Budget cutbacks spur rollouts, promotional spending

Packaging Digest

Food and beverage product launches decreased 51 percent to 2,660 in the first quarter of 2009, according to research company Mintel. "Many companies face internal budget cuts that affect everything from new-product ideation to development and marketing," reports Lynn Dornblaser, Mintel's director of insight for consumer packaged goods.

Also part of the tough economy: far fewer new-product introductions, taking a bite out of potential ad spending. “Faced with low consumer confidence and reduced spending, many food and beverage manufacturers cut back on product development and new-product launches," says Dornblaser. She adds that Mintel has tracked new products during three major recessions, and indicates there is typically a decline in launches at the beginning of a recession and a sharp uptick upon signs of a recovery. Mintel underscores, however, that this year's drop was particularly significant, as it comes on the heels of a 32-percent decrease in all product launches during the first quarter of 2008.

Perhaps that's because the recession began in December 2007, according to the National Bureau of Economic Research. Matters, of course, became worse in early 2009.

Some categories were worse than others. The biggest drops were in non-alcoholic beverages, down 56 percent; chocolate, sugar and gum confectionary, down 55 percent; and dairy products, off 60 percent. Confectionary may have been disproportionately affected as Easter fell in the second quarter this year.

New-product launches have also been slipping in recent years as manufacturers focus resources on quality over quantity. Grocers are increasingly promoting their own house-branded products in store and the number of brand-name products in stores is universally expected to decline in the coming years.

Dornblaser points out, however, that while the decline in new-product launches was particularly troubling in January and February, they began to increase in March. "Consumer confidence has leveled off for the time being, which marks an opportunity for manufacturers," she says. "Now is the time for ideation and innovation for products that answer shoppers' desires for value, quality and pleasure."

Sources: Mintel, Advertising Age