Line extensions set the pace

by Allison Gibeson
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Product innovation is the most frequently cited way food and beverage executives say their company will drive revenue growth during the coming years, according to a survey released in July by the consulting firm KPMG L.L.P., New York. But research also suggests this has not been easy in the current economic environment and innovation today is much more niche-oriented.

“We do see manufacturers are looking to drive growth through innovation,” said Susan Viamari, editor of Times & Trends, a newsletter published by the SymphonyIRI Group, a Chicago-based research firm. “That was not super easy to do this year as consumers were very conscientious and a little bit more hesitant about buying new products.”

Ms. Viamari said SymphonyIRI research shows 46% of consumers tried new products in 2009. But that percentage reflects net new products, and consumers are much more likely to try line extensions than a completely new product because there is some level of comfort in the quality expectation. In fact, many of the New Product Pacesetters tracked by SymphonyIRI in recent years have been line extensions, even though historically new brands outpace brand extensions.

SymphonyIRI Group, Chicago, has been tracking what it calls New Product Pacesetters for the past 15 years, and to make its list a product must achieve $7.5 million in year one sales across grocery, drug and mass merchandising channels, and the research firm begins tracking products after they reach 30% distribution.

Another reason the market has seen so many line extensions is the advent of new technologies enabling line extensions in the forms of flavor or texture innovation, flavor combinations and added attributes like antioxidants, she said.

“C.P.G. manufacturers are definitely using innovation effectively,” Ms. Viamari said. “I think there is a lot more niche-market innovation going on that we’ve seen. So you are still driving growth, but you are driving it in a different way. Rather than casting a broad net, you are trying to target the innovation a bit more. And I think that’s successful.”

For example, she said in the cereal category there is greater focus on organic products, and in snack and granola bars high fiber is grabbing hold. Both organic and high fiber products are designed more for niche markets, she said.

While convenience has been a significant factor in recent years, Ms. Viamari said consumers expect convenience in food and beverage products — relegating it more to a secondary attribute.

“We are going to continue to see the wellness trend,” Ms. Viamari said. “We have three-quarters of shoppers, based on our surveys, who are looking to find meal components to make a quick and easy healthy meal.”

With regard to healthier products, this past year 30% of SymphonyIRI’s New Product Pacesetters featured nutrient claims, such as soy or calcium, 22% had high fiber/whole grain claims, 23% had reduced calorie claims, and 16% had natural/organic claims.

The New Product Pacesetters for 2009 included Campbell’s Select Harvest, Arnold Select Sandwich Thins, Green Giant Valley Fresh Steamers, Dreyer’s/Edy’s Fun Flavors, Gatorade Tiger/Focus, Mountain Dew DEWmocracy, Bush’s Grillin’ Beans, and Kellogg’s FiberPlus Bars. Campbell’s Select Harvest, the top selling product on the list, had year-one sales of $202 million.

Some products SymphonyIRI considers rising stars and is tracking for the 2010 list include Thomas’ Better Start English Muffins, Healthy Choice All-Natural Entrees, Glaceau Vitaminwater10, Marie Callender’s Pasta Al Dente and Dannon Danimals Crushed Cups. Overall during the recession SymphonyIRI has seen declines in the number of Pacesetters coming from the snack and granola bars and cereal categories. The frozen dinners and entrees category as well as the crackers category have increased in the number of pacesetters. Ms. Viamari attributed the increase in the categories to the fact frozen dinners are quick, easy and may be prepared from home, and crackers are a snack consumers may bring from home.

SymphonyIRI also said products that have a sensory appeal and those with sustainability claims may be successful in the future, according to its 2009 New Product Pacesetters report. The research firm said consumers view eating as an experience and food companies are introducing “jazzed up” versions of previously introduced products as well as new flavors and flavor combinations that bring excitement to eating occasions. Technology also is playing a role in this trend by helping preserve food freshness and flavor. In addition, food companies are redesigning packaging to use more earth-friendly materials and reduce overall packaging.

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