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Big manufacturers dominate FMCG innovation

rsz_kimberlyLarge FMCG manufacturers continue to dominate when it comes to innovation despite small manufacturers launching more brands, according to the New Product Pacesetters report released by IRI. The new product pacesetters added a total of $1.4 billion to the Australian FMCG sector value in 2018.

Almost a third of this year’s Pacesetters were brands from small manufacturers but large manufacturers contributed more value. FMCG leaders Mars, CocaCola Amatil, Proctor & Gamble, Carlton United Breweries and Mondelēz accounted for a quarter of pacesetter brands. Kimberly-Clark Australia contributed the most, with 11 per cent of all pacesetter dollars generated by Kleenex Complete Clean toilet tissue and Huggies Ultimate nappies.

Smaller manufacturers are capable of producing more brands as they can quickly adapt to changing consumer trends and demands, but distribution is often limited in the first year.

“Despite challenging market conditions and distribution limitations, a significant number of the new products and brands on shelf in Australia are from smaller suppliers,” said Mairead McElvanna, Channel Insights Consultant at IRI.

“This is unsurprising given the more agile production approach these manufacturers can take, enhancing their ability to react quickly to consumer needs, and enabling them to become more adventurous and strategic in the way they engage with shoppers. As smaller suppliers forge rapid growth in the market, retailer support for these brands across both the physical and digital shelves is imperative to unlock future growth,” McElvanna said.

Over a quarter of this year’s pacesetters were launched in the Snacking and Wine categories, while almost a third were generated by the Household and Chilled categories. While the Household and Chilled categories returned a high proportion of sales off the back of a relatively limited number of brands, Snacking, Wine and Health and Beauty had the opposite impact. These categories launched a significant number of brands, but those brands didn’t generate a lot of sales. This can be attributed to the significant number of brands already in these catagories and a high level of competition to get listed on shelves.

Across the four FMCG channels of Grocery, Convenience, Liquor and Pharmacy, the number of products ranged in 2017-18 reduced by 3 per cent on the prior year. Existing ranges are thus under intense scrutiny from retailers looking to “cut range tail and maximise efficiencies”, reducing opportunities for manufacturers to get new brands listed.

IRI research found that consumers have moved more towards ‘phantom’ brands, thanks to Aldi’s success in the Australian market. Phantom brands are supermarket private label products that don’t have any reference to the supermarket’s brand or logo. Liquor and Beauty have seen the biggest increases but there has also been a noticeable increase within Grocery.

Consumers are more open to purchasing private label products now, with 60 per cent of Australians agreeing that own label products are a good alternative to branded products.
Private label brands made up 10 per cent of the 265 new product pacesetters this year, with almost a quarter of these in the Chilled section.

FMCG innovation is more important than ever with just under 60 per cent of the population saying they like to try new products and brands. Shoppers are seeking innovation in new flavours, new formats and new occasions. Younger consumers are increasingly looking for information on new brands and styles through social media.

IRI Shopper Panel research found that one-in-four Australian households buy groceries online, with a higher incidence among the ‘Digitise Me!’ segment, who always have smartphones in hand, research products on forums, frequently leave reviews on websites and are very active on social media.

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