Despite recent news indicating the pace of new product introductions has shrunk dramatically in the CPG space (-51% first quarter vs. YA, according to Mintel see earlier blog), new products are an important and welcome bright spot in the consumer’s everyday life. Particularly those that impart some special value to that particular consumer.
Some of the beverage manufacturers are bringing to market products that continue to give their consumer a tasty and perhaps enhanced (sports drinks) alternative to water, while at the same time recognizing that times are tough and water is less expensive that some other beverage alternatives, and tap water is free. To that end some new smaller individual containers of beverages have emerged. Seems like a pretty good response to the times. However, even with a reduced current focus on new items, the introductions that ARE being made face the same challenges in “meeting the consumer at the shelf” as always. ShelfSnap tracked a multi item, new size introduction not long ago in the top traditional grocers in a top ten DMA. Some examples of the inconsistencies:
- The number one grocery chain, had distribution of some of the new items in EVERY store
- The number two chain had zero distribution of these new size/flavors. This means more that 20% of the shoppers in the DMA would not find this new item in their primary shopping location. In these times, consumers are significantly less likely to shop multiple outlets, which means that this manufacture is starting off with less than 80% of the potential for these items that they might have hoped for. Further, this means that media and consumer overlays are starting out 20+% less effective than they could have been.
- The objectives from the manufacturer were to have three facings of each flavor on the top shelf. In the first chain they hit the top shelf at 100%. The facing/assortment performance came in at 83% (more…)
150,000 closed stores in 2008. Projections are for MORE closed stores in 2009.
For those who are struggling to survive MVI reported some of the prevailing philosphies that are being carried out at retail today. Those include:
- Building/preserving cash profit is certainly more important than customer revenue maximization.
- Avoid building assets rather than make assets more productive.
- Fear inventory.
I am sure that these strategies will help IF all of the competitors follow suit. However, the store/chain that chooses instead to take Paco UnderHill’s advice and “never leave a dollar of earned demand on the table” would have a significantly different strategy that might offer the consumer a real difference, that should lead to more sales, more loyalty and loyalty for the right reasons.
There were some pretty good speakers and pundits (in addition to yours truely of course) at the NARMS Conference in Colorado Springs at the beginning of the month. It snowed the Sunday afternoon before the Monday noon tee time and I think that kept a few attendees…in attendence. That’s a good thing. MVI, Paco Underhill and Jamie Tensor from the In-Store Implementation Share Group all had some very interesting observations about the state of the industry in these troubling times. I think I liked this one best: “In-stocks are paramount to shopper satisfaction. You cannot leave a dollar of earned demand on the table because of retail conditions.” earned demand…at least my definition is fairly simple. The consumer for one reason or another has decided to spend his/her money on that item in your store. MVI told us that from the consumer’s standpoint “where I am beats, where I am going” (in other words I want fewer shopping destinations for basics…so don’t make me go elsewhere!) I would say this is pretty sage advice….recession or no recession. Consumers come into CPG retail stores to meet and buy merchandise. They do not come for clean stores, friendly service, lower prices or proximity. If the products they want to buy are not predictably in the store, none of those other things matter. If the products they want to buy are not predictably in any of the avialable stores then they need secondary sorting criteria which includes lower prices, proximity, cleaner stores or friendly service. Offer consistent…predictable shopping results from a merchandising standpoint - head and shoulders above the competition - and you will convert AND hang onto a bunch of consumers.
First quarter new CPG product introductions are off 51% vs. year ago, according to MINTEL who track such things. Hmmmmmm. What is that a sign of …really? Surely the new product pipeline has not shifted down to that degree so quickly. There were some signs in early to mid 2008 of some change in new product pacing and focus…primarily related to downsizing and simplifying in order to hold prices which were under pressure from rising commodity and fuel costs. But 51%? Methinks not. I suspect we have seen a slow down in introductions due to the cost of launch and the suspected mood of the consumer that “new” actually means cheaper or substitute or eliminate altogether. Further to the retailer “new” means additional inventory, which even when offset by slotting fees or favorable terms still means costs or inventory assets…when asset avoidance seems to be the rule of the day. Still we see new products being introduced with great vigor in the private label arena by players like Wal*Mart and Kroger…. Of course building a bigger target when consumer’s are aiming in that direction would seem to be a smart and prudent move. What will the consumer think as they encounter new items and introductions from the retailer, while the CPG powerhouses sit on the sidelines? It would seem that some reflection on the new product additiction that the CPG food-chain (Manufacturer, retailer and consumer) might be in order. The backlog sitting in manufacturer development labs, test facilities and warehouses might benefit from some scrutiny and culling which might just yield a stronger 2009 “class” of new products. This could coincide nicely with a bit of consumer enthusiasm as they start to shake off the bad news/crisis de jour blues and look for something enticing, not too expensive but out of the hum-drum to add a bit of fun to their diet. It might also give retailers and manufacturers something to talk about other than price for a change. However, I am not too sure that the new product proliferation pace and nature won’t also be a victim of these times. “Clean stores”, increase PL representation, smaller formats, and the ever-popular SKU rationalization (which fly’s in the face of consumer taste fragmentation but….) will add pressure on all marketers to be “more serious” about their new offerings, at least for a time. In some ways that is too bad. We should have some dumb, fun choices.
