A cry for innovation

Retailers are rationalising their assortments and FMCG producers are launching fewer innovations. The result is an erosion of the consumer offer. According to the research company Circana in 2022 carried out in 6 major European markets (UK, Germany, France, Spain, Italy and the Netherlands), a drop of over 16.5% was noticed in new product launches – and in France the decrease was even over 30%. Both retailers and producers are concentrating on their core ranges to safeguard their market share. Cost price increases have dominated the retail debate for the last 24 months. The P&L has come under scrutiny especially on production costs, the retailers are wanting to safeguard their margins and the consumer has become even more price conscious due to a reduction of buying power.
Bigger brands in particular launched fewer new products onto the market. Medium and small sized companies were the innovation drivers: 75% of new launches and 68% of innovation turnover was generated by SME’s.

The tough retail stance vs low rotation products has made it even more difficult for newcomers to succeed. New product launches need time to be picked up by consumers, time which is no longer given by the multiples.

This is proving to be short term thinking. Sustainable growth is only possible with a good degree of innovation. New products drive consumer demand. Brands need new product launches to grow and protect their market share. The alternative is a fight for market share on price. And in the end only those retailers which have price as a key cornerstone of their business, soft and hard discounters, are the winners. Mainstream retailers with a DNA of originality, quality and differentiation lose in the end. And with them the suppliers. Supermarkets become too much of the same and the curious consumer, often a food lover, feels abandoned.

Medium and smaller companies are more flexible, more entrepreneurial and often more creative. But their inventions need to get the chance to get onto the shelf. With an overly conservative retailer attitude, these innovations simply don’t get the chance to prove themselves. It is a killer for the start-ups and puts medium sized food companies under serious pressure, jeopardizing future innovation.

Companies with a drive for NPD should be supported. Retailers should shift their focus back to dynamizing their categories in store. Margins, healthy rotations and innovation can go hand in hand. It simply needs a bit of courage.

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