Brands’ launch activity, new products’ contribution to brand sales, and their price premia

One in two Top 10 brands was innovating in 2022

For a brand, the launch of new products can have many benefits, such as exciting consumers, maintaining an energetic brand perception, satisfying retailers and defending or growing market share.

Surprisingly, a relatively large number of Top 10 brands across 80+ categories have not launched a new product in the past year. While three in four #1 brands have been active innovators, two out of three #10 brands did not launch a single new product.

The average brand earns 1 in 7 Euros from new SKUS

For the average brand, new products (those that are younger than 12 months) contribute 1 in 7 Euros to their revenue. Given that half of all brands launch no new products, this number goes up to 1 in 4 Euros for the ones that are active innovators.

While the average revenue contribution of new products hardly varies across brand ranks (between 12 and 17%), the contribution for brands that actually launch must go up for smaller brands (since fewer of them launch). Among launching Top 5 brands 1 in 5 Euros comes from new products, whereas this contribution reaches 1 in 3 Euros for #6 to #10 brands that launch. Is this because their launches are better? Unlikely – but their ranges are smaller and launches therefore account for a larger part of the assortment. Also, because these brands tend to have limited salience during a shopping trip (fewer promotions, worse shelf position, no second placement), a launch may be one of the few opportunities to get attention.

The average launch is 12% more expensive

When comparing the price of launches with the price of the existing assortment of the brand, we find that launches are commanding a 12% premium (their regular price might be even higher given the frequency of price promotions for new introductions). Top ranked brands are slightly more prone to exploit their equity: Top 3 brands on average sell their launches with a 16% premium, compared to 8% for the bottom three ranked brands (among Top 10 brands).

Keep in mind that innovations are one of the most effective means to justify high prices as well as premia versus budget or Private Label offerings.