LONDON: "Zombie" and "cannibal" products are killing consumer brands, according to new research which shows that over half of new launches are failing to provide growth or are eating into profits from existing products.
A study from TNS, the research consultancy, looked at the launches of 3,500 consumer goods in the savoury snacks, laundry, soft drinks and skin care categories.
TNS estimated that the food and drinks industry in the UK was wasting £600m per year on R&D alone. Billions more could be added in the launch costs of failed products.
"Too many businesses are spending huge amounts of money on quasi-innovation that only convinces existing customers to swap within their range," said Phil Sutcliffe, managing director IPD UK at TNS.
"The key to unlocking true growth," he continued, "is to focus on genuine innovations that will draw in brand new customers or lead to greater frequency of use by existing customers".
TNS's study found that companies launching new products often relied on volume alone to determine the worth of an idea, without determining the positive or negative impact the launch would have across their portfolio.
It suggested that even though Pringles Xtreme, an extension of the snack foods brand, had generated significant sales, it had also heavily cannibalised the existing range, resulting in minimal franchise growth. Too often, cannibal launches fragmented resources and could lead to shrinkage of the total franchise, the report added.
Only 15% of products launched could be termed "expansion innovations" according to TNS. These were new products that attracted sales and added to a company"s existing revenues. In the soft drinks category, however, this figure fell to just 6%.
"The rewards for those that get it right are phenomenal," said Sutcliffe. "Launching a successful "expansion" product, founded in genuine innovation, can rejuvenate a company"s fortunes and put it into a league of its own."
McCain's Jackets were offered as an example of this. These ready-baked jacket potatoes, said TNS, "delivered significant sales that were highly incremental to the existing brand franchise".
Data sourced from TNS; additional material by Warc staff