In previous posts, I have covered the most successful consumer good innovations in China, USA, Europe and India. Now it is time to take a cross country view and find out the trends across the world’s four biggest markets.
Every year Neilsen publishes a list of their breakthrough innovations in major global markets. These are the star products which produce significant revenue in their first year and maintain it for a further year.
Out of the hundreds of thousands of new products every year, very few meet the criteria. There are just 68 winners! In this post, I will explain the trends and lessons from the entire set.
To see each individual innovation and what made them successful read the following posts first:
We can see the bulk of innovations come in three segments. These are food, beverage and personal care. Personal care was the single largest segment with 35% coming from this segment alone.
Across all four markets, there was only one stand out feminine care and one pet care innovation.
The feminine care numbers are surprising, chiefly for India were many women do not use any form of specialised sanitary towel. There is certainly a large ripe market that a great product could tap into.
The chart above further breaks down the innovations by sub-sector and allows us to see where they were launched.
Some of the countries not present in certain segments appear to be logical, others show that companies are missing an opportunity.
India is the only country where a new non-alcoholic beverage did not manage to reach Nielsen’s criteria for a breakthrough innovation. This seems an oversight in a country where some states have banned alcohol.
Part of this could be explained by the presence of regional beverages that tend to be made fresh.
This is a similar scenario to what Tropicana faced in Turkey. If a company could successfully mass produce these beverages and convince customers to forgo the fresh market stall alternative, they could see huge returns.
The lack of new confectionery products that have broken through in the USA is not surprising.Here the market is more mature with heavy marketing making it difficult for new entrants.
The chart above groups the innovations into four types. Some are product development meaning an improved version of a pre-existing product. Some are expansions, which is simply dropping an innovation into a new country. Then there are two types of diversification, related and unrelated.
We can clearly see across all markets, unrelated diversifications form a very small proportion of successful innovations. For large companies, this points to the old adage of sticking to what you know and do well.
There were only three examples in the sample. Atkins created their own food range for the first time. Streax moved into deodorants. Jiangzhong Pharmaceutical Ltd started a biscuit range. Even though the companies had never produced similar goods before, their principles and brand values aligned.
Related diversification makes up the bulk in all markets except China. In India just under 80% of the innovations were related diversifications. Perfetti Van Melle did particularly well in this category, creating three new types of sweet that all went on be successful.
For businesses, the moral of this story is to use the brand recognition and expertise to create new products. This technique is much less risky than unrelated diversification. As many of the core competencies needed to be successful are already in house.
Product development is the next largest sector in all of the markets. In order to be considered for the list at all, the innovation has to be significant. Minor tweaks do not count. Intuitively, this type of innovation would have expected to do well. All of the enhancements were on products that had already been hits.
There is an aspect of cannibalisation with this category. This makes it slightly less attractive for businesses than related diversification. Ariel’s 3-in-1 pods for example are likely to have taken demand away from previous iterations of Ariel cleaning pods.
Expansion makes up a lower proportion than I would have expected. It seems like a no brainer, if a product has been a hit in one country, release it in another country. However, particularly with consumer goods, local tastes and brand perceptions are vital.
This chart breaks down the innovation by company. There is clearly one company out in front, the king of consumer good innovation Unilever.
Unilever have had 6 products make the breakthrough innovation lists of Nielsen. Five of these products are in India under Hindustan Unilever.
Unilever has stood out in India as hygiene standards improve. As a large international company, it is trusted more than many local brands. The products in India are Tresemme, Lifebuoy Clinic Care, Rin Perfect Shine, Pepsodent Triple Clean and Pepsodent Expert Protection mode.
Tellingly, each of these products were targeted at Indians very specifically. Unilever were not complacent. For Lifebuoy Clinic Care, the sub brand was built up over years of school visits to promote hygiene. Rin Perfect Shine tapped into Indian ambitions for good careers and Unilever set up an online academy to help underprivileged children.
L’Oreal and Pepsi are joint second for most number of breakthrough innovations. PepsiCo has the distinction of being the only company to have a breakthrough innovation in three out of four of the sample markets.
PepsiCo’s innovations are Tostitos Cantina Tortilla Chips and Salsa and Lay’s Xtra in the US, Tropicana juices in Turkey (Europe) and Kurkure Puffcorn. Notably, all the products were again designed with local tastes in mind.
The chart above clearly shows the majority of successful innovations are in separate companies.
This chart shows the extent of this effect. Unilever, PepsiCo and L’Oreal are clear outliers. Half of the innovations were the only entry for their parent company.
This shows that spreading oneself too thinly does not usually pay off. I cannot get data for how many new products each of the sample companies released in the period but the companies with only one breakthrough can be broken into two categories.
The first category is those who put all their efforts into one product launch that year. The second category is those who released many products but only one broke through.
For this second category, it is important to note that not all product launches would have the ambition to be as successful as the products on this list. For example, smaller innovations may have been released as part of a broader ecosystem. The innovation itself may not have been expected to bring much revenue but attracts customers to the brand who then buy other products.
Alternatively, a company may have poured money into many projects in the hope a couple took off and covered the costs of the duds. This is a risky strategy as it means the company focus is split. Products which may be duds under this system could have been breakthroughs if the firm had a singular focus.
One lesson to take is realistic expectations. Only industrial giants were able to make more than one product breakthrough. Do not expect to launch ten new products and they all perform spectacularly!
This next set charts breaks down where There is a clear distinction between the developed European and US markets and the emerging Indian and Chinese markets.
At least 75% of breakthroughs in Europe and US were home grown. This falls to a third or less in both China and India.
Despite the sentiment of some populist politicians, clearly the restrictions in India and China still allow determined firms to be very successful.
In innovation terms, China and India are still far behind USA and Europe. This chart shows where the parent companies are based for each of the four markets.
Indian and Chinese companies did not create any breakthrough products outside their home market. While Europe and USA are evenly pegged in China, European companies have clearly outperformed their trans-Atlantic counterparts in India.
This can mostly be put down to the closer ties between the UK and India rooted in their shared history and subsequent Commonwealth relationship. Six of the seven European company innovations in India were from British companies.
American and European companies have a duopoly in their respective home turfs. While Indian and Chinese tech companies may be gathering steam, they still need to catch up to match the innovative might of European and American companies.
The majority of consumer good innovations that strike big are food products, beverages or personal care items.
India is a market with apparent opportunities. In the sample year, there were no breakthrough feminine care or non-alcohol beverage innovations. This being despite a huge potential market.
Related diversification innovations make up the bulk of this list. They are followed by product development.
For businesses, this should encourage innovations based around skills already in-house rather than dramatic shifts.
Unilever was the star performer in the consumer good market. PepsiCo and L’Oreal were a close second. Most innovations were by a company with only one item on this list.
It pays to heavily invest in brand image for large companies and specific market targeting is a must. Most firms should focus on one big innovation rather than back too many horses.
American and European companies dominate global consumer good innovation. While Indian and Chinese companies make products that sell well in their own countries, they do not export well to the other major markets.
This data was based on innovations released in 2012, giving plenty of time to measure the performance. I look forward to Neilsen’s 2016 reports to see if the trends continue.