2024: a crisis year for FMCG innovation?

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Never before have manufacturers introduced so few new products as this year. This is according to a recent report by Mintel. It is now September and that means we are well over halfway through 2024. Looking back over the past few months, we cannot help but conclude that it has been very quiet in terms of innovation. Manufacturers introduced fewer and fewer real innovations and instead focused more on renovations and line extensions. Annual innovation awards were not awarded because it was too difficult to choose a winner. But also: consumers noticed the consequences of this quiet innovation year on the shop floor. Why is it that manufacturers innovated so little this year? What are the consequences of this? And what opportunities are there that FMCG professionals can capitalise on? You can read the answers to these questions in this newsletter. Innovation year 2024 in numbers

As mentioned earlier, manufacturers have never launched so few new products as in 2024. However, global investments were more in renovations (65%) and less in radical product innovations (35%). Manufacturers are betting more on line extensions and packaging changes, and less on completely new product concepts and brands. In addition, it is notable that food and beverage manufacturers were the least innovative of all FMCG categories, while the beauty and personal care category was the most innovative. Among food and beverage manufacturers, only 26% of all innovations were truly new, while this was 46% for the beauty and personal care category. In addition, it was found that innovation had also declined the most within the food and beverage category; between 2007 and 2024, 50% fewer new products were introduced each year! There are many different reasons for this lesser ‘drive for innovation’ among major manufacturers. COVID, wars, inflation and overall consumer sentiment all play a role in this.

The dangers and opportunities for FMCG professionals

If you are an FMCG professional involved in innovations, it is good to know the dangers and opportunities of this silent innovation year. One consequence you have probably already experienced is the innovation budget. Many manufacturers are making less and less budget available for radical innovations and more and more for (forced) renovations and line extensions. If we look a level higher, we see that the reduced drive for innovation among the big manufacturers is creating more and more opportunities for private label and smaller brands. A McKinsey report showed that only 25% of growth in the entire FMCG sector came from ‘the big boys’ versus 45% from smaller brands and 30% from private label. For this reason, more and more large manufacturers are investing in smaller startups or in-house innovation teams. So this presents opportunities for FMCG professionals within large manufacturers to drive innovation within the organisation. In addition, developments in Artificial Intelligence and eCommerce are causing a shift in the world of FMCG innovation. For instance, eCommerce is increasingly being used to validate products through D2C channels and then introduce them into the traditional retail channel. AI is also widely used to make the innovation process faster and more efficient. Innovation cycles are becoming shorter because AI can automate many tasks, allowing innovations to reach the market faster and faster. All these developments bring dangers, but certainly also offer opportunities for FMCG professionals. Now more than ever, it is important to pay close attention to what is happening in the world of FMCG innovation and take advantage of it.

‘’Innovate or die’’ ?

These were the concluding words of Mintel's research report and I fully concur. Manufacturers need to start innovating more again just now to avoid private labels and startups running away with the growth. While renovations and line extensions are often the safer choice, radical innovations still provide the most growth. However, I am aware that this is easier said than done. Not only do you have to deal with limitations in innovation budgets and the current economic climate, real product innovation can also be risky. Especially when you consider that research shows that over 80% (!) of all product launches within FMCG fail. This is precisely why it is so important to do proper research before launching an innovation. In-store research can help you innovate in a less risky way. By testing products before the launch in a number of supermarkets with real consumers, you know for sure whether consumers would buy your product. You simulate the product launch in a real-life context, so to speak, and this way you find out how your concept performs among all the competitors on the shelf. So you know which concepts are going to be a big success and which ones you still need to tinker with before you decide to launch. FMCG innovation can be risky and exciting, but at the same time it is perhaps the most enjoyable part of our profession. The right research can help you do just this more successfully!

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