For the immediate future, the pathway to product innovation contains many roadblocks.
“The new product story so far in 2020 is SKU rationalization,” Tom Vierhile, vice president of strategic insights, North America, Innova Market Insights, told Baking & Snack in its September issue. “Big food is taking a hatchet to marginal brands to focus time, energy and resources on brands that can impact the bottom line.”
Mr. Vierhile observed that trimming slower-selling products is a healthy practice that should be done from time-to-time. However, the coronavirus (COVID-19) took a pruning process that should occur gradually and made it happen almost overnight as large food companies curtailed innovation. Nationally, new food and beverage products are off about 16% for the first six months of 2020 vs. the same period in 2019, according to Innova Market Insights.
“That decline is unlikely to be reversed this year as companies may be more inclined to delay new product launch plans to 2021 to ensure that supply chain issues get sorted,” Mr. Vierhile said.
He suggested the current reaction by retailers and major food companies is short-sighted.
“You really cannot cut your way to prosperity,” he explained “Big food may undoubtedly achieve some efficiencies that can help improve profit margins as a result of COVID-19-forced changes, but growth must be achieved over the long term and much of that growth is likely to come from new products. The good news for smaller companies is that this pruning process may make things easier for companies that survive this mess since large food companies’ focus on big sales and big brands will likely leave more breathing space in the market.”