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Overstocked with ideas


That's how many items are carried in an average supermarket. It's also how many new products were introduced last year. It's a staggering number that will only get bigger. This year General Mills expects to introduce some 100 new products; Kraft has 61 in its pipeline, and just about every other manufacturer is coming out with a new variety, flavor, or package designed to boost sales. Some are even inventing categories.

New products are popping up throughout the store, but most appear to be in the beverage, snack, household cleaner, and foodservice categories, where consumers are demanding more products to make their on-the-go lifestyles easier.

"We're doing a lot more new-products work for our clients than in the past, in preparation for the upcoming economic recovery," says Jim Holbrook, president and c.e.o. of Zipatoni Co., a marketing services agency based in St. Louis. While many consumer packaged goods manufacturers have stepped up research and development to create new categories, others are trying to revive existing ones. "It becomes a tonnage game," Holbrook says. "You've just got to keep throwing stuff out there, because otherwise the buyers think the category is going stale and they cut space or turn their attention elsewhere."

"We're seeing an increasing proliferation of new products, but their success rate continues to diminish," says Russell Jones, v.p., consumer product retail & distribution, in the McClean, Va., office of New York-based Cap Gemini Ernst & Young. "The most successful introductions in many cases are not really 'new' products, but line extensions. It is a challenge for the CPG manufacturers to find the next hit. They spend a lot of time and energy around line extensions, which are probably not great revenue enhancers, and are probably stealing from other brands."

"The number of new products and SKUs has just escalated tremendously," says Steve Hyland, director, retail channel marketing, for Coca-Cola North America in Atlanta. "We all add SKUs because everybody knows that news drives volume. They know that to grow the category, or even for survival of smaller brands, they need to get retail space for [new items], even if they are not sure they are proven winners."

Some are questioning the value of many of the newcomers. "With failure rates estimated at 80 percent, and only 5 percent of new items actually contributing incremental sales to the category, manufacturers have a tough battle to demonstrate why their product should be carried," says Stuart Armstrong, a v.p. at Euro RSCG Meridian in Westport, Conn. The failure rate is so high because of a lack of pre-launch market research and testing. "Retailers become the testing ground and want to mitigate their risk with an 'in with the new and out with the old' approach within the same brand."

"When manufacturers roll out too many items, the marginal items never even make it to the shelf," notes Phill Schneider, center store v.p. at Big Y Foods in Springfield, Mass. "This is where the decisions get tough. What goes? And when a product goes, what customers are we upsetting?"

Many newbies are line extensions. Tide laundry detergent now comes in a wide variety of scents, and one even matches the scent offered by sister brand Downy fabric softener so clothes won't end up with some odor that's a weird hybrid of mountain and sea breeze. "Clearly, the trend is to leverage perennial—and potential—power brands into line extensions," says Alison Chaltas, a v.p. at Euro RSCG Meridian. "Establishing a new brand is much more expensive and carries significantly greater risk. It is easier to get a consumer to try a line extension from a brand they trust than an entirely new brand," she says, citing the popularity of Uncle Ben's frozen Rice and Breakfast Bowls, which build off the popularity of its mainstay dry rice.

"When Kraft introduces new products, retailers expect us to come forward with specific recommendations for product placement on the shelf," says Chris Hogan, senior director, sales information and technology, for Northfield, Ill.-based Kraft Foods North America. "We work with retailers using the Kraft Assortment Assessment tool and planogram software to identify the best shelf location. Sometimes the space comes from within the existing category, while other times it may come from outside."

It is important that new products fulfill a genuine need and not just cannibalize existing sales. While Vanilla Coke may take sales away from cream soda, the new Coca-Cola Fridge Pack—an oblong cardboard box holding 12 cans—is revolutionizing the case category. "Fridge Pack is the only innovation in 2001 that has actually grown the soft drink category," Hyland points out.

Determining what new products to carry is the question of all time for category managers. "Hopefully, there is a good test market report," Schneider says. "We look at how the category is doing, efficient assortment reports. We use our instincts, and most of all, we listen to our customers as to what they want."

Go, Frito, go!

Yoke's, a Spokane, Wash.-based chain of 10 stores, uses category management to determine new items. "We want to take on as many viable new items as possible, so we are constantly evaluating turn rates and whether or not items are performing," says Joe Hanson, v.p. of grocery operations. "Companies are investing a lot of money in research and development to capture that lightning in a bottle and gain market share." Space for new products is often taken from non-performing items. "The exception is when you get entire lines introduced, like Swiffer mops and Frito Go Snacks," says Hanson.

Frito Go Snacks, from PepsiCo's Frito-Lay division, is one of the hottest products this year. Go Snacks are mini shapes of Fritos, Doritos, and Cheetos packaged in an hourglass-shaped canister that's eight inches tall and has a screw-on lid that doubles as a bowl. They're so successful that they're already being copied by the competition.

"I've met with Nabisco, who is offering a similar package for their cookies and crackers," says Hanson. "They've watched Frito run their test markets, they know they are going to be successful, so they are introducing their own version. Nabisco has seen where Frito has taken the salty snack category, and they are diving on board with their Mini Oreo and Mini Ritz to capture the cookie/cracker segment of that."

The "Cookies &" line of combination cookie/candy bars from Masterfoods USA is also shaking up the cookie aisle. The bar-shaped shortbread with candy topping comes in Twix, M&Ms, MilkyWay, and Snickers varieties. "This is what we consider to be our first foray into the cookie aisle," says Tim Quinn, director of sales, developing snackfoods, at Hackettstown, N.J.-based Masterfoods. Judging from the response the line received at May's FMI Convention, and strong trade response, this is the start of something big, and could lead to other Masterfoods cookie items down the road.

Masterfoods hasn't given up on candy aisle innovations. Later this month it is introducing Starburst Sours in blue raspberry, cherry, green apple, and watermelon flavors. "We're backing this introduction with TV, print, radio, sampling, FSIs, in-store merchandising, Internet support, and book cover programs," says Scott Hudler, Masterfoods spokesman.

In addition to being backed by strong advertising, it helps if new products are unique. "We've adopted the theme 'The consumer is boss,' and we know innovation is our lifeblood," says Tami Jones, a spokeswoman for Cincinnati-based Procter & Gamble. "We've got to keep meeting the needs of consumers and putting things out there that are new, different, and really delight the consumer." P&G is now concentrating on its core $1 billion-plus brands, which include Tide, Pampers, Iams, Bounty, Folgers, and Crest.

One of the company's most promising new products is its line of ThermaCare Air-Activated Heat Wraps that offer up to eight hours of heat for sore backs and other muscles. "It's still very early, but our tests show we are actually growing the analgesics category," Jones says. Other strong new innovations are Swiffer Wet Jet, which purports to cut floor-cleaning time in half; Crest White Strips teeth whitening systems; Pampers Bibsters disposable bibs; and Pampers Wipesters unscented baby wipes.

Consumers calling P&G's toll-free number inspired some of these innovations. "Before we developed Swiffer Wet Jet we did a series of in-depth consumer research to understand household cleaning needs. We found floor cleaning is the second most dreaded household task next to cleaning the toilet, so we developed a product that could fully replace the mop-and-bucket method," Jones says. As testament to its success, competing products were quickly rolled out by Clorox, S.C. Johnson Wax, and others, creating a brand new product category that retailers had to squeeze into the household cleaner aisle.

Today, manufacturers are able to roll a new product onto the shelf faster than ever before. "Kraft continues to put significant focus against streamlining the total logistics around new product introductions," says David Borden, director, sales strategy. "We have developed improved systems and processes to expedite new product development internally and to increase speed to shelf after introduction."

Last year, Kraft generated $1 billion in revenue from new products, and $4 billion has been generated over the last five years. "Our new product focus continues to be on four key growth platforms that align with current consumer trends: convenient meals, beverages, snacking, and health & wellness," Borden says.

Red, vanilla & blue

The soft drink aisle is seeing a lot of product development. This summer Vanilla Coke, Dr Pepper Red Fusion, and Pepsi Blue, a fusion of berries and cola, will be hitting store shelves. "Without question, we've always said that innovation is our oxygen, and Pepsi Blue is the latest in a string of successful Pepsi innovations," says Bart Casabona, a spokesman for Purchase, N.Y.-based Pepsi. "Last year we became the industry's fastest-growing total beverage company, partly because we didn't lose focus on our core brands, but added some innovative products to our lineup that continue to bring news and excitement."

Some new entries are targeting pets. By teaming its Crest and Iams divisions, Procter & Gamble has developed a line of Eukanuba dog food with crystals that clean a dog's teeth as it eats. When P&G finds a way to marry that technology with its Pringles potato chips, the salty snack aisle better watch out.

Senior editor Richard Turcsik can be reached at [email protected].
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