A 12-year analysis for new product launches
Consumer- and retail trends reveal that companies see innovation as a key factor for successful strategies. Almost 7 out of 10 companies say innovation for growth will be their focus over the next few years. Based on this, we analyzed launches in various FMCG-categories over a 12 year period, to better understand what is takes to succeed in the long haul, built on a few common denominators.
The FMCG landscape
Just like U2, ‘I still haven’t found what I’ looking for’; as I browse up and down the aisles searching for my favorite products. There are so many choices, and I often end up not buying due to the jungle. We know we are not alone, as people love good more than they hate bad (choices).
New products are always intriguing if they bring something new to the table, and the ‘contest’ of being the NPD of the year is always present. Companies want to succeed, and thereby penetrate the average 350 large shopper basket. The US tops the list with most FMCG products, with more than half a million SKUs, and with close to 2,000 new brand launches in a given year. We also know that approximately 20.000 SKUs are launched every month in 48 major FMCG economies. On the darker side, we also know that 80-90% of all new launches fail within 18 months, so why launch, and are there some common denominators as thresholds for success?
A World of Abundance
There is a wide FMCG assortment, that would take you 20 hours to pass with only one facing each - at hiking speed. Every year 30K new products are launched, where 83% fail within 18 months. The assortment in a normal supermarket has doubled the last decade, but the selection is still at 350 SKUs for an average family basket in a year.
So, what does it take to create successful launches, and to penetrate the basket size?
The Analysis
We've always heard that 80-90% of all new products fail to succeed after 18 months in the market; and with that in mind, we made an analysis for all new launches in several FMCG categories across Europe, over a 12-year period.
There were five factors we wanted to see:
The #1 launches each year, with their respective category shares
The #2, #3 and #4 best launches each year with their respective category shares
How fast each launch reach their respective peak-shares
How many products that are still in market after five years
Based on this, we wanted to find a magic combination of size and speed, to make the five year threshold.
The Results
A new grocery store takes 17 months to reach its potential, which is rather slow compared to the speed of FMCG products.
For the #1 best FMCG-products, the peak-share happened only after 24 days, where the average peak-share was at 5.7%. 55% of all ‘best launched products’ are still in the market after five years, and some of them have even got a second ‘boost’ several years post this.
For the second best product launches, the average peak-shares were at 2.2%. Out of all these products, only 9% are still on the shelf after five years. For the third best launched products, the average peak-share was 1.9%, and only 8% were still in market after five years. For the fourth best launches, 100% of all SKUs were out of market after five years, and the average peak-share was 1.2%. All these launches used longer time to reach their peak-share compared to the annual winner, ranging from 30 to + 50 days (though +50 days was most common).
On a final note, only 4.1% of all new launches, were still in market after five years. Cynically speaking, we can then say that 96% of all launches failed, but we also know that NPDs do have various roles of why they are taken to market.
So, what does it take of size and speed to remain in market after five years?
A product should on average reach a peak-share of 4.5% in the fourth week post launch, to maximize the likelihood to survive five years in trade. So, how is that best done? Of course, it is about bold 360planning & executions. In the long run, few big launches are better than plenty of minor launches. These launches most often add value to the category, and are not only tactical moves to 'steal' shares.
What does it take to win the long haul?
Products that reach at least 4.5% peak-share within 3-4 weeks, stand a better chance to survive after five years in market, and thereby creating category growth (short term and long term). This is best done with smartness and boldness through 360-planning & execution. It is a given, but these products also need to have a futuristic perspective built on consumer trends, a la PEQN.
There are however exceptions both ways. Some products reached 'only' 3% at peak, but are still in market after five years, whereas other products were double in size, but were removed within 18 months. It is about expectations and acceptance, and the willingness to invest.
Peak-Share among annual winners
Even between the annual best launches, there were quite some big differences. It is all about the major FMCG players, and if they really want to create something new. Then they go all in to become trade shakers and history makers, through proper 360 planning & execution. The worst of the annual winners was at 1.6% peak-share, whereas the most impressive winner was at 12.6% peak-share.
Big differences
The average annual NPD-winners, reached a peak-share of 5.7% in their respective categories. The overall winner during the 12 years, were more than double the size, and is today among top 3 in the overall category, still climbing.
Hit the bull’s eye on consumer trends (PEQN-Model)
If you want to succeed with your launches, you better play alongside what consumers want and need. If you only have a one-dimensional trend launch, the chances for a long launch success is limited. The smarter launches, ‘combine’ trends, and a thorough game plan for further success. This game plan should ideally include six to nine possible steps, based on planning ahead and reasoning back.
To the core of trends
The better you are to hit the center of consumer trends, the better chances the products stand to become sustainable category winners. The PEQN Venn-diagram is one way to visualize how to move towards the center of overarching consumer trends.