Category Growth Higher where Innovations are Plenty

Posted by Oliver Koll on Oct 28, 2015

innoTotal FMCG growth has been modest over the past five years. However, this observation hides substantial category differences. We  examined whether innovations are a major discriminator, not just between growing and shrinking brands, but also between growing and shrinking categories.

We split some 500 categories in seven European markets into five groups, based on the share of new products within  the category’s total assortment: The 15% most innovative categories enjoy the highest category growth rates (12% in volume) whereas the 15% least innovative categories grew by only 2%.

Some additional observations:

  • The share of new products in the 15% most innovative categories is about five times higher than in the 15% least innovative categories. This relationship holds for both new products within the branded part of the assortment and new products within the private label assortment.
  • National brands are more innovative than PLs  with a share of new products in the branded assortment which is about 1.5 times larger than in the private label assortment.
  • In these seven countries, household care and personal care categories grew almost twice as strong as food and beverage categories – and their share of new SKUs was also substantially higher.

“Long-term sales growth for a brand is derived mainly from category growth*” – our findings seem to imply that organizations are not random participants on this journey, but can actively influence it.

*see Empirical Generalizations about Marketing Impact, Marketing Science Institute