The food sector generally fares better in times of recession than non-vital manufacturing sectors, but it does nonetheless take a hit from shifts in consumer spending towards value goods.
Now Mintel has identified a trend from its Global New Products Database (GNPD) that suggests US food and beverages manufacturers have been playing it extremely cautiously in the first months of 2009: New product launches in Q1 2009 are down 51 percent on last year’s Q1.
Lynn Dornblaser, new product expert for the market researcher, said: “Faced with low consumer confidence and reduced spending, many food and beverage manufacturers cut back on product development and new product launches.”
She said that internal budget cuts affect a range of activities, from the generation of new ideas, to development, to marketing.
An annual trend?
Despite the grim statistics, Mintel points out that new product launches do tend to be slower in the first quarter – but this year the pipeline is slower than most.
The low Q1 stats also follow a slow Q4 for the food sector. In the immediate aftermath of the financial crisis, Q4 launches dropped by 34 percent.
Some sectors have also taken the recession worse than others: non-alcoholic beverage launches were down 56 per cent; chocolate 55 percent; sugar and gum confectionery 64 percent; and dairy products 60 percent.
However Mintel pointed out that the chocolate product launch statistics could be skewed by the timing of Easter, when compared to last year. In 2008, Easter fell in Q1, whereas in 2009 it was in Q2.
Innovation call
Despite the slow start to the year, Dornblaser does not think the lower launch stats will last. Indeed, the month-by-month figures indicate that, by March, launch figures were already starting to pick up.
“Now is the time for ideation and innovation for products that answer shoppers’ desires for value, quality and pleasure.”
Mintel’s data is not split out to indicate whether the new products that have been launched are big-brand goods or private label. It is also not clear whether any of them are value ranges.
However brand manufacturers are facing encroachment of private label goods on their territory – a trend existed already as private label quality has been steadily improving. Now, consumers may be more likely to buy private label goods, as they have an image of being better value than branded goods.
Industry insiders have suggested that brand manufacturers need to keep up the innovation in order to retain their market share.