New Product Innovation and Digitization Key to Drive Growth for Large FMCG Brands
The archetypal tale of David and Goliath is unfolding between small craft or start-up brands (David) and large fast-moving consumer goods (FMCG) companies (Goliath). In a recent Financial Times article, Bain & Company stated that these Goliath FMCG companies experienced 7.7 percent growth from 2006- 2011, but only .7 percent growth from 2012-2016. And according to a New Product Innovation Report, Nielsen states that of over 60,000 new SKUs introduced in Europe in the last few years, just over half (55 percent) made it to 26 weeks.
Today’s consumers’ tastes are fragmented as they migrate to smaller, start-up brands that are often perceived as healthier and more authentic such as KIND and Rx bars, Halo Top Creamery and Peet’s Coffee.
With this shift, large FMCG brands really aren’t growing anymore; in fact, they are experiencing innovation deficits, as they struggle to create desirable new products for consumers. These deficits have created opportunities for start-ups to take on big brands and succeed.
Why are these smaller artisanal brands starting to outperform the Goliaths of the FMCG world? These craft brands are innovative: creating new products based on what resonates with their target consumer, establishing a strong sense of purpose and why behind their product. They’re agile: quickly rolling out new products and many also have an established e-commerce presence: allowing consumers to purchase directly online. Many of these brands’ grassroots marketing efforts also started online. In short, today’s Davids simply have better slingshots.
But that’s not to say that big brands cannot prosper. According to Nielsen, 57 percent of consumers in developed markets say they prefer to buy new products from brands familiar to them. The opportunity for major FMCGs to grow is still there.
How can FMCG Goliaths get back to healthy growth? Expanding the definition of innovation is the answer.
Traditionally, FMCG research and development departments considered innovation to be tweaking established offers: creating new flavors of chips or lowering the fat content of an existing product, for example. But according to Mintel’s North American Trends 2018 Report, product innovation can also mean adding more information to product packaging (increasing product authenticity and transparency) or incorporating video livestreams of production methods at the manufacturing site that consumers can watch. Designers can also create more attractive packaging design, making a product more desirable.
I was recently talking with a digital transformation leader who said his FMCG company had plenty of ideas to drive innovation through packaging, but not enough people or technology to bring them all to market quickly. Many projects sit in the queue for three to four months and then stay there for a number of reasons:
- The work done in the execution is not digitized, it’s very manual, so the process slows down.
- New product launch approvals cannot get sign-off from multiple departments.
- Companies run out of resources to execute the final product.
- Priorities get re-aligned halfway through the project.
- Too much time elapses and trend insights grow stale and irrelevant, so the project is dropped.
As Edison says, “Vision without execution is just hallucination.” But this Japanese proverb takes it one step further: “Vision without action is a daydream. Action without vision is a nightmare.” Touché. Goliath is living a nightmare, which can be alleviated with the right battle plan: digital technologies and an agile new product launch strategy fueled by packaging.
A process focused on high-quality inputs and connectivity, that still allows the flexibility needed to work in today’s ever-changing business context, is critical in cutting time out of new product launch plans. Too many folks just want to get started with a project before they have all the inputs to know that they are going down the right path.
More digital tools are also needed to help teams execute new product development projects, specifically within packaging. Visualizing the final product with 3D design and virtualization software can help drive alignment before too many resources are deployed. Leveraging packaging artwork files and digital workflows to fuel e-commerce channels is one way both large and small FMCG players can increase speed to market, quickly establishing processes and gain management approvals.
Just like start-ups, when large businesses choose to transform the packaging value chain, they also impact the model by which they do business, which in turn, facilitates new product launches. If brands don’t have the process and the solutions to quickly develop and launch new products, they restrict their product launches and could continue to suffer minimal growth.
David may have won some of the battles, but Goliath can learn from David and become more agile.
FMCGs need to break down functional silos and connect ecosystem partners to support product innovation including packaging. Holistic end-to-end process and solutions for product launch will ultimately help satisfy the consumer and increase sales. If brands want to build process muscle and new product innovation into their business model, they need to utilize digital tools that will help sustain these goals.