IGD CONVENTION: Innovate to ride out downturn, argues Heinz
Heinz's Hill said innovation was vital for industry to engage with consumers
Heinz has called on the grocery sector to invest in innovation to drive growth amid the tough trading conditions facing the industry.
Matt Hill, president of the US food group's businesses in the UK and Ireland, said there had been a 30% drop in products launched this year compared to two years ago.
However, he told the IGD annual convention in London that innovation was needed to "drive engagement" of consumers and claimed it would help manufacturers gain market share.
"I believe in the Charles Darwin school of marketing. In fast-changing times, brands that adapt are going to survive. We've got an incredibly fast-changing environment out there. We have to innovate," Hill said.
"Many companies are cutting back on innovation during the recession. According to Nielsen, there were 30% less new grocery products this year versus two years ago. In R&D spend, research found those that sustained R&D spend increased profitability by about three times more coming out of recession than businesses that cut back. Academia says sustain, invest more than ever during a recession."
Hill claimed Heinz had "put that to the test" and looked to double the rate of innovation in two years. He said the company invested more in "consumer insight, R&D and in marketing".
He pointed to the launch of products including Heinz Five Beanz and a range of hot sauces. Hill also cited Heinz's decision to launch a balsamic vinegar flavoured tomato ketchup through Facebook. "Insight and ideas are critical to keep driving engagement of our categories," he said.
However, he acknowledged businesses faced a "challenge" in finding the resource but urged the sector to be "bold" in the choices they make.
"The question I started off addressing was: is now the time to invest or save?," Hill said after his presentation at the conference. "I think the real answer is both but more boldly then you have done before. It's time to make bold investment choices and I think innovation is one we all need to be making but you've got to balance that by making some very bold choices elsewhere in your budget."
The IGD conference polled delegates on how they saw the rate of innovation changing over the next five years. Fifty-five per cent of those present said they expected there to be "much more" innovation.
Hill said he would "love to believe that" and added: "It's what we need as an industry."
Hill was commenting as part of a panel that also featured Morrisons commercial director Richard Hodgson. He admitted he expects innovation to fall and told the IGD the retailer had seen the rate of "real product innovation" decline in recent years.
"From our suppliers we are seeing less innovation - and less innovation that's landing and sticking, which is a shame because we want it because it adds value to the category and creates interest. Over the last two years, we are seeing less suppliers bringing real product innovation. There is loads of innovation in technology and how we communicate with our customers but in terms of real product innovation most of what we see are slight tweaks on known trusted brands or pack formats."
Dan Cobley, MD of Google's UK and Irish operations, was also on the panel and he was "very encouraged" by the audience's belief innovation would increase.
Cobley argued the development in digital technology meant companies could test new products more easily.
"In this digital world, you can experiment with new products much more quickly and cheaply. You can fail more quickly. The key to innovation is learing how to fail. On the product side you will benefit," he said.
- Analysis: Is Heinz, Kraft merger "a growth story"?
- M&A Watch: Who could be on 3G Capital's radar?
- The challenges awaiting ConAgra's new CEO
- Focus: Can Mars gain share in Indian chocolate?
- Viewpoint: Faber-led Danone gets realistic
- UPDATE: Heinz, Kraft strike merger agreement
- Fatal explosion at French desserts firm Senagral
- Kraft "in buyout talks" with Heinz owner 3G
- Infographic: Heinz, Kraft unveil combined business
- Buffett: Kraft Heinz to withstand health focus