Innovation by Retailers: Rare, but there

Innovation is an essential growth strategy for both brand manufacturers and retailers. New products allow companies to charge higher prices and create differentiation vis-à-vis competitors. While brands introduced nearly 2/3 of all the new FMCG products in seven European countries over a period of four years. The Private Labels of mainstream retailers and discounters account for the rest although discounters lag behind with only 7% of all new products. Out of all new products, only 20% are major innovations (new brands or sub-brands). The rest are renovations, which usually only change features of existing products (e.g., colour, flavour, size). When analysing innovation behaviour, the share of true innovations amongst the three players is unbalanced: for brands 23% of the total are major innovations, whereas mainstream retailers and discounters this drops to 17% and 11% respectively. This suggests that retailers are not developing enough major innovations to support growth and more reliant on brands to do so.