New products are the lifeblood of the consumer goods industry. Whether it is a product/line extension or a blue-sky innovation, introducing new offerings keeps the portfolio fresh and top of mind among consumers. Effective new product development requires a structured approach from ideation through launch, and significant challenges and market barriers must be conquered to succeed. This Targeted Research report benchmarks the current state of product launching across the CG landscape and pinpoints where today’s leaders are placing big technology bets to ensure pre-launch forecasts are meet.

Key Findings

  • 28% of CG revenue come from products released in the past three years.              
  • 39% of new product launches fall short of sales projections.                        
  • In the next 12 months CGs point to ERP (14%) and automated project scheduling systems (11%) as major investment areas. 
  • 71% of CGs say low product quality is almost never the cause of new products failing to achieve profit objectives.
  • 35% of CGs report that their innovation processes are more unstructured and flexible than they should be.
  • Only 11% of CGs report that they always adhere to their gated new product development processes.
  • 4% of surveyed CGs report an iterative/sprint-based process has been deployed and is always leveraged during product development.

Serving as the fuel feeding the CG engine, companies must continuously develop and launch products. According to survey respondents, 28% of CG revenue comes from products released in the past three years.

While CGs are constantly developing, innovating, and refining their product offerings, not every new product launch is a market-defining event. In fact, 43% of product releases are line extensions and 23% are revisions to existing products. Just 20% of new products released in the last year were described as highly innovative by survey takers.

Months, and in some cases years, go into the development and launch of a new product, with countless projections on its success driving the go/no-go decision on its release. Interestingly, just 38% of CGs report that they compare their pre-launch financial forecasts with actual financial results for all new product offerings, with an additional 48% saying they compare forecasts to results most or some of the time.

This pre- and post-launch financial analysis yields one striking statistic — 61% of new products meet their profit goals, meaning nearly 4 in 10 (39%) of new product launches fall short of sales projections. Why do new products fail to meet profit objectives? Launch failure can be credited to numerous factors. 71% of CGs say low product quality is almost never the reason, meaning product failure is primarily a business-side failure rather than an R&D misstep. Frequently CGs point to ineffective promotion (31%), ineffective pricing (28%), an inadequate distribution channel (25%), and higher than anticipated product costs as key components.

One factor that cannot be ignored in the current landscape is the troubled supply chain. Many of the supply chain woes consumer goods companies are experiencing today are beyond their control, but they must factor in the unreliable and unpredictable supply lines into their forecasts. Currently, 17% of CGs report that supply chain problems are often the cause of an underperforming product launch, 21% say it is frequently to blame, and an additional 38% say it is sometimes the culprit. 

Managing the product portfolio is a balancing act that gets more difficult with every additional product added to the assortment. Top challenges include: resources being stretched too thin, not enough high-value projects in the pipeline, and the inability to decipher if there are enough people to resource the desired portfolio. To meet these challenges, more than 10% of CGs are currently investing in ERP, office-based tools, internally developed systems, automated project scheduling, and automated agile-based systems. In the next 12 months CGs point to ERP (14%) and automated project scheduling systems (11%) as major investment areas (Figure 7). When the timeline is stretched to 24 months, we see gated management systems (11%), ERP (7%), automated portfolio management (7%), and automated scheduling (7%) as investment priorities.

While product innovation is a mix of art and science it is very important to have a system in place to manage the process and ensure vital benchmarks are being met on the road from ideation to product launch. We asked consumer goods executive to rank their current innovation process from far too structured to far too flexible. The good news is that 38% of CGs report that their innovation pipeline has the right balance of structured versus unstructured processes. Unfortunately, 35% of CGs report that their innovation processes are more unstructured and flexible than they should be.

One way to introduce structure to the product innovation pipeline is with a stage-gate, phase-gate, or similar gated development process. But like any solution or system it can only be successful if the process is not followed. Only 11% of CGs report that they always adhere to their gated system’s process, 21% say they usually do, and 50% report they somewhat adhere to the process. Taking the gated approach one step further is iterative/sprint-based product development. However, only 4% of those surveyed report an iterative process has been deployed and is always leveraged. 


Methodology

This study was conducted in September and October 2021. The survey was sent to CG executives at both large-scale and SMB manufacturers. 41% of respondents work for consumer goods manufacturers with revenue north of $250 million. 52% of survey takers work for a food/beverage company, with 24% employed by a non-food consumer packaged goods producer.

Conclusion

With nearly 40% of new product launches failing to meet pre-launch projections, consumer goods companies have a golden opportunity to improve their new product development processes and realize a meaningful uptick in profit. Adopting, and adhering to, a stage-gate approach and more specifically an iterative/sprint-based strategy will allow CGs to add more structure to product development and improve their ability to forecast post-launch success.

Source: Consumer Goods Technology