Dusseldorf Pandemic and high inflation rates have left visible traces in the assortment of German supermarkets. There are significantly fewer new products on the shelves than a year ago. From January to December 2022, the index value for new launches fell from 100 to 83 points.
This is shown by data from the market researcher Innova Market Insights, which is exclusively available to the Handelsblatt. “No experiments” is the motto of manufacturers and consumers – a trend that is reinforced by high energy costs and consumer restraint. Only in sports nutrition and meat and milk substitutes were there more innovations on the shelves than in the previous year.
Before the pandemic, Germans were quite willing to try new foods. Supermarkets also opened up to product ideas from young companies – also to set themselves apart from discounters.
“The red carpet was rolled out for start-ups by retail,” states Werner Motyka, industry expert at the Munich Strategy consultancy. Their products enjoyed quasi “puppy protection” for one to two years. Retailers such as Edeka or the drugstore chain dm even set up their own incubators for start-ups, supporting them throughout the entire founding process.
In the Corona period full of uncertainties, consumers turned back to familiar products and brands. This phenomenon is confirmed by Lu Ann William, Innova’s Director of Global Insights. As a result of the global lockdowns, there was also a backlog in the innovation pipeline.
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“The manufacturers were primarily concerned with stabilizing their fragile supply chain,” says Motyka. “Corona certainly played a part in the fact that major innovations were less likely to be seen across the industry,” explains Nestlé Germany.
Many production chains got out of step. “The companies were happy if they could produce their existing range,” says Bastian Fassin, President of the Federal Association of the German Confectionery Industry. As a result, trade and industry were less interested in innovations.
The number of innovations across Europe fell drastically during the pandemic – from almost 54,000 in 2019 to 38,000 in 2021 in Germany, France, Spain, Italy and Great Britain, explains Bettina Frankl, Director of Innovation at market researcher Nielsen IQ Bases. And: “The downward trend continued in 2022.”
The wave of price increases for energy and raw materials, triggered by the Russian war of aggression against Ukraine, put the next damper on innovations. “Many consumer goods producers now have to cut costs and are therefore also saving on new products,” observes Motyka.
More innovations than last year.
(Photo: imago images/Shotshop)
Bringing this onto the market is very time-consuming and expensive. SMEs need an average of six months to three quarters of a year before new products are ready for the market, says the industry expert. In large corporations it can take two to three years.
Apart from high development and marketing costs, manufacturers usually have to pay listing fees of several hundred thousand euros to retailers, according to Motyka. In this way, they cushion their economic risk when they free up shelf space.
Inflation has also reduced the purchasing power of consumers – and with it their willingness to try things out. “Innovations from start-ups in particular are often expensive. Many of them have therefore put product launches on hold for the time being,” says Motyka.
More private labels – less innovation
The trade wants to lure customers into its shops with low prices and is therefore increasingly putting low-priced private labels on the shelves. “Own brands are – apart from a few exceptions – generally not one of the innovation drivers,” explains Motyka. “Rather, they mostly replicate successful products from brands and thus minimize their risk.”
>> Read here: Own brands are booming – but not for all products
In fact, most new products fail. Nielsen innovation expert Frankl assumes a flop rate of 75 to 80 percent. As a result, eight out of ten new products do not catch on. “In general, it’s difficult to keep an innovation on the shelf for more than a year,” says Frankl. This is especially true in Germany.
“German consumers are among the most critical in the world,” comments Alexander Antonoff, spokesman for Nestlé Germany. This, in turn, means that if an innovation succeeds in the German market, it has already passed its toughest test.
Lots of novelties in vegan meat and cheese
In the past two years, Nestlé alone has launched more than 100 plant-based innovations. In Germany, for example, a vegan Kitkat bar, a vegan schnitzel and a liquid, plant-based egg alternative from the Garden Gourmet brand went on sale. “We are seeing strong growth in alternative proteins,” says Antonoff.
>> Read here: Plant-based alternatives to meat, cheese and eggs are booming
According to data from Innova Markets, vegan substitutes are among the only two categories in which there were more innovations in 2022 than in the previous year, with an increase of ten percent. New products came onto the market, especially in the area of plant-based cheese alternatives. The mostly protein-rich sports nutrition was even more innovative with a plus of twelve percent.
The largest declines in new products were in the meat, fish and egg category (minus 30 percent). According to figures from the Federal Statistical Office, meat prices rose by an above-average 14.5 percent. Consumption is falling, also because consumers are switching to more sustainable substitute products.
Manufacturer Nestlé is seeing strong growth in plant-based proteins.
(Photo: obs)
There were also significantly fewer new products for breakfast cereals (down 23 percent) and baby and toddler food (down 25 percent). Not surprising for industry insider Motyka: The business with cereals has been stagnating for a long time: “Because of the high sugar content, consumers are increasingly having reservations.” According to him, the market for baby food is also difficult and largely saturated.
Innovation is a prerequisite for growth
The industry expert is convinced that by 2024 at the latest, when the recession is over, the desire for new products will increase again. Then he expects a catch-up effect: “Anyone who only buys the essentials for a long time will eventually want to try something new again.”
Market researcher Williams is already seeing many innovations at trade fairs. New products are also indispensable for Nestlé: “Innovations are a prerequisite for further growth – especially in times when consumer behavior is changing.”
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