Matevž Ambrožič, Marketing and PR Director at PharmaLinea, discusses new product launch strategies for brand growth in 2022
Innovation (new product launches) has been responsible for most of the growth in the supplement category during the past 3 years. But, what type of innovation should we choose if we are hoping to grow our brand(s) in 2022?
The supplement industry has been able to grow in sales at an admirable rate in the past decade … but where exactly does this growth come from?
Change in total turnover is roughly a combination of changes in the price of existing products, variations in sales volumes (of existing products) and turnover generated from new products — innovation.
Research published by IQVIA in July 2021 shows that innovation is the main recent growth driver across all consumer health categories. According to the report, the vitamins, minerals and supplements (VMS) category grew nearly 19% in the past 3 years.
A drop in sales volumes of existing products accounted for a 9.8% market decline and was countered by 11.4% growth owing to price increases of existing products, and 17.1% growth derived from new products. Taken together, the size of the VMS market increased by a total of 18.7% and it’s apparent that innovation is key to sustaining growth in the future.
Whether it’s because of the fast-paced change of trends or simply the increasing novelty demanding nature of today’s consumers, investing in innovation is a top priority for businesses today.
In a survey conducted by The Boston Consulting Group, 79% of polled executives claimed that innovation ranked among their top three business initiatives — the highest score since the survey started nearly 10 years ago.
On the list of the top 50 most innovative companies, we now see pharma, consumer health and CPG players, such as J&J, Bayer, Novartis, Nestlé, P&G and Unilever, which is highly impressive given the competition the likes of Apple, Google and Tesla.
But what kind of innovation should the non-giants of the industry pursue?
Not everyone has the marketing power to disrupt, to educate consumers about a new concept or even create new demand. Importantly, there are different types of innovation.
Aside from breakthrough innovation, which concerns completely new products, needs or technologies (an example of which would be personalised nutrition or digital health solutions), there is also adjacent and core innovation, which aim to improve existing concepts with advanced technologies (such as advanced delivery mechanisms) or alter products with small changes (new formulations, packaging, positioning, flavour, ingredients, target group, etc.).
The more radical the innovation, the higher are the investments, risk … and also returns. In reality, about 80% of launches by top consumer healthcare brands are new pack sizes, with the remaining 20% being true innovation.
Notably, the average sales per SKU are low; the average year one country sales amount to €91,000 per SKU in the VMS segment, which is only half as much as in the pain segment.
IQVIA claims that very few launches stand out amongst a high number of new products and that success is normally concentrated in the top 10 new launches in each segment.
It seems that the majority of the industry is running on a mass of short-lived products and likely overspending on marketing budgets for projects with limited returns.
What we see to be one of the key success factors of launches by our clients, is that the product not only promotes an initial purchase, but also stimulates consumer retention through great user experience and efficacy.
With a quality new product, each marketing dollar spent at launch goes a longer way. In our view, the industry could gain by choosing fewer launches of higher quality products with more focus and formulating with consumer retention in mind.