Faaez Samadi
Oct 13, 2016

SEA brands struggling to turn innovation into success: Nielsen

New report finds that an overwhelming majority of new products fail in Southeast Asia, thanks to risk-averse behaviour and lack of long-term strategic planning.

Six of the 10 FMCG products that met criteria for innovation.
Six of the 10 FMCG products that met criteria for innovation.

SINGAPORE - Less than 1 percent of new products launched in Southeast Asia meet the threshold to be considered an innovation success, according to a new report launched by Nielsen.

The company’s Southeast Asia Breakthrough Innovation Report analysed 12,920 new FMCG products launched across Indonesia, Thailand, the Philippines, Vietnam and Malaysia.

Of those new products, just 10 met Nielsen’s criteria for a successful innovation: delivering a new value proposition to the market, generating significant year-one sales, and achieving at least 90 percent of year-one sales in year two.

“When we did a manufacturer survey earlier this year and asked them how many innovations met their expectations of growth last year, 69 percent of the manufacturers responded 0 to 25 percent, which means that the vast majority of innovation doesn't meet the expectations of growth,” Johan Vrancken, managing director of Nielsen’s innovation practice, told Campaign Asia-Pacific.

The report identified five trends that are the main challenges for FMCG innovations in the region: the growing demand for affordable luxury, the emergence of homegrown companies, consumers getting greater access to information through connectivity, the growth of health and wellness, and the demand for convenience from innovation.

Vrancken said many companies make the mistake of not planning long-term, particularly when it comes to their marketing and communications strategy, because everything is focused on product launch instead.

“Too often we see brands pull off the gas pedal when it comes to supporting their new brands,” he said. “Leading innovators do the opposite; when confronting a big opportunity, they push the pedal to the metal. It’s not just enough to launch big, you’ve got to sustain.

Brands need to treat in-market execution as a priority, not an afterthought, he continued. "Many marketers restrict their focus to product formulation, communication, and pricing when designing the product mix, and they neglect the importance of execution in the brand’s story.”

Nielsen’s report also announced the winners of this year’s Southeast Asia Breakthrough Innovation awards:Garnier Sakura White – Thailand (personal care category):

  • Downy Parfum Collection Mystique – Thailand and Philippines (personal care category)
  • Rexona Invisible Dry – Indonesia (personal care category)
  • Mr. Keso – Philippines (beverage category)
  • EC Crunch Choco Flakes – Philippines (snack foods category)
  • TEA + Oolong Tea – Vietnam (beverage category)
  • Mountain Dew – Vietnam (beverage category)
  • Fami Canxi – Vietnam (beverage category)
  • Aquarius – Vietnam (beverage category)

Key to these brands’ success, Vrancken said, was their engagement with local consumers in a consistent manner across several channels.

“As consumers are exposed to thousands of advertising messages daily, you need to stand out from the crowd, from the competition," he said. "Consistency in execution that ensures consumers are exposed to the same product messaging across all consumer touchpoints, is pivotal to success. Breakthrough winners design their product mix to deliver a 360-degree consistent consumer experience, resulting in an outstanding brand platform that reinforces the brand’s position across all touchpoints.”

The lack of strategic planning is coupled with a “self-reinforcing cycle of bad behaviour”, Vrancken said, where brands seek to mitigate the initially low returns of innovation by playing it safe with less-disruptive ideas, using consumer insights to prevent mistakes rather than exploring problems that need fixing, and not investing enough in their new product or its long-term strategy.

“This risk-mitigation behaviour only succeeds at mitigating growth, which fuels the perception that innovation is risky, and thus reinforces risk-averse behaviour,” he said. “In short, it’s a vicious cycle.”

Below are some additional findings from the Nielsen report.



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