Publication of the annual IRI New Product Pacesetters Report is an eagerly-awaited event in the US food sector, the report being viewed as a useful barometer of the state of the market and current trends. Ben Cooper spoke with IRI consumer and shopper insights practice executive vice president Anne Berlack about this year’s findings and particularly the impact of the recession on new product development and consumer behaviour.
just-food: What would you say are the stand-out trends this year among the better-performing new products?
Anne Berlack: There are two things that really come to the front, and one is a continued focus against health and wellness on both the food and the non-food side. And then the second one is the impact of the economy, and we see that in terms of affordability, and affordability really manifests itself in the consumer’s choice around how they define value, which means it isn’t always about the lowest price. It’s about this combination of performance and price.
j-f: So health and wellness continues to be a priority for consumers, in spite of the downturn?
Berlack: Very much so, and it’s a continuing trend. This is actually the third year in a row that we’ve seen the top ten pacesetters in food and non-food dominated by health and wellness brands.
j-f: Are you surprised that health and wellness has remained a prevailing trend given the economic conditions?
Berlack: I’m really not surprised. This was not a pop-up trend. This has been an evolution over the last three or four years. And food habits are beginning to change. So when consumers go to the store, even though they have less money in their pockets, they’re still looking for healthier alternatives.
We’ve seen a huge increase in the US in the use of private label, and the store brands that have lower calories, lower carbohydrates, lower salt levels are doing very, very well. So we’re seeing it both at the branded side and the store-branded side, which is further evidence of consumers seeking better-for-you type products.
j-f: The report identifies the growth in home-dining as being a key trend. What are the reasons behind that and do you expect this trend to continue?
Berlack: Absolutely yes, we expect it to continue. With the crunch in the economy, two things happened. One, either consumers lost their jobs and had much smaller amounts of money to spend, or people who are still working just put their wallets in their pockets and said I’m going to wait this thing out. What that meant was that fewer consumers were dining out and they were choosing to eat at home, so we saw an increase in the kinds of products that go into constructing a meal.
When we look at the top ten categories that grew last year, it’s things like frozen vegetables and frozen poultry and different kinds of products that you would use as a meal ingredient, like rice and pastas. And there was a lower level of increase in prepared foods but still very much there. And at the same time, we saw a dramatic decrease in the number of diners, as well as overall dollars, that were going to restaurants.
j-f: How has this affected the pace of innovation in gourmet prepared foods?
Berlack: Innovation in gourmet prepared has stalled. There’s not a doubt about that. What we are seeing is an increase in prepared components. So there’s an uptick in store-cooked poultry and meats and fish products and then people are taking those home and using them as a centerpiece in the meal, as a convenience. They are not buying the entire meal at the store. There are pockets where that still exists but for the most part the innovation in prepared foods has definitely stalled and that’s a direct reflection on the economy.
j-f: The IRI research suggests Pacesetter brands continue to offer new varieties, including products targeting specific demographic segments, health conditions and times of days. Have you seen this form of highly targeted product development affected by the recession or do you see it continuing as part of a long-term trend?
Berlack: It’s part of a general trend over a number of years. The products that are in the Pacesetters analysis for the most part were launched in 2007 and completed their first year of sales in 2008. And we saw the economy absolutely create an impact in the last four months of 2008. So as we look at that we have to keep that in mind, and it does make things a little bit more convoluted.
But the approach of targeting consumers in specific age groups, or ethnic groups, or with certain kinds of health and wellness focuses, is something that is a mainstay for US marketers and is going to continue, particularly around the issue of health and wellness.
j-f: But does your research suggest there will be a slowdown in the rate of new product development of this type during the downturn?
Berlack: There will be a softening but it is not going to go away.
j-f: Were you surprised that sustainability continues to feature so prominently as an issue for consumers?
Berlack: For the consumer, if the price around sustainability is relatively low they are going to support it. It goes to that value conversation. If the consumer can see a distinct value and there is not a price penalty in their minds, then they will very definitely support it.
j-f: Your research points to a dominance of line extensions over brand new launches. Will the recession exacerbate this trend?
Berlack: The trend toward line extensions is something we have seen over the last couple of years, so there has been a steady decline in the number of totally new brand names that have been introduced to the marketplace. And I think that the economic impact is going to force that trend to continue.
It costs upwards of US$50m to $75m in the US to put a totally new brand into the marketplace successfully. In this case, successful is defined as more than $50m in year-one sales and continuing that into year-two sales. So given the cost of money and what the economy has done to the credit markets, it’s much easier to take a known brand and add a type, or a size, or a flavour, than it is to add a totally new brand. Absolutely I think that trend is going to continue.
j-f: You alluded earlier to the growth in private label in the US. Historically, private label has tended to follow brand developments. To what degree does your research show that this pattern is changing with retailers more keen to innovate themselves?
Berlack: On the food side, we very definitely see that and we see it most predominantly in the natural and organics area where large food retailers in the US are coming out with products under their ‘natural’ banners. They are putting products into the marketplace and managing that brand as if it was a national brand and not waiting for manufacturers to do it first.
j-f: For brands, how important is new product development in withstanding the growth in private label?
Berlack: New products are the lifeblood of the industry and it will continue to be that way. I think that we’ll see a slowdown. We have seen and will continue to see a slowing of the number of new items that are launched into the marketplace, simply because of economic conditions. But new products are how we maintain consumer interest in categories and in brands, and that’s very definitely going to continue.
j-f: The IRI Pacesetters research has been undertaken for 14 years now. What do you see that is different about the current downturn in comparison with previous recessions?
Berlack: For the US, what is different about this particular situation is the fact that it has impacted every level of society, every economic band, every age group, every geographic area. And that’s something we’ve not seen before. So there’s been a general contraction in spending whether you are employed or not, whether you’re retired or not, whether you have a large family or a small family. Consumers have just stopped spending, and that’s what’s so different about this one.