumer feel a certain way, can have social implications and may relate to how a person defines him/herself. This is particularly evident in beverage alcohol and apparel.

Sore Losers

There still are potential pitfalls to launching successful products. One is introducing something nobody really needs. Case in point was Starbucks' Cream Liquor. Unveiled in 2005, it was discontinued in 2010. Consumer taste reviews were positive. But at $24.99, it cost more than Bailey's Irish Cream, the established brand. Another popular label, Carolyn's is cheaper than Bailey's. But the cream-liquor category is small and has no room for three major players—even though the Starbucks taste worked well.

Barilla's Restaurant Creations pasta sauces also failed due to lack of need—despite winning awards for the product's unique, two-tier jar packaging (Packaging World, Feb. 28, 2006). The product involved mixing two prepared sauce ingredients. But this "in between" pasta preparation position may have hurt.

"They spent a lot to get it right and it didn't gain traction," said one analyst. "There's a segment of the population that wants to make sauce from raw components. At the other end are people who want ultra convenience and don't want to mix anything. Being in the middle didn't work."

Companies can also mistake a fad for a trend. This happened a few years ago with low-carb foods following the South Beach diet craze. Many manufacturers were burned.

"They loaded up shelves with 100 SKUs in every category and it was a huge fiasco," says Ben Ball, vice president at Dechert-Hampe, Northbrook, Ill. "Sorting trends from fads is hard because fads are so visible, communicate so broadly and propagate quickly in today's information world. They can be meaningful but have a short life cycle."

Some categories, such as nutritional supplements, are driven by fads. Category managers must stay on top of them. "Gummy vitamins and vitamin D are really hot now," says John Ferramosca, principal at Edgewood Consulting, Parsippany, N.J. "The question is, what is the next gummy?"

Generally, supermarkets are not set up to jump on fads. They are about distribution and replenishment. "This isn't an environment or business system to exploit fads," Ball says. "It moves too slowly. Data and culture are all orchestrated around taking lots of items and frequently replenishing them in many locations. That shouldn't change."

But speed to market can be important with hot new CPG items. Rodriguez says speed varies by retailer, with slower chains taking up to 13 weeks. "This is a whole fiscal quarter slower. They aren't telling shoppers they're the place to go when something comes out. Wal-Mart's supply chain is much more efficient."

For minor launches, speed is less important. For major ones, like P&G's highly successful Tide Pods, the product should be on the shelf within three weeks. "If it's being launched off cycle from their shelf reset, they'll get manufacturer funding," adds Rodriguez. "For minor launches, the retailer can wait for the next reset."

Today and Yesterday

It is much harder to launch new products in grocery stores today than it was 20 years ago. In addition to the channel's maturity, costs have escalated tremendously. "Cost is the big impediment," Stibel says. "It's more expensive than ever."

A fragmented market with more ethnicities and lifestyles also presents challenges. Some companies have not reacted. "They don't have a homogenous audience anymore," Rand says. "While there are now many working mothers, for example, nobody is targeting men who shop and cook."

The growing private label segment is another barrier. Private label can occupy 10 percent to 30 percent of shelf space, Picciola says. "There's much more competition, with three brands plus private label fighting over space."

Some companies are bypassing grocery and making introductions in specialty stores, club stores or elsewhere. This eliminates slotting fees and other pitfalls. If the item succeeds, supermarkets will request it. Chobani Greek Yogurt, for example, entered specialty outlets first since the company was initially too small to introduce and back products in supermarkets. Today, it has displaced many supermarket dairy items.

"We're seeing variations on the path to market with some items crossing over," Rand says. "Chobani is a good example of both ends of the spectrum. The strategy works particularly well with natural and organic products. If the product is taken by Whole Foods or Sprouts, it becomes more compelling to general retailers. It's easier to go from specialty to the general market than the other way around."

This also happened with Nutela. The hazelnut spread was sold in specialty stores for 30 years. Two years ago, following what Ferramosca calls a "terrific marketing program with outstanding sales support," it went mainstream. "They also successfully communicated with retailers on how to merchandise it for visibility and did social media. Everything took off like a rocket."

Some companies bypass food channels altogether. This works well with candy. "The biggest growth has been in other channels," Jones says. "Our clients sell tons of candy in Bed, Bath & Beyond and OfficeMax."

Maybe all those sheets, towels and paper shredders activate the sweet tooth. Perhaps supermarkets should cross-merchandise dental floss near gummy vitamins—while gummies are still a fad, that is.

Every year, more than 10,000 CPG items are introduced but fewer than 16 percent succeed.

Generally, supermarkets are not set up to jump on fads. They are about distribution and replenishment.

2012's Biggest Hits

By all accounts, two of the most revolutionary products of 2012 were Tide Pods and Chobani Greek Yogurt. Both fit all the criteria for success. But they are from opposite ends of the spectrum and followed very different paths to purchase: Tide Pods was developed by CPG behemoth Procter & Gamble; Chobani was produced by a small company with no ad budget.

Tide Pods is an improvement over other laundry detergents in that the dissolvable, concentrated balls are very portable and eliminate the need to measure liquid detergent. The product delivers on the "brand promise" in that it performs like Tide liquid. But it costs more, making shelf space more profitable. As is usually the case with P&G, the Tide Pods introduction was backed by huge, integrated campaigns involving traditional advertising and other media.

"Historically, P&G has always produced items that have altered their category," says John Rand, senior vice president at Kantar Retail, Cambridge, Mass. "They're not 'me-too,' they're the gold standard."

After starting from scratch six years ago, Chobani generated almost $1 billion in 2012—up 54 percent over 2011, according to (Nov. 12, 2012). This brings it closer in size to dominant players $1.3-billion Yoplait and $1.2-billion Dannon. In addition to having the health benefits of Greek Yogurt, Chobani comes in unusual flavors such as pineapple and pomegranate and has a shiny, noticeable label. It is also cheaper than other Greek yogurts and has not limited distribution to specialty stores where it was first introduced.

In addition to aggressively using social media, Chobani persuaded supermarkets to let it conduct sampling rather than pay fees for shelf space, according to It later sponsored the 2012 Olympics and Paralympics. "Greek yogurt has redefined the yogurt category with a unique taste profile," says Don Stuart, president and chief executive officer at Kantar Retail. "They also caught the tide at the right time."

Over time, other products have also been big winners, huge fiascos or disappointments. While not comprehensive, the list on page 32 cites some of these items. Some are newer introductions, others are classic examples of what works and what does not:


Non-dairy: Non-dairy milk beverages brought new taste profiles, higher sales per square foot and are alternatives for the lactose intolerant.

Craft beer: There is always something new and different and the price is higher than for everyday stuff. The more obscure and unknown the product, the better.

M&M Pretzel: Introduced in 2010, the sweet/salty mix opened up a whole new set of taste profiles.

Vodka: The three-tier distribution has traditionally limited the number of products and players. By introducing flavors, premium labels and organic products, suppliers have heated up the competitive landscape.

Soup: Campbell's Soup knows how to pair the old with the new. Since it introduced its first soups in 1869, it has done well with decades-old favorites as well as new flavors, convenience packaging and gravity-fed merchandisers.

V8 Juice: Campbell's is a powerful V8 engine when it comes to tomatoes, too. Over the years, it has successfully diversified the concept to new formulations, such as V8 Splash, V8 Fusion and large plastic bottles.

Jerkey: Beef jerky is an old category with new twists including turkey jerky, low-sodium and low-nitrate products. This has diversified the segment and made it healthy and wholesome.

Wrigley's 5 (2007): Stick gum sales have been declining among young adults. Wrigley 5 makes gum cool again with 17 robust flavors, great scents and sleek black packaging--all backed by futuristic advertising. Micro packs were added in May 2012.

Gillette Fusion (2006): The five-bladed razor has been in such demand that retailers in iffy neighborhoods often lock it up. But many consumers are willing to pay more for a product that really provides a better shave.

Granola Bars: In 1975, General Mills averted disaster. Believing the latest health craze would stick, it increased production capacity for granola cereal. The momentum died and the company needed to do something with all those hills of granola.

Dole: So long as it involves fruit, the label works.


Super low-calorie (less than 100) beer (2000s): It tastes awful and hardly has any alcohol—get real, nobody drinks beer just for the flavor.

Barilla's Restaurant Creations: (2004) While the two-chamber, stacked jar packaging concept was neat, nobody wanted to mix packaged ingredients. They would rather make pasta sauce from scratch or buy it completely pre-made.

Grandparents Day: Grandparents Day was first proclaimed in 1973 by West Virginia by Governor Arch Moore. (Okay, this is an occasion, not a product.) But only greeting card companies got excited. Consumers preferred to honor grandparents on Mother's and Father's Days. Lesson learned? Only dead presidents should get new holidays.

A1 Poultry Sauce (1980s): Isn't it supposed to say steak?

Starbucks Cream Liquor (2005-2010): It was more expensive than Bailey's Irish Cream, the dominant brand. Another popular label, Carolyn's is cheaper than Bailey's. But the cream-liquor category is small and had no room for three players. Maybe Starbucks should join the flavored-vodka craze.

New Coke (1985): It was a historic disaster. Why fix what ain't broke?

Low-carb Movement (2003): Need we say more? Suppliers put so much faith in this big fad that by late 2004, they were donating surplus low-carb products to food banks in Appalachia.

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