INNOVATION, INNOVATION
Innovation, innovation... Newto FMCG News,Mike Faers, ex-McDonalds food chief and innovation genius,will be advising on howto innovate in the economic downturn
Hello readers of FMCG News. It is integral in the economic downturn to continue to innovate in order to remain competitive in themarketplace. Therefore, I have teamed up with themagazine to offer advice on how to innovate in the FMCG industry.
I
nnovation can differentiate, create new markets and increase value in a
competitive marketplace. However, being in a recession
drives a behavioural shift within consumers from a culture of immediate satisfaction to a real and genuine fear for protecting their future. It’s more than tightening the belt with a real threat to the basic human needs of food and keeping warm. To increase the sales value
within the industry we have to change the way we think about innovation, with the focus more than ever on the additional long term benefit we can offer to our customers.
INNOVATE OR FAIL Company aligned innovation objectives together with a consumer-focused and risk taking culture are pre-requisites for successful innovation whether in a recession or not. There are plenty of examples
of companies that have innovated during a recession and not just survived, but managed to drive real sales growth. In the 1920’s there were two
brands of cereal in the US, Kellogg’s or Post.When the depression hit, Post cut their spending whereas Kellogg’s invested in launching a new product, Rice Krispies. By 1933 Kellogg’s profits had risen by 30 per cent and it had become the number one brand. Apple has consistently put the
the economic downturn,
manufacturers’ top three priorities
should be in any FMCG
Innovation, especially in
consumer together with innovation and design, at the heart of their business. Their P&L for the last financial year gave results of: • Annual turnover €108bn – a 65 per cent increase year on year, • Gross margin of 40 per cent, • 300 per cent increase in iPad sales, with sales now $20bn • Annual earnings per share growth of 80 per cent. There are not many
businesses during these financial times, expanding at such a rate, despite charging a premium, not discounting and improving its margin Therefore, consumers are still prepared to pay for innovation and the food industry can take learnings from Apple’s bold leadership approach to its business.
VALUE INNOVATION NOT VALUE ENGINEERING Businesses look to value engineers in times of rawmaterial inflation and recession tomaintainmargin – consumers have noticed and
rejected this strategy andwant more genuine differentiation. In the meat industry, the price
of mince has risen as cheaper dishes like shepherds pie and burgers are in greater demand. We need to look at ways to add value through innovation, for instance by using the forgotten cuts such as pigs and ox cheeks. Intelligent packaging will be a
differentiator in the next decade with microbial films that inhibit food spoilage organisms, combined with laser edge sealing technology which reduces wastage and therefore costs in the supply chain.
GOLDEN RULES According to theMcKinsey Quarterly global innovation survey, 70 per cent of leaders say innovation is among their top three priorities for growth and the most important driver for good innovation is their people, yet only 34 per cent say innovation is part of their leadership agenda. Best practice learnings suggest
the following golden rules: • Ensure core offer relevance and CIP optimisation, • Over invest in portfolio management, • Over invest in consumer insights and needs, • Be ruthless with your resource – recruit the best and over invest in training, • Measure the success – socialise the importance of innovation to the organisation, • Remove process, system and cultural blockages, • Make innovation accountable at a P&L level. With innovation continuing to
be critical in creating market value, following these points should create a continuous circle of profitable, relevant and sustainable innovation across the entire spectrum.
Mike Faers is the founder of agency Food Innovation Solutions. For more information visit
www.foodinnovation
solutions.com.
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