By Al McClain
There is new life in some large, long-established categories, according to presentations at a recent editor’s briefing by Procter & Gamble (a RetailWire sponsor) in Cincinnati.
According to Jim Flannery, Managing Director, Customer Development, Procter & Gamble Global Operations, the company is focusing on two moments of truth – the first when a consumer makes a decision at the shelf, and the second when they actually use the product. According to Ed Shirley, Group President of P&G North America, they are striving to constantly innovate by learning fast and turning insights into action, which leads to commercial success. The company is currently spending $200 million per year on consumer research, and conducting a staggering 10,000 studies per year.
For the “old line” consumer products companies (P&G started selling soap in the 1830’s), it really comes down to inventing completely new products and categories, while continuing to push organic brand and category growth. P&G gave trade publication editors glimpses of three categories where it’s been able to do this: beauty, bath tissue (mainly Charmin), and laundry.
In beauty, P&G seems to be focusing on the “beauty enthusiast” – those 30 percent of consumers who spend 70 percent of the dollars in the category. One example of success they’ve had is with Olay Regenerist Derma Pods, which are basically single use pads with the treatment inside that reduce puffiness and wrinkles around the eyes.
P&G believes retailers can capitalize on the emotive quality of health and beauty categories by getting involved in the “retailtainment” trend – having beauty advisors in-store; using their websites to educate consumers; and redesigning departments to make them more appealing.
In the laundry category, P&G is focusing on growing their billion dollar brands – Tide, Downy and, soon, Gain. A recent success has been Tide to Go for treating stains on the run.
High-Density Liquids (HDL’s) now make up nearly 80 percent of detergent sales. The big news there is that P&G brands are getting “compacted” as 100-oz. bottles go to 50-oz. bottles, and so on down the line, beginning in September. Benefits accrue to consumers (smaller package size), retailers (supply chain efficiencies), and the environment (less materials and energy used).
According to a May 21 article in the Wall Street Journal, all major players in the industry, including Unilever (All & Wisk), Henkel (Purex), and Church & Dwight (Arm & Hammer and Xtra), are going the compact route. The Journal mentions that retailers will be able to get more bottles on the shelf (reducing out of stocks and labor costs), while manufacturers will cut costs (packaging and shipping), but that there could be a challenge convincing consumers to pay the same price for half the product, albeit double-powered. No mention is made of private label in the story.
The environmental benefits of compact detergents would seem significant as well, especially at a time when “green” and “sustainability” are industry buzz words. Yet a May 30 WSJ letter to the editor indicates that at least some consumers misunderstand the initiative and view it as a move to increase consumption.
On bath tissue, the big news for P&G is that Charmin has its largest initiative in history launching in August. Charmin Ultra Strong (Red) is going from one ply to two, increasing strength and yielding less lint, while staying just as soft. While this might not seem to be a big deal, P&G is projecting increased sales of $240 million from the initiative. And, they are looking for 100 percent consumer awareness at launch, so suffice to say some big media bucks will be spent.
Charmin is also doing some non-traditional media such as the Charmin restrooms you may have heard of in Times Square, demos at state fairs, in-pallet demos where consumers can compare old versus new right from end-cap displays, etc.
Bottom line (so to speak): There still seems to be a ton of life in some of these long-established categories. The branded manufacturers obviously have to keep the pedal to the metal on innovation, in order to stay ahead of each other as well as private label, and to figure out what the consumer wants next.
Discussion Questions: What big retail categories do you think have the most room left for innovation? What new products have you seen lately that had the “wow” factor?
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Candidly, most of the innovations in consumer products over the past several years have come not from industry giants, but more so from entrepreneurs, small consumer goods business, and niche brand players.
Often, the major mega-brand firms will come into play once the new innovation has established itself for a while in the marketplace, then the major will invest the dollars to take the item to the next level and beyond with well funded advertising, promotion, and greater placement.
Actually, I love this scenario because it works for everyone, including the originator that usually prospers in a very big way and gets well rewarded. It’s been my absolute pleasure and a thrill over the past several years to take this ride with several of my entrepreneurial and small company clients whose products and innovations are now in the hands of great marketing companies like Procter & Gamble, and others. This is what makes the consumer goods industry the best of all businesses.
There is room in every consumer category more new ideas and innovation. No exceptions.
I agree completely with the above comments. Innovation is a necessity for every retail category today and at the core of it is understanding the hearts, minds and desires of our shoppers. If we listen to and question them, we can respond with products and experiences that they want to incorporate into their lives. But by listening, that doesn’t mean a one-time or sporadic effort…it means having an ongoing pipeline to people that keeps our fingers on their pulses. After all, trends are driving change monthly…so we have to change with them and meet their needs accordingly.
Swiffer is a home run for P&G. Unlike laundry detergent and toilet paper, there seems to be no strong national brand competition. The best innovations aren’t incremental, they’re completely new categories previously unseen. Making detergents more concentrated is worthwhile, but the biggest sales and profit increases will come from the Big Ideas.
When it comes to household essentials, category growth is difficult to achieve. Consider the fundamental sales volume equation, that sales is equal to penetration times first repeat rate times consumption.
Take laundry detergents. In the US, imagine that penetration is close to 100% of households as the percent buying more than once in a year. Consumption must also be fairly stable (unless you can get people to wash something other than clothes with LD). There is simply little arithmetic room for sales growth except for price changes or people using more bottles per year because they don’t believe they can use half of the liquid. On the other hand, there is lots of opportunity for share steal (LD used to be 80% powder, now it’s 80% liquid, so there you go…) Of course, outside the US, in developing markets, there is tremendous opportunity for growth of packaged LD.
Now, other categories do not have full penetration, such as face creams, or hand and body lotions, so there is tremendous opportunity to create growth by changing consumer and shopper mindsets. Many years ago, Prego created a lot of growth by convincing people who always made their own spaghetti sauce that “it’s in there.”
Innovation isn’t coming from today’s new products–it’s coming from consumer trending into the future.
Here are a few which will drive innovation: the rise of the single person household; the aging consumer; sustainability demands; increased discrepancy in income; the influence of Asian and Latin cultures, etc.
My personal favorite is the aging population. Did you know that 2/3 of the people who have ever turned 65 are walking the earth today? That is unprecedented in the history of mankind. Pretty wild stuff.
In terms of retailer response–look at Germany’s Generation Market, geared in every way for the aging consumer. ABCNews.com has a video showing the store.
In terms of manufacturing & CPG–the response may be in the form of the Seven principles of Universal Design: 1. Equitable use, 2. Flexibility in use, 3. Simple and intuitive, 4. Perceptible information, 5. Tolerance for error, 6. Low physical effort, 7. Size and space for approach and use. (NC STATE U CENTER FOR UNIVERSAL DESIGN)
The Future Never Gets Old.
Big brands are like aircraft carriers on the sea of marketing–they are large and threatening, and take a long time to turn. As many business writers, including our own Ryan Mathews, have pointed out more creatively than I can, innovation usually comes from the fringes. Activities by smaller players impact the sales of the bigger guys, who are then forced to react and make changes to recapture market share. There are notable exceptions to this, of course, but the cases of older brands like Crest changing their offerings to address the inroads of newer brands like Arm & Hammer in the toothpaste category are far more prevalent.
As for the second question, there wasn’t anything at the recent FMI show that made my jaw go slack, although there were some interesting organic products that looked tempting.
Any existing product or category that can be contemporarily reformulated, redesigned, repackaged, repositioned, etc., and and also create the perception that it makes one beautiful, younger, more appealing, and/or easier to use is a candidate for modern-day innovation. This is particularly true when they are in the astute marketing hands of P&G, who are masters at building “Wow Power” in “old” products. For instance, “new” TIDE has come in out a dozen or more times and each time that old product hits the shore it gets better–and more profitable.
Home Health seems to be the one category packing the most “Wow” lately. In particular, there are a lot of machines and appliances (Blood Pressure Monitors, Body Fat Indicators, Ovulation Watches) that sell for over $50.00 that consumers seem to be accepting.
The oldest category in the grocery store has seen more innovation and growth than all other categories combined. The beverage category has been a leader for years and has now become the leader in innovation. I dare say that more new ideas are introduced in the beverage category in a month than are introduced in all other categories in a year.
The category or the product doesn’t determine whether there is room for innovation. Understanding the consumers and solving problems creates the oppprtunity for innovation. Tide to Go is a great example. Having products to apply to the stain at home before washing do not resolve the problem of the spill in the middle of your shirt or top. Tide to Go does. That was an unsolved problem that created the opportunity for a new product. Finding those unsolved problems is critical not examining which product or category is good for innovation.
Anything having to do with the preservation of health and wellness or easing the transition of aging will be hot. Products that genuinely improve (or are perceived to improve) quality of life, ranging from high quality prepared meals for consumers on the go to innovative new OTC gastro products for–well–consumers on the go! In fact, OTC and nutriceuticals may be the two areas most ripe for innovation driven growth.
Any category in a store is ripe for an innovative product. The bigger question is whether it is a category-growing innovation or a brand-switching innovation. Olay may be bringing in new users with an easy-to-use product. Charmin, unless it charges more for the new product, will just gain brand share in a relatively stable market. The same with laundry detergents all moving to more concentrated versions. The demand for toilet paper and laundry detergents are unlikely to change because of these innovations.