Innovation and the New 'Core': Few and Focused

September 2020

In the aftermath of the COVID-19 pandemic, new product innovation in consumer goods remains difficult but no less essential. New innovations will likely be fewer in number and highly focused around a few key themes: promoting more control and convenience for consumers, creating value in challenging economic conditions and rebuilding certain categories to better align with long term shifts in consumer priorities.

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Key findings

In the aftermath, belts tighten and shelves shrink

By many measures, the environment for product innovation in FMCG could not be more difficult: household incomes are expected to shrink in the aftermath of the COVID-19 pandemic, while major producers and retailers seek to aggressively cut the number of products in each category. SKUs in most industries have declined substantially since March, while large producers continue to announce reductions in spending, brand discontinuations and other cut-backs.

Few and focused: Finding the small windows for new product opportunity

Despite an operating environment with unprecedented challenges, there remains an imperative to “act now”. Brands must seek the smart, targeted investments that align with the sustainable long-term shifts in consumer priorities and retailing behaviour. Small, scalable and agile investments will be essential in areas ranging from remote work to preventative health, home sanitation and contact-free physical retailing.

For me, by me: More control, convenience and enjoyment for consumers

  While it may be difficult to distinguish the stopgap measures and fads from long-term changes in the way people consume and shop, some behaviours (DIY home improvement, cooking from scratch) and new health priorities (re)discovered (particularly sanitation, immune support and stress-relief) will have a lasting impact.

Value and values: Low prices, rediscovering simplicity and limiting consumerism

The value equation will be redefined across consumer goods, first and foremost by a simple desire for low prices as a deep recession becomes apparent in the second half of 2020. The definition of high quality and service will also change, prioritising simple, reliable everyday solutions (potentially private label) and trustworthy brands.

Resurrection: Building products and channels back better than before

Inevitably, the pandemic will yield long-term changes that are not simply kneejerk reactions to unusual circumstances or temporary adjustments in behaviour. Particularly in the areas of personal health and retailing (physical as well as digital), the innovations of the next year could produce much longer-term improvements in overall experience.

Introduction

Scope
Key findings

Few and Focused: Product Innovation and COVID-19

Our themes
“Voice of the Industry”: less time in store, more time online
Innovation and the new ‘core’: ideas to centre on more time at home
COVID-19 era: core innovation themes across the consumer landscape
Risk-averse producers re-focus as retailer shelves are trimmed
Act now: the necessity of innovating post-COVID-19
Few and focused: three pillars of product innovation after the pandemic

For Me, By Me: Following the Consumer

Greater push for hygiene: improvement for the home and in-store
Seeking mental wellbeing: opportunity for cannabis-derived ingredients
Food for the household: DIY kits, bestseller bundles, and healthy NPD

Value and Values: The New Value Equation

Balancing value and values as consumer brands slowly recover
Reducing both price and complexity through private label
Creating value through budget brands, smaller packs and little luxuries
Building brand value through online commerce and marketing

Resurrection: Re-engineering Formats and Occasions

Reinvention: telehealth and the role of distance in innovation
Reinvention: contactless vending to coax return to foodservice
Resurrection: juice’s re-emergence as prominent immunity format
Resurrection: from on-the-go back to sit-down breakfasts

Conclusion

Key findings

Appendix: Via Pricing

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