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FMCG Innovation

FMCG Innovation


In the current trading environment (declining volume, shoppers trading down, high inflation) the challenge for manufacturers and supermarkets is to increase category volume sales. The solution could be FMCG innovation.

This simple blog provides a very simple framework and hints and tips for manufacturers and supermarkets (private label ranges) undertaking an innovation project. Importantly innovation can be achieved by passionate businesses with limited resources.

There is a lot of research highlighting many new products in FMCG fail. The numbers vary from 70% to 95% of new consumer good products fail. The research into product failure has 2 common themes:

  • Lack of understanding about shopper demands
  • Insufficient marketing spend to educate shoppers about the innovation

Hopefully this blog provides some simple hints and tips to improve the success rate of FMCG innovation. 

FMCG Innovation

In this blog FMCG innovation is creating a new product experience for shoppers. As explained in my blog, Value in FMCG, shopper demands have evolved to focus on the overall shopping experience. Historically, innovation in FMCG focused on the physical product and packaging. Today shoppers now have other demands, such as ESG and sustainability, that are important factors in the product experience.

Identify the gap

The important first step in FMCG innovation is to define ‘the gap’ in the market. ‘The gap’ is simply a shopper demand that is not being met by the current offer. Some examples of ‘the gap’;

RSPCA approved chicken for shoppers that want ethically sourced foods

Mars using recyclable paper-based packaging for Mars, Snickers and Milky Way chocolate bars to meet shopper demands for sustainable packaging

Dollar Shave Club launching a D2C (direct to consumer) subscription service for razors / shaving products to make the shopping process easier

Unfortunately, many in the industry still focus on having ‘the best product at the best price’. Shopper demands have evolved and many successful brands focus on delivering the best product experience possible.

Importantly FMCG innovation can be a concept / product that is successful in other markets and not offered locally. For example, Dietrich Mateschitz consumed a product similar to Red Bull (called Krating Daeng) in Thailand. He then partnered with Chaleo Yoovidhya (creator of Krating Daeng) to launch Red Bull in other markets. Considering Australia is a multicultural country, there are probably many other innovations that could be launched locally.

There are numerous other sources of innovation ideas. For example, can you create an innovative product that resolves a shoppers’ problem with the current range? An obvious example is Coca Cola launching Diet Coke for shoppers that did not want a soft drink with sugar. With an increasing number of people choosing restrictive diets is a keto or gluten free range a solution? With an aging population in Australia is easier to use packaging a solution to a shoppers’ problem?

As reported by the inspiration for Frank Body Coffee Scrub was:

‘It all came to mind when Mr Rowley, who is the owner of several Melbourne cafes, was approached with a rather unique request from his customers: they were looking for leftover coffee grounds they wanted to use to exfoliate their skin.’

An often overlooked source of innovation is consumers. Current, lapsed shoppers and non-buyers can be a great source of ideas for innovation.  For suppliers to major supermarkets buyers are able to share insights into what their shoppers are now demanding. The insights are normally broad such as smaller packsize / retail due to cost of living pressures or less plastic in packaging. Buyers share these insights so suppliers can create ranges to meet their shopper demands.

There is increasing demand for convenience, healthy, sustainable and Australian made food and drink ranges for Australian shoppers. Also, there is increasing demand for anything that makes shopping easier. An obvious example of an easier shopping experience is major supermarkets, such as Woolworths, offering digital orders (direct to boot / click and collect / home delivery) so shoppers don’t have to walk around the store. Maybe innovation for a manufacturer could be offering a D2C (direct to consumer) service like Dollar Shave Club has done.

Ideally (budget allowing) this phase will include some shopper research to ensure there is some shopper interest in the innovation. Some research agencies, such as Kantar or Focus Insights, do have standard concept testing research for FMCG products. The risk with not completing research at this early stage is that you could invest a lot of effort, money and time to develop a concept with limited shopper demand.

Many will suggest a business case (commercial analysis) should be completed at this stage to ensure the concept is financially viable. From personal experience this is a valid step for businesses already making similar products in a category. These businesses will have a lot of the necessary information easily available to complete the analysis. For businesses launching new products into new categories, including start-ups, commercial analysis can be difficult. To access the necessary information may require sharing information (the concept) to potential competitors. During development the concept may change. Also, the quality of the initial information may be questionable. I suggest commercial analysis is completed when the business believes it will be accurate and provide actionable recommendations.

 Concept development

After identifying the gap the next step is concept development. Others use the term NPD (new product development). Personally, I prefer concept development as the innovation may be in the service offered (e.g. Dollar Shave Club) not only the physical product.

The goal of this step is to determine whether the concept can be launched in the market. Depending on the concept the timeframe required can vary greatly from a few weeks to a few years. There are many different processes businesses use for concept development. IMHO (in my humble opinion) these different processes all use trial and error to determine whether a concept can be launched in a market.

It is normal during the concept development phase that the concept can change. I suggest people are open minded during this phase to realise opportunities that may arise. It is common, particularly in larger organisations, that people think they can only test the current concept i.e. complete the assigned task. Unfortunately, this leads to many great ideas not being shared with the team. It is also normal during this phase that other concepts may be discovered. Ideally all these ideas / information are documented and shared with the team.

Shopper research

In an ideal world during the concept development phase there will be on-going shopper research (budget allowing). Simply put you don’t want to spend a great deal of effort, money and time developing a concept that shoppers do not want. There are a number of factors such as brand positioning, packaging, price, product attributes etc that need to be developed and tested during concept development.

A relatively inexpensive, yet very useful, way to test a concept with shoppers is at farmers markets. Importantly markets allow the team to engage directly with shoppers and get vital feedback during concept development. Simply put if the concept does not sell at a local market, it probably won’t sell on major supermarket shelves. For businesses with a D2C platform another option for cheap research is to reach out to current customers and offer a free trial to get their feedback on the concept. Depending on existing relationships it is also possible to discuss innovation with customers, including supermarket buyers, to get their thoughts. Formal research is normally more expensive but can minimise the risk of launching a concept that is not successful.

Partner for success

An often overlooked part of concept development is considering who to partner with to maximise the likelihood of success. For example, chicken farmers partnering with RSPCA to offer RSPCA endorsed chicken. There are numerous schemes to improve the credibility of innovation. Some examples:

ACO (Australian Certified Organic) for organic product certification

B corp certification for sustainability

HSR (health star rating) for healthier products

Another group of potential partners are other brands. More businesses are engaging in co-branding to provide an improved shopper experience. Co-branding may also include using personalities / influencers to endorse products. A recent example is Cadbury’s developing a new chocolate block with Curtis Stone (Raspberry & Hazelnut Tart). Another interesting trend in co-branding is brands from other channels selling ranges on supermarket shelves. For example, Nando’s (QSR – quick serve restaurant) selling Peri Peri based sauces / marinades in supermarkets. I am sure many frozen poultry buyers would love to launch KFC chicken in the freezer aisle … on a personal note the ‘new’ Louisiana frozen chicken products are nothing like KFC …

To increase your chances of securing ranging you can also consider who your customers would like you to partner with. For example, the Victorian government Healthy Eating Advisory Service provides a traffic light system for assessing food and beverages. If you wish to supply government institutions (schools, hospitals etc) then offering products that categorised as green is preferred. Similarly, Woolworths wants to range more food and beverage products with HSR of 3.5 or higher.

If you are concerned about partners sharing confidential information about your innovation then consider a NDA (non-disclosure agreement) with business partners. From past experience trust between businesses is normally more important than legal documents but a NDA can be a useful tool if required.

GTM (Go To Market)

Now the concept has been developed it is normal to complete a business case (commercial analysis) to ensure the concept is financially viable. Depending on the innovation and go to market plan the initial investment to launch can vary greatly. To minimise the initial investment / risk many businesses will do a soft launch with limited distribution. Once the concept has been successful in a small test market then they will scale up (increase distribution, marketing support etc) to drive sales.

The research into product failure highlights the importance of marketing support for innovation during the initial launch phase. Many great concepts have failed because shoppers did not know they were available and / or the how the product was innovative. The go to market plan should focus on how to maximise trial and repeat usage with the target market. As a general rule if your product is not achieving an acceptable UPSPW (units per store per week) within 3 to 6 months of launch further research to identify the problem will be required.

On a personal note, I believe too much research is focused on WUBIT (would you buy it). This research only increases the likelihood of initial trial. An often overlooked, but vital area of research, is after consuming the product / service would you buy it again (repeat purchase). Major brands are successful due to repeat purchase, brand loyalty etc, not shoppers trialling their range. If after 3 to 6 months of launch, sales are in decline it suggests shoppers trialled the product but did not repeat purchase. Budget allowing panel data (e.g. Nielsen Homescan) can highlight the number of trial and repeat shoppers. Major supermarkets loyalty card data is also a useful tool to understand shopper behaviour. If the data suggests low repeat purchase additional research (probably qualitative) to understand why would be useful.

Another point to consider, if your innovation is not succesful, can it be re-launched? Many people become disillusioned if innovation ‘fails’ but maybe some minor tweaks (packsize, price etc) are all that is required to re-launch. Considering the effort, money and time to launch innovation it is often prudent to consider re-launch. From personal experience people can make emotional decisions if their baby (innovation project) is not successful. Try to focus on fact based decision making. 


The current trading environment is challenging. Simply put manufacturers and supermarkets are trying to increase prices to cover their increasing CODB (cost of doing business). Shoppers want cheaper prices due to Cost of Living pressures. This is leading to price inflation, declining volume sales and shoppers trading down and sometimes stop buying a category. A solution to this problem may be innovation.

Existing research highlights the high fail rate for new products in supermarkets. To minimise risk manufacturers and supermarkets should try to ensure the innovation meets shopper demands. Secondly manufacturers and supermarkets should invest in marketing to educate the target market about the innovation to maximise trial and repeat purchase.

Hopefully this blog has provided some hints and tips to help your next innovation project succeed. Good luck.

The information provided in this blog post was general in nature. If you require more information I offer a free initial consultation. Contact Details .