The global decline in innovation: a threat to the attractiveness of retail markets?
Innovation has been a key driver of growth and diversity in global markets for many years. However, a significant decline in innovation in the food industry is now threatening the wealth of choice available to consumers and the economic vitality of SMEs.
Last year in France, according to Circana, new products accounted for just 0.6% of food sales in retail, 4 times less than five years ago.
Innovations, levers for development
In 2023, according to ProtéinesXTC, despite a slight recovery, global food innovation grew by only 3.9% (VS -12.7% in 2022), well below expectations, while in France, it grew by 8.2% (VS -23.3% in 2022).
In France, “pleasure” is by far the most important aspect of food innovation at 61% and continued to gain ground in 2023 with +3.8 pts whereas the rest of Europe is “only” at 54%. This means that bringing pleasure to consumers must be a key factor in the development of innovations.
Health is in second place at 17% but lost interest with a drop of 4.1 pts. French people are not as much interested in the health aspects as the rest of the Europe (24.2%).
Ethics and convenience round out the reasons for purchase, with an average of 7% each and a fairly stable trend in France, rates that are similar to the rest of Europe.
The main barriers to innovation
The barriers to innovation are numerous and often interdependent:
- Financial risks: Innovation is costly; commodity prices have risen sharply as a result of a number of crisis (Covid-19, geopolitical conflicts, climate change), making R&D investments riskier than ever. Whereas before 2022, the one-year mortality rate for food innovations was 80%, “non- essential” innovations are now simply no longer being launched.
- Consumer demands: Consumer expectations are increasingly high. They are indeed more concerned about the costs of their purchases with inflation, as they still want quality products at the lowest price possible. This increases the complexity and cost of developing new products, which are on average 30% more expensive.
The impact on SMEs
According to Circana, the ranges of national brands fell by 2.9% compared with the previous year, while the range of value line products rose by 7.7%.
Small and medium-sized enterprises (SMEs) were particularly hard hit, with their shares of supply falling to 3.9%. Unlike large groups, they have limited resources to invest in long-term projects with no guaranteed return on investment. As a result, SMEs risk losing competitiveness and, in some cases, disappearing from the market.
Consequences for the market and consumers
The decline in innovation has a direct impact on the diversity of products available to consumers. Less innovation means less choice, which can lead to a uniformity of products on supermarket shelves. Manufacturers, on the other hand, tend to focus their innovations on those that have the best chance of success.
Moreover, the gradual disappearance of mid-range products in favour of low-cost or premium ranges is further limiting consumers’ options. Products whose positioning is not clearly fixed at one end or the other might no longer emerge.
Conclusion
To revitalise the market and meet consumer expectations, it is crucial that brands and retailers return to innovation. This will require both incentive policies and a stable economic environment. Innovation is not only essential for economic growth, but also for maintaining a diversified and attractive offer for consumers. Without this revitalisation, markets are likely to decline, to the detriment of the entire value chain.
The future of innovation will depend on how to overcome these challenges and create an ecosystem where innovation can once again flourish, ensuring renewed diversity and attractiveness in global markets.
The impact on SMEs
According to Circana, the ranges of national brands fell by 2.9% compared with the previous year, while the range of value line products rose by 7.7%.
Small and medium-sized enterprises (SMEs) were particularly hard hit, with their shares of supply falling to 3.9%. Unlike large groups, they have limited resources to invest in long-term projects with no guaranteed return on investment. As a result, SMEs risk losing competitiveness and, in some cases, disappearing from the market.
Consequences for the market and consumers
The decline in innovation has a direct impact on the diversity of products available to consumers. Less innovation means less choice, which can lead to a uniformity of products on supermarket shelves. Manufacturers, on the other hand, tend to focus their innovations on those that have the best chance of success.
Moreover, the gradual disappearance of mid-range products in favour of low-cost or premium ranges is further limiting consumers’ options. Products whose positioning is not clearly fixed at one end or the other might no longer emerge.
Conclusion
To revitalise the market and meet consumer expectations, it is crucial that brands and retailers return to innovation. This will require both incentive policies and a stable economic environment. Innovation is not only essential for economic growth, but also for maintaining a diversified and attractive offer for consumers. Without this revitalisation, markets are likely to decline, to the detriment of the entire value chain.
The future of innovation will depend on how to overcome these challenges and create an ecosystem where innovation can once again flourish, ensuring renewed diversity and attractiveness in global markets.
Sophie Delcroix
Managing Director, Green Seed France
To get in touch with our France team