Launching new products can be a big revenue driver, but it can also be a big cost to companies. The beverage industry is well-positioned for new products that capitalize on consumer trends, but there are several things companies should keep in mind when launching new beverage products, a panel of experts said during a recent Beverage Industry webinar.
One important thing to keep in mind is value, according to Larry Levin, executive vice president for industry insights at IRI. Consumers are willing to pay more for products they find valuable and that make their lives better.
“New product innovation is truly at the heart of consumer demand,” he said. “Value doesn’t mean cheap, value means making my life better.”
Levin outlined a process for launching new products that included interviews with consumers trying them for the first time, media evaluations, SKU rationalizations, media and merchandise planning and communicating effectively with consumers and educating them about the products. Companies can even take this process a step further by employing “descriptive sensory panelists,” who are trained to identify aspects of products that consumers like or don’t, said Kevin Waters, president and CEO of the National Food Laboratory. According to Waters, these panelists provide companies with more actionable information that can help them determine whether products should be reformulated and which consumer segments to target.
Early adopters can also be key in new product launches, Levin said. About 80% of early adopters say they like to try new products and talk about them with others.
“They can make or break our success,” he said.
According to Levin, coffee and tea and beer, wine and spirits take the top two spots among categories driving sales in consumer packaged goods, and consumers don’t care whether new beverage products come from big or small companies as long as they meet their demand.
“New product launches are for anybody and everybody who’s listening to the hearts and minds of consumers,” he said.
Among the top trends in CPG, all three panelists named health and wellness as one of the most lucrative and applicable to the beverage industry. There is about $4.6 billion in revenue to be made in the health and wellness sector, Levin said, especially for companies that capitalize on trends such as fiber, multigrain, natural and organic foods, real fruits and vegetables and vitamins, all of which can be included in drinks.
Functional beverages are especially on trend right now, according to Jeff Hilton, co-founder of branding agency BrandHive, and beverage companies that follow consumer demand for superfoods like yacon and quinoa, fiber, omega3s, probiotics, proteins and antioxidants have a good chance at success, as long as they educate consumers on the benefits of their products.
“Consumers accept that functionality is worth something…but they don’t know what the value of that is,” he said. “The more we educate, the better we’ll be able to sell products.”
For beverage companies looking to capitalize on the health and wellness trends, millennials are an emerging market to focus on, Hilton said. Millennials want choice and diversity, they have a unique take on health and wellness and they want to have relationships with brands.
“They don’t necessarily jump on the big brand bandwagon, they prefer brands they can interact with on a detailed level,” he said. “It’s all about educating millennials so they can share your product offline and online.”
Another key to launching new products in the beverage sector is planning beyond the first year, the panelists said. New product innovations account for a quarter of new launches, but more than a third of revenue, according to Levin, so it’s important for companies to make sure they can support products in their second year. More than three-quarters of new products received decreased media during the second year, which leads to less sales.
“You’ve invested a lot and you want to make sure they’re sustainable,” Levin said, adding that shopper targeting is also critical to sustained success of new products.
According to Hilton, 80% of new functional products fail due to inadequate promotion, inadequate consumer education, inadequate performance, a lack of differentiation in the marketplace and a failure to deliver on promised benefits.
Waters said it’s all about finding a product’s “sweet spot,” and relying on consumers to tell companies what they like and why they do or don’t like it.
In the end, consumers help brands “answer the what and how more effectively,” he said.
If you enjoyed this article, join SmartBrief’s email list for more stories about the food and beverage industry. We offer 14 newsletters covering the industry from restaurants to food manufacturing.