Product innovation in the time of COVID-19
New product launches face difficult road during pandemic
In the wake of the coronavirus pandemic, many grocery retailers have made the decision to cancel semi-annual shelf resets, slamming the brakes on planned new product and line extension launches. This leaves consumer goods companies wondering what to do with the pipeline of innovation and provides an opportunity to review short-term innovation, its role in the market, and new approaches to product or varietal introduction, through the eyes of the end consumer.
In the COVID and post-COVID environments, consumers will demand safety, transparency, and accessibility from brands, products, and retailers. They will also be seeking simplicity and comfort as antidotes to the uncertain journey to the “new normal.”
Many new products slated to launch are already in production, and driving trial is essential to any successful innovation. But what happens when you can’t actually get the product on shelf? CPG and brand manufacturers, particularly within food and beverage, should look beyond the traditional supermarket channel, and consider potential foodservice partnerships they’ve minimized or ignored altogether.
It’s no secret that the restaurant industry is also struggling in the wake of the coronavirus pandemic. However, fast food, fast casual, and other restaurants—already expert in the take-away and/or delivery game—present new launch pads for innovative products and flavors. By leveraging established relationships between their foodservice teams and national restaurants chains, CPGs can not only still launch new products, but also test it in-market before spending trade dollars to buy distribution. Food delivery services can further promote the new product or meal, increasing impressions and potential for trial.
Another option would be to cancel the launch—accept the sunk cost and move on. Consumer demand and need should be the first metric when considering whether to kill new products. Marketers consider line extensions and new flavors to be great ways to bring “new news” to grocery retail partners, expand categories, and gain facings on the shelf, hopefully at the expense of the competition. But, when it comes to many everyday items, from lunchmeat to salad dressing, consumers tend to stick with classics—oven roasted turkey or ranch dressing. While they are willing to try new flavors, repeat rates often quickly drop as folks return to their staples.
It is too early to accurately predict exactly how COVID-19 will change consumer purchase behavior and how long some, or all, of those changes will last. It is however probably safe to assume, at least in the near term, that it is far more likely shoppers will reach out to trusted and comforting brands and products faster than they will grab the latest line extension.
An honest reflection on the part of brand marketing teams should uncover whether their core consumers need additional options during this time of uncertainty. It will likely be more productive to double down on the classics that people know and love. And, if a new product is launched at a price premium, consumers will be hard-pressed to purchase it given declining disposable income.
While this may be a solid option for food manufacturers, it likely does not have legs for producers of household or personal care goods. Instead, they can revisit the option of building out a direct-to-consumer (DTC) model as an additional testing ground for planned new products. A DTC model has been top-of-mind for many manufacturers for years, even before the internet was around to facilitate it, but hasn’t scaled because of cost and the fear of alienating existing retailer relationships. Today, DTC can be leveraged to de-risk product introduction, testing out new options or variations and enabling a stronger story for retailer sell-in, by establishing proven success metrics.
In the longer term, it will be critical that retailers and consumer goods companies understand the emotional, psychological, and economic drivers, the “why” behind behavioral changes; what those changes look like; and how, going forward, they will impact consumer purchase behavior. This may require facing the fact that our current definition of innovation, at least as it applies to products, needs to be radically revised.
Greg Portell is lead partner in the global consumer practice of Kearney, a strategy and management consulting firm. He can be reached at Greg.Portell@kearney.com. Katie Thomas leads Kearney’s Global Consumer Institute and can be reached at Katie.Thomas@kearney.com.