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July 29, 2016

NPD launches falling as UK retailers cut ranges, says study

The number of new products being launched by manufacturers into UK retail stores is "falling significantly", according to a study of the performance of new grocery products from launch published by IRI, a leading provider of FMCG market intelligence.

The number of new products being launched by manufacturers into UK retail stores is “falling significantly”, according to a study of the performance of new grocery products from launch published by IRI, a leading provider of FMCG market intelligence.

The study indicates that as major retailers such as Tesco “cut their ranges to remove slower selling items, resulting in 1,000 fewer packaged grocery items on shelves (a drop of 6.3%)”, 13% fewer new branded items were launched in 2015 compared with 2013.

IRI’s 2016 New Product study shows a drop in the number of new products launched in both food and non-food categories. “The number of new private label items launched also fell, but twice as quickly – by 26%,” IRI said. “This trend is continuing into 2016, with the rate of new product innovation falling further.”

Study author and IRI’s strategic insight director Tim Eales said: “As UK retailers look to rationalise their ranges, new products are finding it harder and harder to get listings. At the same time, however, suppliers are producing fewer new products, largely due to budgetary pressures brought about by massively high trade promotion costs and squeezed margins as market prices drop.”

Eales said: “We are also seeing new products not being supported by trade promotions as much as they used to be, which is contributing to their price premium having increased and, arguably, negatively impacting rate of sale. Delisting is happening more often and more rapidly under the scenario of more aggressive range management by retailers. All of this culminates in a big drop in the contribution of NPD to overall grocery sales, a serious concern given that it is recognised as the lifeblood of an industry that is struggling to cope with a number of serious challenges.” 

According to the study, the number of NPDs launched in the baby food sector were down 62% last year compared to 2014. However, average maximum distribution levels, which the report noted is a “prerequisite of success but is getting harder to do”, were up by 4.7 percentage points (pp) since 2010-11. In addition, success rates in baby food lines have risen from 12.5pp in 2010-11 to 19.4pp in 2013-15.

In confectionery, average maximum distribution levels are down by 3.3pp since 2010-11 while success rates (defined as selling faster than the sector’s average) have fallen from 31.4pp in 2010-11 to 29.7pp in 2013-15. 

In the baking & cooking sector, the number of NPD launches fell 3% in 2015 from 2014. The report said supermarkets are decreasing the number of stock keeping units (SKUs) by an average of 8.2%, “making it much harder for NPDs to gain listings”. Meanwhile, success rates in the sector fell 64.9pp in 2010-11 to 27pp in 2013-15.

However, biscuits saw a 9% rise in NPD launches in 2015 compared to 2014, although NPDs’ contribution to overall sales fell from 5% in 2010 to 2.6% in 2015. The success rate in biscuits also fell 24.9pp in 2010-11 to 23.9pp in 2013-15. Average maximum distribution levels in biscuits were also down by 9.4pp since 2010-11.

NPDs in bread and bakery fell 10% last year compared to 2014 and the report said supermarkets are decreasing the number of SKUs stocked in the sector by an average of 6%. Success rates in bread & bakery were also down – from 25.5pp in 2010-11 to 18.1pp in 2013-15.

Breakfast cereal NPDs were up 20% last year compared to 2014, although success rates fell from 13.5pp in 2010-11 to 2.9pp in 2013-15.

There was no change in the number of NPD launches in the meat & fish “main meals” sector in 2015 compared to 2014 the report said. However, success rates in this sector have risen from 20.9pp in 2010-11 to 21.2pp in 2013-15.

Cheese brand launches fell by 46% in 2015 compared to 2014 and the contribution to sales fell from 2% in 2010-11 to 0.5% last year. However, the report said success rates in cheese have risen from 17.7pp in 2010-11 to 18% in 2013-15.

NPD launches in the desserts & cream sector were down 18% last year compared to 2014 and NPDs’ contribution to sales fell from 5.4% in 2010 to 2.4% in 2015. Success rates in desserts & cream also fell from 21.6pp in 2010-11 to 19.2pp in 2013-15.

In ice cream, there was a 5% increase in NPDs last year over 2014, although NPDs’ contribution to sales fell from 10.4% in 2010 to 2.3% last year. Success rates in ice cream also fell from 28.1pp in 2010-11 to 17.2pp in 2013-15, the report said.

NPDs in snacks soared 67% last year compared to 2014, although NPDs’ overall contribution to sales fell from 5.5% in 2010 to 2.4% last year. Nevertheless, the report said success rates in snacks have fallen from 23.1pp in 2010-11 to 12pp in 2013-15.

In sugar confectionery, NPDs also increased to 29% last year compared to 2014. However, the contribution to sales fell from 4.3% in 2010 to 2.8% in 2015. Success rates in sugar confectionery rose from 32.7pp in 2010-11 to 36.4pp in 2013-15.

The IRI new product study excluded the slowest selling new products – “those that never achieve at least 5% category weighted distribution (CWD) or sell less, on average, than GBP10k (US$13k) in an average four-week period. According to the survey, new products can be entirely new brands, range extensions and new sub-brands, “but new sizes are not new products, while new formats and scents or flavours can be, but not exclusively”.

IRI said it measured 3,378 new products launched between January 2013 and June 2015, analysing how well they were distributed, promoted and priced, as well as how they performed against their competition based on value sales, and, where possible, compared with a similar study on new products launched in 2010-11.

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