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MARKETING

Leading companies in FMCG are still the torchbearers on the path of innovation in India

The greatest inventions of the last two centuries have one thing in common – their creators fumbled, stumbled and erred enough times to make a virtue of perseverance. The other great commonality that rarely gets spoken of is that they did not have quarterly targets to meet and often bootstrapped themselves to fund their innovation. The world however has changed dramatically for innovators in the last half century. Not only are assessments by the world at large more exacting, investors and management are far less patient in their quest for success.

This is not without reason – we know from our own analysis that innovation is an integral driver of incremental growth and essential to profitable survival. Yet, very few companies and brands manage this in a manner that is truly breakthrough. Surprisingly, breakthrough innovation is not a quest for the impossible – to be conquered only through great wisdom and luck. There is a known path to breakthrough success for brands that use the right map. The tenets of breaking through, though thought to be elusive, often remains strikingly similar across those who manage to achieve it. It rests upon fundamental truths that are embedded in the consumer’s life, rather than strategic and esoteric boardroom discussions.

Our report this year, emphasises these rules and then uncovers a few revelations too. The truth about breaking through in the Indian market:

Make yourself available to your core consumers: On average, our 23 winners were available in 115,000 stores at the end of six months and over 200,000 stores at the end of 18 months. Six winners attained 150,000 stores within six months of launch and five winners had distribution in over 250,000 at the end of 18 months.

Be worth your consumers’ hard earned money: The winners’ average revenue achievement was about INR 80 million at the end of six months which tripled to about INR 240 million by the end of 12 months.

Offer a genuine difference in your category: Even though many winners belonged to well-penetrated categories, on average they garnered 1.5% market share at the end of 18 months which was about 1% last year at the end of 18 months.

THE MAKING OF WINNERS

The current edition of the Breakthrough Innovation Report follows a similar approach that was employed in the first edition and examines all the new launches from more than 80 FMCG categories. For this report, we evaluated products launched in the calendar year 2012 and analysed their performance over next 18 months. To be a breakthrough innovation winner, a product needed to satisfy three requirements:

RELEVANCE: Generate launch-year revenues in the top 0.5 percentile for new FMCG launches in India (in the channels tracked by Nielsen in India). This corresponded to approximately INR 105 million sales in year one at a minimum.

ENDURANCE: This measure confirms a sustained level of consumer demand after the launch year. Winners had to either double launch year sales in months 13-18 or generate revenues in the top 0.5 percentile at the 18 month milestone for all launches. This corresponds to approximately INR 177 million sales at a minimum in the channels tracked by Nielsen in India.

DISTINCTIVENESS: Deliver a new value proposition to the market. Our innovation experts excluded re-packaging, reformulations, and re-positioning and ensured that distinctive offerings that abided by demand-led principles and/or differentiated themselves with breakthrough execution made the final cut.

Our success criteria for threshold sales have come down marginally from 2011 because the average sales generated by all the new launches was lesser in 2012. This further impresses the fact that with overall consumer expenditure coming down, achieving success in 2012 and 2013 was even more difficult. The winners therefore had to show tremendous agility to stay relevant, sustain their endurance and offer distinctiveness to impress consumers.

SUCCEEDING IN TOUGH TIMES

The 23 breakthrough brands we selected are spread across 17 categories ranging from food, personal and household care and overthe-counter pharma products. Though the odds of success remained the same, fewer brands could survive the criterion of distinctiveness, relevance and endurance as compared to 2011. The overall rate of success dropped to 0.1% in 2012, compared with 0.2% in 2011. This was true for both global and local players and nearly similar to the marginal drop in the success rate of top players. However, the top 20 FMCG players continued to dominate the innovation space with the total number of new launches from them going up to 491 in 2012 from 437 in 2011, reinstating the fact that leading companies in FMCG are still the torchbearers on the path of innovation.

Read 1478 times Last modified on Wednesday, 06 April 2016 09:36
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