Part 6 – Innovation Lessons from the Great Recession to Apply Today
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Special COVID-19 Series: Recession-Proof Your Business PART 6 – INNOVATION LESSONS FROM THE GREAT RECESSION TO APPLY TODAY June 12, 2020 The Latest Recession-Focused Reports from IRI (click to see full report) CLICK HERE TO ACCESS THE 2019 NEW PRODUCT PACESETTERS REPORT © 2020 Information Resources Inc. (IRI). Confidential and Proprietary. 2 Context Executive Summary Every recession varies in scope and duration, but LESSONS FROM EMERGING TRENDS COVID-19 is ushering in unique THE GREAT RECESSION IN THE 2020 RECESSION behavioral changes, including • Sales of the Top 10 food and beverage • Big companies continue to be well-positioned heightened awareness of products during the Great Recession were for innovation. personal health and safety. lower than pre-recession levels as • In-home professional services will be a key opportunity The impact of these changes consumers stuck with tried and true as consumers shift from salon-style services, restaurant will be best reflected in CPG products and hunted for value. going or medical and dental practices due to health and innovation that meets changing • Particularly in non-food categories, financial stress; however, bifurcated income means many consumer needs and wants. Pacesetter products promoted multi- are willing to pay a premium. functional benefits and co-branding. • Given channel shifts (e.g., greater adoption of e- IRI has been tracking New • Among a few products, continued focus on commerce, value and grocery), as well as new shopping Product Pacesetters* for 25 brand building with well-timed advertising behaviors (e.g., shoppers spending less time in stores), years. Even top-selling products and promotions drove year-2 sales to further manufacturers should follow five principles: propel brand health. − Focus on attributes that really matter need continued marketing • Successful Pacesetters products focused on: − Develop clear and more impactful positioning support and innovation to sustain − Premiumization − Define and execute against the RIGHT distribution long-term contributions to − More value by focused occasions − Promote in Year 1 and beyond − Set realistic sales expectations manufacturer and retailer growth. − Brand extendibility − Package size innovation • Trusted brand status, endorsements and price This report features learnings − Private label expansion promotions are vital for building awareness of products. from 2008-2010 New Product Pacesetters and offers strategies • The IRI COVID-19 Impacts on how to approach innovation as HOW CAN Innovation Requires Sophisticated we emerge from the pandemic. • The COVID-19 Dashboard IRI HELP? Strategies: IRI New Product Pacesetters, Brand Optimization Engine, Brand • IRI CPG Demand Index™ Landscape, Assortment Optimization • IRI Inflation Tracker™ *Criteria for New Product Pacesetters and data used for this report can be found in the Appendix © 2020 Information Resources Inc. (IRI). Confidential and Proprietary. 3 Innovation During the Great Recession • Sales of the Top 10 Pacesetters during the 2008-2010 recession were cumulatively lower than pre-recession levels. • Smaller manufacturers had fewer products in the New Product Pacesetter ranks, but were more successful than large and medium manufacturers. − PepsiCo, General Mills, and Kraft were the top 3 manufacturers with the greatest total food and beverage New Product Pacesetter sales in 2008- 2010. However, the incrementality and sustainability rate for Pacesetters among the largest innovators was lower than average. − Procter & Gamble, Johnson & Johnson and L’Oréal were the top 3 non- food manufacturers with the greatest total Pacesetter sales 2008-2010. − Popular, high-penetration categories exhibited a lower incrementality rate with innovation, while high-growth categories (e.g., energy drinks, yogurt, snacks nuts/seeds/corn nuts) had more success. • High-growth food categories included energy drinks, yogurt, and snack nuts / seeds / corn nuts. Among non-food departments, Beauty and Health were the highest innovating departments. • Themes that emerged during the recession included professional quality for at-home use, premium pet products, multi-serving, multifunctional, and on-the-go consumption. © 2020 Information Resources Inc. (IRI). Confidential and Proprietary. 4 Recessions Prove Challenging for Innovation: Shoppers in a Recession are More Inclined to Plan Purchases Pre-Shop; Discretionary Spending Curbed Purchase Decisions During the Great Recession: % of Shoppers, 2007-2009 Before Entering Store 60% 75% 83% In-Store 40% 25% 17% 2007 2008 2009 Longitudinal Economic Study, IRI AttitudeLink, n=1,000+ shoppers 10/2009: Zero-Moment of Truth: Redefining the Consumer Decision-Making Process. IRI Consulting Analysis / IRI Consumer Survey, Top 2 box 8/2008 / 9/2008 © 2020 Information Resources Inc. (IRI). Confidential and Proprietary. 5 Cumulative Sales of the Top F&B New Product Pacesetters Were Down During the Great Recession; Median Sales Did Not Vary Dramatically New Product Pacesetter Sales in $B Total F&B Pacesetters Top-10 Pacesetters Median Launch $5.0 $4.1 $25.0 $3.5 $4.0 $19.3 $19.9 $18.9 $20.0 $17.5 $2.8 $2.7 $16.7 $3.0 $15.8 $2.4 $2.3 $15.0 $2.0 $1.3 $10.0 $0.7 $0.8 $0.8 $1.0 $1.0 $0.6 $5.0 Median Year Median One $- $- in Pacesetters$M 2006 2007 2008 2009 2010 2011 $4.0 $3.2 $20.0 $2.7 $2.7 $17.1 $3.0 $15.3 $15.7 $2.4 $15.4 $2.5 $15.0 $13.9 $2.1 $13.3 $2.0 $10.0 $0.8 $0.9 $1.0 $0.9 $1.0 $0.6 $0.7 $5.0 $- $- Median Year Median One 2006 2007 2008 2009 2010 2011 in Pacesetters$M Total Non-Food Pacesetters Top-10 Pacesetters Median Launch *CLICK HERE TO ACCESS THE 2019 NEW PRODUCT PACESETTERS REPORT Source: IRI 2019 New Product Pacesetters Analysis. © 2020 Information Resources Inc. (IRI). Confidential and Proprietary. 6 Focus of Successful New Product Pacesetters 2008-2010 Premiumization – consumers were willing to spend more on DIY services, small indulgences and higher quality entrées, often as a tradeoff for not dining out or scaling back on coffeehouse purchases. While “Value” Multi-Serving Products – Technology played a role in upgrading the quality of microwaveable products but Was a Key consumers were also drawn to products that delivered more. Product Attribute Multi-Function Products – The power of two brands came together to win over consumers drawn to known brands that could deliver During the Great multiple benefits, delivering both time and money savings. Recession, it Expansion into Adjacent Categories – Several brands, including Kellogg’s Special K, Dove, Gatorade, Starbucks and Crest, successfully Didn’t Mean pushed into adjacent categories to tap into pockets of growth. “Cheap” Private Label Expansion – During the Great Recession, retailers invested in tiers of private label products, delivering value and often innovation that was unique to their store banners. © 2020 Information Resources Inc. (IRI). Confidential and Proprietary. 7 Premiumization was a With a Recessionary Response Fueling “Value Key Winner in 2008-2010 for the Money” Creating Better-Life Experiences Top New Product Pacesetters delivered IN-HOME PROFESSIONAL QUALITY at premium prices. An array of at-home DIY SERVICES including nail care, dental care and skin care products were an AFFORDABLE TRADE-OFF to professional services. Source: IRI New Product Pacesetters Archived Reports. © 2020 Information Resources Inc. (IRI). Confidential and Proprietary. 8 Multi-Serving Products Were Not Only Focused on Price Value; Many Were Led by New Technology to Create a More Premium Experience Multi-serving products helped consumers see VALUE FOR THE MONEY, but often delivered a MORE PREMIUM PRODUCT, including Bertolli’s Oven Bake Meals and Stouffer’s Easy Express. Technology supported advancements in microwaveable fare. Plant-based dairy alternatives and a new wave of enhanced beverages also emerged. Source: IRI New Product Pacesetters Archived Reports. © 2020 Information Resources Inc. (IRI). Confidential and Proprietary. 9 Dual-Focused Benefits Also Delivered Enhanced Value to U.S. Consumers CO-BRANDED, MULTI-BENEFIT PRODUCTS were embraced by consumers looking to consolidate purchases during the recession. DUAL-FUNCTION PRODUCTS were, and continue to be an important innovation platform to fuel consumers’ need for SPEED AND EFFICIENCY. Source: IRI New Product Pacesetters Archived Reports. © 2020 Information Resources Inc. (IRI). Confidential and Proprietary. 10 Pre-Recession and Post-Recession Innovation Illustrates Changing Consumer Preferences Pre-Recession Post-Recession Pro-quality, use of Post-recession saw the technology and better continued impact of for you lead 2006-2007 K-cups, on-the-go Pacesetters. consumption and BFY. Non-food began to see Trends continue, the conversion from RX especially in Rx to OTC to OTC to drive broader and pet foods begin to adoption. Technology win with natural and positioning allow Fusion positioning benefits. to shave the competition. Source: IRI New Product Pacesetters Archived Reports. © 2020 Information Resources Inc. (IRI). Confidential and Proprietary. 11 Small Manufacturers with Fewer New Product Pacesetters Had More Incremental Sales Than Large and Medium Manufacturers Innovation Performance by Manufacturer Size, 2008-2010 New Product Pacesetters FOOD & BEVERAGE NON-FOOD Number of Number Of Pacesetters Incremental Pacesetters Incremental Number of with Incr. Total Sales ($M) Number of With Incr. Total Sales ($M) Pacesetters Share Gain Pacesetters % of Total Pacesetters - Share Gain Pacesetters % of Total Manufacturer Average per (% of Total