Product Innovation Key to Growing Top Line Sales
By Anne-Marie Roerink / May 2016Insights
Megatrends, shopper demographics, e-commerce, mergers, acquisitions and more are driving profound changes in the food retailing landscape. Working closely together with food manufacturers, retailers continuously adapt short- and long-term strategies to ensure maximum relevance to their shoppers while optimizing traffic, sales and profits.
In the recently-released Financial and Strategic Initiatives in Food Retailing 2016 by the Food Marketing Institute, retailers foresee stable, if not improved, market conditions for 2016. They were particularly optimistic about improving sales, profits, margins and the average transaction size. The report found that retailers see driving top line growth as their top priority for business success in the next few years. The study looked at specific strategies for successfully driving top line growth in a marketplace with very little inflation and fierce margin pressure and found that retailers see store and product innovation as the number one way to drive sales and differentiate. This was ahead of pricing and promotional strategies that took second place.
Actual sales numbers as reported by data insights firm IRi certainly underscore the importance of frequent new item introductions to the financial health of food retailers. In 2015, IRi measured more than 65,000 new items introduced to the marketplace that were responsible for generating more than $72.6 billion in sales. These may include completely new items as well as flavor, pack size, product size and other innovations and line extensions to existing items.
To keep shoppers engaged and to differentiate from the competition, new item introductions take place throughout the store, with a number of powerhouses, including home accessories, cosmetics, snacks, confectionery, pet, baby and beverages, to name but a few.
- For shoppers looking for a little sweet indulgence, food retailers introduced nearly 3,000 new confectionery items in 2015, generating about $1.8 billion in sales – led by chocolate and non-chocolate items.
- For those favoring a savory snack, retailers introduced no less than 3,675 new snack items, good for more than $4.3 billion in new dollars, with important contributions by salty snacks and cookies, as well as granola bars and meat snacks.
- HBC too is a powerhouse in innovation with many new introductions in nail cosmetics (1,224), lips (564) and facial (356). Add to that great levels of innovation in hair accessories, soaps, shampoos and conditions – making HBC one of the most innovative areas of the store.
- Beverages sees great levels of innovations across many items including beer/ale (914) but also bottled juices (443) and other drinks.
- In home care, Americans see many new items annually, including candles (1499), air fresheners (987) in addition to many new items in storage and cleaning tools.
- Pet and baby food and accessories too are good for many new introductions and dollars. For instance, the market saw no less than 2,023 new items in pet supplies alone in 2015, good for more than $458 million in new dollar sales.
- Perimeter departments too drive new item sales through many new launches in bakery (680), yogurts (463), cheese (831) and other fresh items.
What will be your share of the $73 billion in new item sales?
Contributed by Anne-Marie Roerink, Principal and Founder of 210 Analytics
Anne-Marie specializes in quantitative and qualitative market research. Prior to launching 210 Analytics, she served as the Director of Research for the Food Marketing Institute (FMI). Responsible for all research projects, she distilled complex research data into usable and easy-to-understand materials for business audiences ranging from America’s largest retail chains to single-store family companies. Studies and presentations included shopper insights; retailer benchmarking and trending in financial, operational and tactical areas; and internally-focused research such as conference evaluations and member needs assessments.