The number of new products being launched into UK retail stores is falling significantly, according to an IRI report.
IRI’s 2016 New Product study showed that 13% fewer new branded items and 26% fewer new private label items were launched in 2015, compared with 2013 .
NPD is a key driver in category growth, encouraging consumers to trade up, according to Tim Eales, author of the study and director of strategic Insight at IRI. He said this was “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”.
The report stated that first year sales of branded NPD contributed just 2% to overall sales in the UK across 2014 and 2015, down from 3% (based on a similar study by IRI in 2011). IRI said this was happening as the multiples rationalise their ranges to remove slower selling items, resulting in 1,000 fewer packaged grocery items on shelves (a drop of 6.3%). And this trend is continuing into 2016.
He added that NPD had the potential to give retailers a competitive advantage versus their discounter competitors who had limited SKU ranges.
As well as the issue of rationalisation, Eales said suppliers were producing fewer new products, largely due to budgetary pressures from high trade promotion costs and squeezed margins as market prices drop.
“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,” he added.
The study also showed that new products were finding it harder to achieve distribution in multiple retailers.
“To be successful with new product development, manufacturers will often aim for 75% distribution within 12 weeks. In fact, what we’re actually seeing is that only one in 20 new launches achieve this target in multiple retailers,” he explained.
Eales said the key question the study raised was whether manufacturers and retailers could find a way to collaborate and champion the right innovative NPD, whilst managing range reduction agendas, adding: “If they get this right, NPD can continue to be a differentiator for all parties.”
Read the IRI 2016 New Product Study online here.