SPINS Looks at New Item Trends

Innovation through the creation of new products is crucial in the grocery retailer CPG space to meet evolving consumer demands. New product development is essential for several reasons: differentiating in a competitive market, leveraging technological advancements, adapting to changing lifestyles, and enhancing consumer engagement. Ultimately, the goal is to ensure long-term growth, sustainability, and relevance for manufacturers.
SPINS:  Natural Channel & Conventional Multi-Outlet (powered by Circana); Trended Weeks Ending 5.19.2024; First Week Selling

While innovation and new product entries are constant, the rate at which they appear in the market fluctuates. Relative to last year, we have seen a slowdown in the total store new UPCs arena, across MULO and the Natural Channel, both from an annual and YTD perspective. The slowdown in innovation can be attributed to economic uncertainty, which makes investors cautious and more focused on stability than taking risks. Also, consumers are leaning towards established brands and value-driven purchases, which lowers the demand for new products. On top of that, supply chain issues and strict regulations are adding to the challenges, delaying the development and launch of innovative products in today’s competitive market.

Aligning with Consumer Needs
From the week ending 01.07.24 through the most recent week of 5.19.24 (YTD), more than 18,000 new products have entered the marketplace across various categories. These new UPCs account for nearly half of last year’s total innovation volume and have collectively generated approximately $2.7 billion in sales, with over half a billion units sold. Despite a decrease in the quantity of new products introduced, the sales volume only saw a slight decline of 9% compared to the previous year. This was largely driven by increases in unit sales and average retail prices within high-traffic segments. For instance, within the grocery shelf stable hot cereals category, new products experienced significant growth in both dollars (+262%) and units (+196%), with an average retail price increase of 22%. This trend indicates that certain new items are effectively meeting consumer needs across different store sections and are outperforming last year’s innovations.

Distribution of New Items
Despite the decline in overall innovation, the distribution of new UPCs across store departments has remained consistent with last year. Grocery and body departments led with the highest volume of new item entries, followed by refrigerated, alcohol, and pet products. Together, these two high-innovation departments accounted for nearly 60% of new product introductions and generated $1.9 billion, which constitutes 72% of total new item sales.
New Launch Positionings
Across the entire store, excluding alcohol and vitamins and supplements, conventional products dominate new item launches. In the grocery category, conventional products account for over half (55%) of new UPCs and two-thirds of innovation dollars. In body care, conventional products make up an even larger share, with 63% of new items and 77% of innovation dollars. Despite this, natural and specialty products are still significant, generating a combined $595 million (30%) in sales across both departments, highlighting their importance for overall market growth.
Tiered Performance
When analyzing categories that surpassed average sales volume within their respective departments, several segments stood out. In grocery, snack, beverage, and indulgent categories demonstrated strong performance with their new products. Similarly, key contributors in body care included segments such as cosmetics, deodorants, hair care, and oral care. In the visualization below, the Y-axis represents new item sales, the X-axis denotes unit sales, and the size of each bubble correlates with the number of new UPCs introduced.

Economic Environment: Manufacturers must stay aware of economic trends and investor sentiments. During periods of economic uncertainty, there is often a shift towards stability and lower-risk investments, affecting the pace of new product development. Understanding these economic conditions can help manufacturers make strategic decisions about when to launch new products.

Consumer Trends: With consumers leaning towards established brands and value-driven purchases, manufacturers need to focus on building strong brand loyalty and delivering value. This might involve enhancing the quality and affordability of existing products or introducing new products that align with consumer expectations and trends.

Supply Chain and Regulations: Navigating supply chain disruptions and strict regulations is critical for the timely development and launch of new products. Manufacturers should invest in robust supply chain management and stay updated on regulatory changes to mitigate delays and ensure compliance. Efficient logistics and adherence to regulations can facilitate smoother innovation processes and quicker market entry.

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Looking for more information? Please contact the SPINS Account Manager for PRESENCE, Mike Murphy at mmurphy@spins.com.