CPG, See What Playing safe Got You!

March 30, 2010

In most years, new food brands outsell brand extensions.

In most years, new food brands outsell brand extensions. The reverse happened in 2009, however: more than 90% of New Product Pacesetters (as determined by Symphony IRI Group) were brand extensions with year-one average sales of $28 million, nearly double the new food-beverage brand sales rate of $15 million.

At The Lempert Report, we call that playing safe in the recession, playing off of established brands to bring out new varieties that might be lower calorie, lower sodium, or be in different packaging, as examples. To us, it shows CPG erroneously thinking that consumers reining in their spend during a tough time are also reining in their imaginations and demand for innovation.

We think the lack of wide-scale true, original new-product innovation in 2009 helped open the door wider for private labels to earn market share gains in categories throughout the supermarket. Why not? People are finding PL to often be as good as many name brands—and if there’s no new differentiating aspect, why not save some money?   

If anything, consumers more challenged to make ends meet, not only in the money they spend but in the time chores take—particularly if they are scrambling with multiple low-paying jobs to make their monthly budget, and somehow finding time to prepare more meals for eating at home as they eat out less. They need solutions. They need brands to keep seeding their consumption with innovations that help make mealtime easier and healthier.

What we are saying doesn’t diminish the standing or value of many of the Pacesetters named by Symphony IRI Group (though we should note that one of the Pacesetters, Gatorade Tiger/Focus is already off the market, likely because of its celebrity tie-in). We are speaking generally of the misplaced notion by CPG that 2009 was a year to coast on stretch innovation because they felt consumers would continue to spend less. What CPG did (or actually didn’t do) played just as big a role in PL expansion in this recession by not setting the product performance bars higher.

We’d hate to think that CPG simply failed to invest in true innovation because the companies were trying to save money. That would be even more of a disservice—to consumers, to retailers who want excitement in their categories, and to CPG companies themselves that need to differentiate.