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 three quarters, 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, it is still well below normal levels. These shifts can be attributed to a combination of changes in distributor activity, retailer choices and consumer behavior. And unfortunately, things will not go back to normal overnight.
Skupos examined the top six products introduced nationwide each quarter in independent convenience retail. By focusing on product distribution, one 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 topped the list of best-sellers 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 arestill 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 its 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.
What to expect in 2021
Looking forward to 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 hit the market.
This post is sponsored by Skupos