The poor strategies to promote innovation in some chains, and consequently, the lack of access to such innovations on the part of the consumer, results in the failure of 55% of product launches. This is in deep contrast with the clear support to innovation though Manufacturer Brands shown by Carrefour, Alcampo, El Corte Ingles, Eroski and other supermarket chains. That is one of the main conclusions of the study "Analysis of consumer access to innovations in the Spanish market", carried out by ESADE Creápolis and presented this week in Madrid, whose goal was to analyse the development of innovation in the retail sector in Spain between 2012 and 2016.
The report highlights the clear falling trend of innovative activities in this sector in Spain during the period at hand, showing that the total number of innovations drops as of 2012, and in 2016, with the financial crisis already behind, it reaches its peak, with a 23% drop.
The report also shows that innovation is limited to very few product categories (mainly food), and that 5 of them alone account for almost 30% of the total. Yogurts are the most innovative category, followed by chocolates, soups, detergents and ready-made dishes. At the same time, the study shows that innovation appears to be a key strategic decision to successfully compete in these categories.
Manufacturer Brands (MB) are clearly the engine of innovation, accounting for 88% of the innovations analysed in this study, compared to the 12% of Distributor Brands (DB). Of this percentage, two retailers alone account for 94% of the DB's innovations in the sector.
Correlation between the market share of the DB and the number of innovations in a category
The results of the study confirm the conclusions reached by previous studies, such as that of the European Commission ("The Economic impact of modern retail on choice and innovation in the EU food sector"). They highlight that there is a correlation between the market share of the DB and the number of innovations in a category. According to the report, and also confirmed by studies of Kantar WorldPanel, when the market share of a DB reaches 30-50%, innovation in the market is significant reduced. In this sense, there is also a relationship between the higher level of innovation and the lower growth of a DB, so we could understand that the efforts in innovation of the MB helps to slow down the development of the DB. One of the main reasons why many innovations fail is because they do not become easily accessible to the consumer due to poor strategies on the part of the distributors. Even the most successful innovations barely reach quotas/penetration exceeding 30% after one year of their launch. Chains with business strategies focused on offering small ranges and supporting their own brands; that is, with a larger share of DB's, seem reluctant to introduce the innovation of MB's into their shelves, as opposed to chains such as Carrefour, Alcampo, El Corte Ingles, Eroski and some supermarket chains, which give clear support to brand innovation.
Most successful innovations belong to Food sector
Consumers say that they like to try new products and they mostly discover innovations at the points of sale (in 54% of cases). In spite of that, the visibility of these innovations on the shelves is low and, consequently, the success rate is also low (45%).
The study shows that success is usually greater for manufacturers with a higher focus on innovation. In 2016, despite the decrease observed in the overall figures, the success rate increased significantly (53%) and stood at its highest since 2012. The Food sector achieved the higher success rate (72%). The data also seems to show that the greater the innovative activity, the greater the growth of the categories.
The advantage of innovations lasting less and less
Another of the problems analysed by the study is how innovative products of MB's are copied by the DB's. When analysing 10 examples of MB innovations during the period at hand, 4 of them have been copied by the DB's in less than a year. It usually takes between 4 and 36 months for them to be copied, according to the study, which clearly makes it difficult to make the innovation efforts profitable.
Ignacio Larracoechea, president of Promarca, stressed that "in recent times, numerous voices and studies have stressed that the reduced efforts in innovation are still a challenge in Spain. It is very clear that we must work together in their promotion with a mix of voluntary, fiscal and legislative measures."