The reduction of our economy’s deficit is a slow one. The low pound is inflating costs, and consumers are feeling the pinch. This creates caution in shoppers and they want cheaper prices. Recent analysis by The Grocer showed the 100 most popular innovations with consumers were 94p cheaper than the average of the total products tested.
But it’s no good just bringing cheaper options to retailers who will then demand double margin to avoid diluting their profit. The ‘suck it up and you’ll win back your shoppers’ argument is spent and it’s getting harder to see the retailer benefit when marketers are looking to meet the need for ‘cheap’. Building category returns is so much easier when consumers don’t mind paying more for their perceived benefits.
In the analysis, the top 10 consumer-rated NPD included seven brand variations and three offerings from Tesco, Aldi and Asda. While I applaud the Asda cornflake chicken fillets, Tesco sweet pepper and Aldi sweet grapes isn’t my idea of innovation. They are just peppers and grapes, but sweet. Branded suppliers always lead the way on NPD. If they succeed, discounters will copy them, while the rest replace them with own label to protect margin and pressure them on price to avert the threat of the discounters, reducing innovation budgets.
So the NPD consumer/supplier/trade triple-win is a holy grail. Finding premiums that are acceptable to consumers or a motivating retailer story for cheaper lines without hacking your own profits is a challenge. Let’s look at vegetables: shoppers want to pay less and one answer has become wonky veg. It’s a marketing miracle, bang-on for the food waste issue. The supplier also benefits from income that may have previously been fed to pigs. The retailer financials, however, show a deflation and less turnover. Soon, certain types of wonkiness will be aimed at the ‘right-on’ consumer who also likes the ability to peel easily. Premium wonky, it’s coming! Perhaps a bad example as I know most suppliers can’t sell rejects off the line. Although wait, yes it’s OK now in Morrisons because it won’t bill you for consumer complaints, apparently.
We could be in for an innovation drought, I fear.
David Sables is CEO of Sentinel Management Consultants