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India fails to innovate in FMCG

News, 16 April 2015

NEW DELHI: Out of almost 17,000 product launches in the FMCG sector in India in 2012, a mere 23 can claim to have been a success according to a new study.

The second India Breakthrough Innovation Report from researcher Nielsen looked at 16,914 new launches across 80 FMCG categories in 2012 and decided that just 0.14% could be classified as Breakthrough Innovation Winners, compared to around 0.2% in 2011.

Winners needed to score on three counts: demonstrate relevance by generating first-year sales in the top 0.5% of all new FMCG launches; demonstrate endurance by generating revenues in the top 0.5% after 18 months; and demonstrate distinctiveness by delivering a new value proposition to the market.

Nielsen director Amit Bali noted that overall sales from new launches were down: In 2011 the year one benchmark for the top 0.5% was equivalent to Rs 125m but in 2012 this had fallen to Rs 105m.

The Economic Times highlighted five reasons why the great majority of FMCG innovations fail to take hold, the first being that marketers are often looking in the wrong direction.

"The trend in India of late is that consumers take a backseat," said Prof Prashant Mishra of the Indian Institute of Management Kolkata. "This in spite of a lot of talk about consumer-driven innovation when it's in fact driven internally or by competition."

"India is one of the fastest growing FMCG markets compared to similar ones in Asia Pacific or Australasia but many of the innovations are either focused on trying to bring in a value for money offering or line extensions," he added.

Other factors include a failure to build thinking about innovation into the everyday running of an organisation, a tendency to become trapped by existing ways of thinking about markets and consumers, taking an overly narrow category view, and not allowing enough time for significant innovations to come to market.

Hindustan Unilever emerged as one of the most successful innovators with five winners, including Tresemme shampoo, Lifebuoy Clini-Care soap, Pepsodent toothbrush and Pepsodent Expert Protection toothpaste and Rin Ala Fabric Whitener.

Data sourced from Economic Times; additional content by Warc staff