New Delhi: Consumer companies are holding back on product launches and innovations as the prolonged economic slowdown weighs on both demand as well as their budgets, according to data by Nielsen, a global provider of information and insight into what consumers watch and buy.
Product launches across fast-moving consumer goods categories declined by 2.5% in 2012 and by another 6% earlier this year, said Ranjeet Laungani, vice-president and head (innovation practice) at Nielsen India. Laungani, speaking at Consumer 360—Stand Out, a day-long conference organized by Nielsen in Gurgaon near Delhi, said while consumers are cutting back on discretionary spending, companies are turning away from pathbreaking innovations.
“Of the 14,509 product launches during this period (2011), barely 31 were blockbuster innovations,” he said. “In the last few years, we see that the number of innovations are lower.”
Nielsen counts both incremental and breakthrough developments in a new product as an innovation.
Top executives at consumer companies admit to being cautious in launching new products. “We have, quite honestly, been a little conservative in expanding our portfolio. Again, the mood is a bit defensive,”Sunil Duggal, chief executive at Dabur India Ltd, said in an interview last week.
It’s not difficult to see why.
With prices rising unrelentingly and economic growth slowing to a decade’s low of 5% in the year ended 31 March, consumers, especially in the cities, have become wary of spending on non-essentials. “Needless to say, a lot of clients and key brands tend to have a knee-jerk reaction and take a pause (on investments). They monitor and then invest,” said Laungani.
According to the Nielsen index, consumer confidence fell six points to 112 in the quarter ended 30 September over the earlier three months as a result of rising prices and the slowing economy. But despite this, firms launched premium products banking on their high margins. “Premium stood out in terms of new product launches,” said Laungani. “We continue to see that even today.”
Duggal agreed that Dabur pushed higher priced products in the market in the last two quarters. GlaxoSmithKline (GSK), too, launched premium products such as Sensodyne and Parodontax toothpastes. “It is important to understand what needs to be adapted to suit local tastes for innovation,” said Jayant Singh, executive vice-president at GSK, speaking at the conference.
Laungani added that shopper baskets (household purchases made by consumers) in India are upgrading, and so launches in categories such as personal and healthcare will increase.
Mumbai-based Godrej Consumer Products Ltd (GCPL) in the past few months introduced six products such as Crème hair colour and Good Knight Fast Card (a mosquito repellent). Sunil Kataria, chief operating officer (sales, marketing and SAARC), said the products were launched to fill specific needs and with a sharp differentiation. “Innovation is a very strong part of what we do,” he said.
According to industry experts, domestic companies are more conservative in launching products than their global counterparts. Speaking at the Nielsen event, Pratik Pota, chief executive and managing director atNourishCo Beverages, a joint venture between food and beverage companyPepsiCo India and Tata Global Beverages, said Indian firms “have more patience and resilience while MNCs (multinational companies) move faster and are more restless about innovation. Leadership has to bring creativity and romance in innovation”.
Modern trade continued to be an influential platform for firms to launch products, largely in urban catchments, Laungani said in his presentation. “Modern trade evolving is an opportunity to bring innovation into the market,” said Nandini Sethuraman, chief marketing officer at Bharti Retail, speaking at the conference.
According to Nielsen, demand and product launches are likely to bounce back by the first quarter of 2014. Laungani expects that over the next 12-18 months, largely driven by the political environment in an election year, launches will be mutli-tiered and address both rural areas and small towns, where consumer spending has been good.
PRASHANT SHAR4MA
PGDM-I
No comments:
Post a Comment