Product Innovation in FMCG – An Overview

Consumer-centricity is at the heart of successful innovation. By understanding the needs and desires of consumers, brands can create innovative products that resonate with their target audience.

It is important to dig deep and uncover the core reasons behind consumer behavior. For example, Gillette's in-depth understanding of shaving habits revealed insights that led to a series of successful innovations that helped address unstated needs and also help the brand premiumize. By addressing these insights and pain points and delivering solutions like Gillette did with Gillette Mach 3 or Gillette ProGlide Flexball for instance, brands can stay relevant and appeal to both current and new generations of consumers.

Another example of product innovation is Cadbury Dairy Milk Silk, a premium chocolate in India. In this case, the brand was able to think both present-forward, but also future-back to create a better product experience for the consumer. Going beyond smooth chocolate, they created a slight dome shape for each cube of chocolate, which fits the palate of the mouth better. As a result, the chocolate melts faster, giving the consumer the experience of a smooth, melting chocolate.

Trends, too, play a pivotal role in driving innovation. Brands must keep a pulse on emerging trends and anticipate future needs, potentially working with companies like Kantar and Euromonitor, who can provide these insights. For instance, urbanization is a huge trend that brands need to pay attention to. Across Asia and Africa, people are moving into urban centers in search for jobs, creating different views of how they approach their purchasing decisions. As a brand, you should keep on top of trends – especially the mega trends that will achieve significant scale 10 years from now.

By identifying trends that have the potential to become significant in the long run, brands can position themselves as frontrunners in the market. You should understand your consumer cohorts and segmentation, have frequent brand and consumption tracks, and leverage social listening to approach innovation with your customer’s experience in mind.

Additionally, cross-industry inspiration and collaboration can spark breakthrough innovations. Taking cues from other sectors and adapting them to the FMCG space can lead to exciting and disruptive products that capture consumers' attention. Think about the ice cream cone – a completely serendipitous product innovation when an ice cream seller ran out of cups and had to think on his feet. He ended up partnering with a waffle maker in a neighboring stand, and thus, the ice cream cone was born!

There are three different types of innovation that FMCG brands can explore: core refreshes, disruption, and breakthroughs. Which of these makes the most sense for you? That will depend on how your brand and category are performing. Imagine a 2x2 grid, one axis measuring how the brand is performing, and the other measuring how the category is performing. 

Core Refreshes 

If both the brand and category are performing well, then that requires the least amount of tinkering. You will, however, need to ensure that the brand stays fresh by innovating and growing your core. David Taylor, who talks about growing the core of your brand, often references the example of James Bond, which has remained relevant to audiences through the years by keeping certain core elements consistent – the plot, the British-ness and guns, gadgets, girls. Yet the innovations that have happened around these core elements have helped the 007 brand stand the test of time. 

An example closer to the FMCG space was the Milka innovation in Europe. Mondelez tweaked the sugar and cocoa levels in the chocolate, positioning it as “tender tastes better.” As a result, the brand saw 10% plus growth in a mature market like Europe. Core innovations often happen on a regular basis – for instance every three years, a company might look at innovating to keep the core fresh and relevant. In these scenarios, the typical Stage-Gate process would still apply. 

Another way to keep the core fresh and in a strong category is to have core sustaining innovation. A good example is Coca Cola, which frequently comes up with new flavors that consistently drive excitement upon launching, across various markets. Coca Cola recently launched AI based innovation, which got people talking.

In Southeast Asia, Cadbury launched a Durian flavored chocolate, which generated lots of conversation, building the core brand. Another example is Oreo’s BlackPink cookie that was a huge topic of conversation and made the brand exciting to younger GenZ consumers. 

Here, as a brand, you also need to aim for scale and ease of communication. If messaging is too complex or too simplistic, you’ll be burning your advertising money, without adding much value to your core brand. 

Breakthrough innovations

Now, let’s say the category isn’t performing well or playing below potential, but the problem is well defined. A good example of this is the mobile phone 15 years ago. Back then, we had PDAs, palm pilots, pagers, calculators – an array of devices we needed to get through the day. When the iPhone came along, it was the kind of breakthrough innovation that changed everything. Ride sharing platforms such as Lyft, Uber, Ola, or Grab, and brands such as Airbnb, Netflix, and TikTok are examples of breakthrough products. 

In the world of snacking, a lot of chocolate brands launched Choco-Bakery. They noticed that the biscuit category was slightly basic, and saw an opportunity to penetrate the category and charge more for these products. So now, instead of a biscuit with a little cream, you have biscuits with real, rich chocolate – an innovation that redefined how indulgent, tasty yet nutritious biscuits can be. These kinds of innovations usually come from visionary leaders who seek out breakthrough innovations through hackathons or innovation forums. 

Disruptive Innovations

And finally, let’s examine what to do when the category is very well defined but the brands aren’t performing to potential. In the world of oral care, Hismile is a great example. As toothpastes weren’t able to provide a strong whitening solution, and doing this at a dentist would set you back several hundred or even thousands of dollars, Hismile innovated to offer a whitening solution at an affordable price point. This is an example of disruptive innovation. 

Disruptive and Breakthrough innovations tend to be need based – when the domain is struggling, or there’s a clearly defined problem that needs to be solved. Questions to think through when considering when to innovate include: 

• How is the category performing?
• How is my brand performing? Is it business as usual? 
• Is the brand growing ahead of the category? Is it gaining share? 
• Is the category declining? 
• Is the brand struggling while the category is healthy? 

Innovation Cycles

As the saying goes, half of all innovation fails in six months! Look at reviewing innovation in six month, one year, three year, and 10 year windows. If in six months, the trial cycle is completed and hasn’t driven the expected results, you have a problem. At the one year mark, seeing a good repeat cycle coming is a great sign. At the three year mark, you see the innovation really starting to take root, having built a sizable set of users. Whether you’re able to hit the 10 year mark is the real acid test. 99% of all innovations fail by year 10. As a brand, you have to think about how you get to the scale of USD10 or 25 million within 10 years. Are you able to invest in your products? What does it take to keep the product on shelves for that long? These are all considerations to keep in mind. 

Why Innovations Fail 

The innovations that tend to fail typically have been created just to fill a gap in the quarter or year, or perhaps give salespeople something new to talk about. As cool as those innovations might be, they tend to fizzle out quite quickly as they’re not rooted in your customer’s real needs. Going back to consumer centricity, every innovation should begin with your customer, and address a quantifiable need or pain point they have – either said or unsaid.

Mistakes can also happen when executing the innovation. Are you staying true to the 6 P’s (Product, Pricing, Promotion, Place, People, Proposition) and playing to your full potential in each area? Often, I see people in a rush to be agile, which is where things break. In my opinion, you should aim for both perfection and agility. The team needs to be very exacting in their pursuit of excellence. 

Steve Jobs, when his team brought him a prototype of the iPhone, asked if this is the smallest, and the best they could make it. The team responded in the affirmative, saying they had already delayed significantly and needed to launch something soon. In response, he dropped the iPhone into a fish tank. When bubbles came out, he showed the team that there was indeed space left inside the device. 

So as you look at the team executing your innovation, make sure you have the right people, mindsets, and capabilities on board to achieve perfection. 

The biggest challenge organizations face today is connecting the dots. FMCG companies have tons of data, but the missing piece is often having a team connecting the dots between the data, consumer insights and trends to create something that’s truly out of the box. For innovation to happen, your entire organization should come together and work collaboratively. For example, are Marketing and Consumer Insights teams speaking to each other. Are these insights being translated effectively by Product and R&D teams? Are your Sales teams executing to the original vision? 

This is where having a visionary leader plays a pivotal role. Great leaders can pull the arms of the organization together and connect the dots to create massive impact. Indeed, many companies driving big innovations are helmed by visionary leaders – people who can leverage exceptional talent across different functions, and get them working together effectively to deliver outstanding innovations. They do this by creating a set of shared goals that go beyond potentially conflicting departmental objectives. They articulate the vision for innovation clearly on an organizational level, and review progress frequently as a cross-functional team. In this way, they’re able to break silos and reward progress towards collective goals.

In conclusion, innovation is the driving force behind growth in the FMCG industry. By adopting a consumer-centric approach, identifying trends, and staying relevant through effective marketing and branding, brands can thrive in the dynamic marketplace. Timely innovation, coupled with adaptability to changing consumer behaviors, sets the stage for long-term success. As the industry continues to evolve, it is imperative for brands to embrace innovation as a core value and actively seek opportunities to delight consumers with innovative products.

1 Be Consumer Obsessed 

All of your innovation efforts should begin with your consumers. Remain focused on identifying, articulating, and solving for your customer’s pain points. 

2 Sweat the Process

Innovation isn’t a walk in the park, and 99% of innovations have failed in ten years. In the FMCG space, there’s a high probability that your innovation will fail, so it’s important to seek both perfection and agility in how you execute your vision. 

3 Be Patient 

Often, companies pull the plug on innovation way too soon, claiming that it’s bleeding the bottom line. Have faith in your innovation. Focus on the six month, one year, three year, and 10 year windows, and build alignment across the organization on these milestones.