New Product Introduction Expected to Return to Normal in Q3 2021
During 2020, consumer buying behavior shifted, with many shoppers gravitating more towards products they were already familiar with. At the same time, production lines and supply chains were disrupted, and many remain so today. As a result, retailers and distributors have been less willing to add new products to their mix, and brands are pulling back their innovation pipeline to focus on optimizing sales of trusted favorites.
In looking at new product introductions over the past year, it’s easy to see a big shift in the way all market participants are treating innovation items. New product introduction fell off a cliff in Q2 of 2020 and, while it came back slightly in Q3 and Q4, they were still well below normal levels. These shifts can be attributed to a combination of changes in distributor activity, retailer choices and consumer behavior. And while new product introductions have started to pick back up again in 2021Q1, it is clear that things have not gone back to normal overnight.
Skupos examined the top six products introduced nationwide each quarter in independent convenience retail. By focusing on product distribution, we can identify key trends in new product introduction. Skupos measures distribution as the percentage of stores selling each product.
As expected, the first quarter of 2020 showed normal distribution trends. A number of SKUs entered the market then rapidly achieved distribution over the first three months. The top six products shown above achieved anywhere from 15% to 65% adoption depending on the strength of the brand and distribution network.
The second quarter was dramatically different. Right off the bat, no new item achieved more than 5% distribution in its first 12 weeks in the market. Quite notably, 16-ounce bottles of rubbing alcohol made the top six new items for the quarter! With uncertainty in the market, brands put a hold on their innovation calendar, distributors were not eager to put new products on their trucks, retailers were hesitant to stock new SKUs, and consumers avoided new items in favor of tried and true favorites.
Q3 of 2020, however, may be the most telling about where the market is headed. Things have slowly started to bounce back, however, there are still trends from big brands that reflect that things are still not quite back to pre-COVID performance. For example, in this chart, Monster Energy, The Hershey Company, ABInBev and Molson Coors all hover around 10% to 20% distribution in their first three months on shelves. To put this into context, in Q1, Monster’s new entrant saw approximately 50% distribution within three months, compared to their Q3 introduction, which only reached about 20% distribution.
Q4 saw similar trends to Q3, with many brands holding off on large-scale new product distribution. As evidenced in the chart above, brands prioritized distribution of seasonal offerings such as Bud Light Seltzer’s Ugly Sweater 12 pack and Starbucks’ Peppermint Mocha. Seasonal products such as these reached their highest distribution during the weeks leading up to the holidays and then tapered off. Similar to the products from Q3, other non-seasonal new products saw increases in distribution ramp up over time, with products like Reese’s Big Cup with Pretzels and Peanut Butter reaching a distribution high of 25% in its twelfth week on the shelves.
New product distribution is still well below average from a year ago, however packaged beverages have started to make a comeback, taking the top 6 spots for most widely distributed innovation products in Q1 2021. Energy drinks continue to see growth, with two new products finding themselves amongst the top. In fact, the innovation product that saw the highest distribution within it’s first 12 weeks was Bang’s Delish Strawberry Kiss, which peaked at just under 40% distribution across the US.
Although new product introductions are down year-over-year, they are slowly climbing back quarter-over-quarter. If you look at Q3 2020 compared to now, we’re seeing new products achieve 10-30% more distribution within 12 weeks. This indicates that brands, retailers, and consumers are willing to take more chances and try new things as everyone grows accustomed to post-pandemic life.
What to Expect Moving Forward
Looking forward to the rest of 2021 and taking into consideration the trajectory of the pandemic, Skupos predicts that it won’t be until around Q3 of 2021 that the convenience retail market shows new product adoption rates similar to pre-pandemic levels.
As the world normalizes post-pandemic and consumers open back up to new experiences, retailers can get excited about the next wave of new products to hit the market.