New Product Pacesetters 2004

The most successful new food and beverage products of 2004 delivered against U.S. consumers' desire to take small steps toward healthier eating, with convenient packaging that fits evolving on-the-go lifestyles, without sacrificing great taste and emotional satisfaction. That is the top-line conclusion of Information Resources, Inc.'s latest New Product Pacesetters report, an annual analysis of the most successful new consumer packaged goods brands, the factors driving their success, and key consumer purchase trends to watch in 2005. New brands that fit into both calorie-watching and carb-watching lifestyles topped the list for 2003-2004, and included Carb Smart ice cream and frozen novelties and diet carbonated beverages from Pepsi and Coke. These products are joined by healthy yet palate-pleasing foods like Dannon's Carb Control, Yoplait Nouriche smoothies, and Healthy Choice Flavor Adventures frozen dinners.Last year's top 10 new non-food brands were dominated by health and beauty solutions; no new home care or general merchandise brands made the cut. The success of several of these brands is a testament to consumer demand for new and better solutions to address health problems, as four of the top 10 were over-the-counter remedies including Prilosec and Mucinex. Other top brands offered improved do-it-yourself personal care solutions as a convenient alternative to professional services, such as Crest teeth whiteners (a substitute for expensive sessions at the dentist's office), L'Oreal Dermo Expertise and Olay Regenerist anti-aging creams (to eliminate the need for more invasive dermatological procedures). Brands with high-tech design and the promise of better results also repeatedly make this list, with this year's entries led by Schick's Intuition and Quattro razors."It's great to see food companies addressing obesity and other diet-related health issues with more convenient versions of naturally nutrient-rich foods and healthier versions of processed convenience foods," says Valerie Skala Walker, IRI's vice president of Analytic Product Management. "This trend should continue for several years, with an emphasis on getting more fiber and less "bad" fat."On the non-food side, manufacturers are creatively finding ways for consumers to reduce the time spent on basic home care and personal tasks by cutting steps from the current process or by making results last longer," says Skala Walker. "[This trend has led to the creation of] New Product Pacesetters in categories as diverse as facial cosmetics, skin care, pain relief, dental care/whitening, air freshening/odor removal and home cleaning."The full 2003-2004 New Product Pacesetters list includes 122 food and 100 non-food brands. To qualify for the list, a brand must have been introduced between February 2003 and January 2004, so that it had a full 52 weeks of sales data by December 2004, and must have achieved at least $7.5 million in retail sales in food, drug and mass outlets excluding Wal-Mart (FDMx) in that first year. IRI has been issuing the report since 1993. Datasets and summaries of each year's Pacesetters are available for purchase from IRI.Detailed findings from the report were first presented by Skala Walker at IRI's 2005 Retail and CPG Summit, held in Miami Beach Feb. 27-March 1. Following are some highlights.A successful new product can be defined by four critical success factors: Getting into distribution in the first place, and hanging onto that precious shelf space for at least two years -- or at least long enough to pay-back introduction costs. Large sales in the first year. Our New Product Pacesetter brands all qualify on the first two measures. But being a Pacesetter does NOT guarantee long-term success. In fact, a number of brands on the list are already headed to oblivion. For true success, at least part of those sales must be incremental to the manufacturer and, preferably, to the category (rather than cannibalizing sales from existing products). Sustainability is defined as retaining 80% or more of year-one sales into year two, and sometimes even showing growth in year two. Typically, a new product drops off about 20% in sales from year one to year two, due to the fact that most people try a new product once and then don't buy it again, either because it fails to meet their expectations in some way or because the product may be inferior to, or in parity with, other alternatives.) Either way, consumers remain sufficiently satisfied with their "old favorite" and not sufficiently impressed with the new product to change their buying habits.Of the Top 10 Food/Beverage Pacesetters from 2002-03, four grew sales in year two, two hung onto roughly 75% or more of their year-one sales, and three saw their sales decline by 30% or more. Among the Non-Food Pacesetters, five have improved sales, two maintained sales and three posted sales declines. (See charts at right.)Food and Beverage PacesettersThe 2003-2004 list consists of five non-alcoholic beverages, one alcoholic beverage, two yogurts, an ice cream, a frozen dinner, and a snack. That total includes six products for people trying to cut calories where they can.It also includes four indulgent products: Mountain Dew LiveWire (which was supposed to be a limited-time product, but was only off the market for a few months before coming back); Sprite Remix (which launched as Tropical Remix pineapple mango in April 2003, then switched to Berryclear in April 2004); Smirnoff Twisted V (a fruit-flavored malternative); and Nabisco Ritz Chips.REMINDER: These figures represent retail dollar sales for food, drug and mass outlets, but not sales from Wal-Mart, convenience stores, club stores, liquor stores, and other channels of trade that sell food and beverage products (like bars and restaurants). Add another 20% for sales through Wal-Mart, and possibly another 20% for brands with a lot of business in c-stores, liquor stores, or other outlets not tracked in InfoScan Reviews. Ad Spending to Sales RatioIRI estimates the ad-to-sales ratio of the top 10 food Pacesetters to be in the 10% to 15% range. (See chart at right.)Ones to Watch in 2005Of the biggest food & beverage products that didn't have a full year of sales data as of 12/30/04, IRI does a rough projection to estimate year-one sales potential (assuming the latest month's sales total to continue for the remainder of the year, with no adjustment for distribution changes). Among the brands featured here (see chart at right) are products from manufacturers seeking to: expand their market share and take volume from competition, (as in the case of the carbonated soft drinks), expand their core expertise into adjacent categories (such as Banquet frozen dinners offering the crockpot meal kit and Campbell's extending from soup to chili), create or enter new segments within their own category (like 7Up Plus creating the first vitamin-enhanced soda, and Interstate Bakeries moving into "superpremium" bread with Bakers Inn).In terms of major growth drivers, there are not a lot of changes versus 2004:1. Last year, the heat was on "white food" -- processed flour and sugar, or "bad" carbs. This year, the focus is more on "nutrient density" -- getting more nutrition per calorie and cutting back on empty calories. Addressing the obesity crisis will be a driver for at least five to 10 more years.2. Natural, organic, and vegetarian foods are still strong segments, long-term trends that have been growing steadily for years. News stories about good vs. bad fats, food safety, and the incredible focus on children these days all contribute to Americans' increasing interest in natural and organic foods. 3, Energy and vitality continue to be popular buzzwords, and there's still a lot of opportunity for products that meet needs in this area.--"Superpremium," or "artisan," segments have cropped up in many categories, from butter to cheese to bread to prepared meals. 4. The low-carb approach to weight-loss has spawned a billion-dollar market for reduced/no/low carb foods. Natural/Organic and vegetarian lifestyles represent a long-term trend that has been steadily growing over the past few years. 5. Mass luxury foods address consumers' increasingly more sophisticated palates and diverse ethnic make-ups, and help time-starved consumers get the premium foods they crave at the supermarket. 6. Producers of healthy foods are finally figuring out how to make their products more convenient: longer shelf lives, less preparation, and more portable packaging. There used to be a perception that consumers wouldn't pay a price premium for commodity products like produce. But many Americans are regularly paying a price premium for organic produce and "convenience" items like bagged salads. There's a lot more opportunity in this space.Non-Food PacesettersAll of the top 10 Pacesetters for 2003-2004 were health & beauty care items. And five of them came from Procter & Gamble: Prilosec, the year's big prescription-to-OTC conversion, three Crest dental-whitening SKUs, and Olay Regenerist, the product that claims to be a mini face-lift. The rest of the list includes Dermo Expertise from L'Oreal, which includes a "wrinkle de-crease" item that claims to attack wrinkles caused by facial expressions (delaying the need for Botox injections); two razors from Schick (a successful category in recent years, with two razors in the Top 10 in 2003 as well); Mucinex, a mucus expectorant from Adams Laboratories that became available "from the pharmacist, without a prescription" in October 2003, and over-the-counter in mid 2004; and Tylenol 8-Hour from Johnson & Johnson.The cut-off for the top 10 list this year was $42 million, which is significantly lower than last year's cut-off of $60 million. We hope this is not indicative of manufacturers' ability to drive large new-brand launches, but rather just a sign of the continued drain of sales out of FDMx and into mass merchandiser and club store outlets.

New Product Pacesetters 2004

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