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Will Strong Innovations Improve CPG Companies’ Sales?

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Stiff competition should drive innovation

Due to intense competition, CPG (consumer packaged goods) companies’ business growth depends on the successful identification, development, and launch of innovative new products. Procter & Gamble’s (PG) calendar 3Q15 ended on September 30, 2015. The organic sales for the grooming segment didn’t change. They were driven by growth in Braun from innovation and increased trade support.

With continued growth, Procter & Gamble recently launched FlexBall into markets in Latin America and Central and Eastern Europe. In less than 18 months, 25 million FlexBall razors were distributed around the world. On December 17, Procter & Gamble’s Gillette filed a lawsuit against Dollar Shave Club for patent infringement.

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R&D expense

Clorox’s (CLX) calendar 3Q15 R&D (research and development) expenses were $0.03 billion. The company’s recent launch of Hidden Valley Ranch helped strengthen its leadership position in dressings and sauces. Clorox faces stiff competition from Unilever’s (UL) Knorr and Chicken Tonight sauces and the frozen food range in the US.

Local innovations

Colgate-Palmolive focuses on local innovations to its global innovations by creating appeal in a particular region. For example, Colgate Active Salt was launched in emerging markets like India and Thailand. Salt is a rural remedy for toothaches and gum ache in these markets. In India, Colgate’s toothpaste retail (XRT) market share came in at ~55% for 3Q15.

According to Kantar’s Brand Footprint report, Colgate-Palmolive (CL) is the fastest-growing FMCG brand. It attracted 19 million new shoppers in 2014. Downy (PG) and Dove (UL) attracted 11 million and 14 million new shoppers, respectively.

In-store and blockbuster innovations

Procter & Gamble’s peers Kimberly-Clark (KMB) and Colgate-Palmolive focus on in-store innovation in order to attract consumers and meet retailer expectations. For example, Procter & Gamble’s in-store innovations like hard tags make it easier for consumers to shop. Clorox also aims to leverage platforms to allow for “blockbuster” introductions followed by “sequels” in the next quarter.

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