Innovation in the consumer packaged goods industry
This Blog post will help you capture innovation practices in different product areas based on successful product launches in the consumer packaged goods industry. The main focus is thereby always on value creation for the customer.
Long-lasting companies all have one thing in common: They succeed by reevaluating their business and its external environment over time, therewith constantly capturing value through iteration and customer interaction.
Anheuser-Busch InBev, the giant drink and brewing company showed how customer insights can be used for product launches. Budweiser, one of the most successful brands from AB InBev, also sells a lighter version called Bud Light, including different taste versions like Lime. While closely observing their customers, AB inBev noticed, that people use the Bud Light Lime especially for making margaritas. This led to the creation of the LIME-a-RITA:
A malt-beverage drink in a can. Two years after the launch, the drink led to nearly $500 Million in sales. After that success, AB inBev created a whole line of “Ritas”, including "Straw-Ber-Rita" and the seasonal "Cran-Brrr-Rita". This example shows how important it is to be as close to the customer as possible. Oftentimes creativity and innovation within the firm and its products is steered by ideas of customers themselves.
Wheat Thins is a great example that innovation is not only limited to the company’s point of view or the market conditions but also has to include current consumer trends. Nabisco, the producer of Wheat Thins and an affiliate of Mondelez International had seen declining numbers for the healthy cracker segment. Accordingly, Linda Lee, former Senior Director at Mondelez International, had to act. First she looked at internal processes and the firm itself but could not figure out what was going wrong. However, looking at the market conditions, Lee realized that also the market for healthy crackers was not the problem and was in fact increasing. The real problem turned out to be that the healthy crackers were made out of wheat, since more and more people in the US turned towards a gluten-free diet. Understanding this new consumer trend, Nabisco came up with “Good Thins”, a potato based healthy cracker and turned it into a huge success.
Again, the focus was on the customer in order to innovate. Monitoring upcoming trends is key for companies to anticipate changes in consumer behavior. To always adapt to customer needs, you should therefore not only focus on your own narrow industry but look across other industries that are influencing yours and that might offer substitute products.
Nestlé's Butterfinger is an example of how value propositions need to constantly adapt to consumer preferences. The Butterfinger was a key product in the US snack and confections market. However, sales for the Butterfinger were stagnating. Jeremy Vandervoet, Director of Marketing, had to undertake something. In 2014, as one of the early users of Pinterest he discovered that while people still liked the product, they rather saw the Butterfinger as an ingredient for other dishes and not as a snack. Taking this knowledge, Nestlé came up with the idea of creating Butterfinger Peanut Butter Cups and thereby challenging the successfully selling competitive product "Reese’s Peanut Butter Cups". It showed the combination of a snack that customers really like with an ingredient that was very popular as well. The Nestlé Launch was so successful that even Reese’s tried to implement this crunchy aspect into its product.
Here it becomes obvious that in the beginning of creating a product, companies try to fulfil the needs of their target segment. However, those needs adapt over time and might also not always be fully understood. The value proposition therefore needs to be revised constantly to stay competitive. For a long-term customer focus, a constant process of iteration is required, identifying what creates the most value for customers. One effective tool to create new value propositions is to draw value curves in the strategy canvas. Like this, Nestlé was able to compete with one of the best selling confections in US history.
All of these success stories show that an outside-in approach is crucial to continuously create value for customers. Monitoring customer preferences, trends and behavior is key to stay competitive, especially in the industry for consumer packaged goods.