IRI analyzed 3,500 new branded products in the UK’s major retailers, excluding discounters, between February 2014 and February 2017. The study covered products from over 300 grocery categories, including confectionery, soft drinks, and personal care.
"Confectionery is an area where people are prepared to try new products. Generally speaking, new products are more expensive than existing ranges in store. That little premium they (new products) have can help add disproportionally to their value sales."
The overall sales from new products of all categories were down by 6.5% during the study period, which equated to losses in revenue from new product development of £99.6m ($128m), IRI said.
Retailers, such as Asda, has cut product range on their shelves by 9.8%, followed by Tesco and Co-op who reduced their product range by 8.3%, IRI data indicated. Meanwhile, Sainsbury’s reduced its range by 1.7% and Waitrose by 2.7%.
Declining confectionery sales
The product range-cutting trend made by UK retailers has made it harder for confectionery manufacturers to stay on shelves as well as getting new products into stores and thus covering their expenses of innovating, Tim Eales, strategic insight director at IRI, said.
The total sales of confectionery posted around £3.89bn ($5bn), while new confectionery products posted total sales of about £159m ($205m) during the second year of the IRI study (February 2015 to February 2016).
Year 2 sales (Feb. 2015 to Feb. 2016)
year 3 sales (February 2016 to February 2017)
NPD % contribution year 2
NPD % contribution year 3
During the last year period (February 2016 to February 2017), however, the total sales of confectionery declined to £3.82bn ($4.92bn) with new confectionery products decreasing to £144m ($185m) worth of total sales, IRI data showed.
Eales said the total revenue from confectionery NPD has decreased by 3.8% in the last two years.
Why do retailers cut product range?
“There’s a profit argument in here,” Eales said. “Once it hits the [sales] ceiling, the retailer is concentrating very hard on making as much money as they can out of their whole business, partly by using their shelves as efficiently as they possible can.”
Retailers may not immediately put new products on shelf once they come out, but instead, they will select a few and see how they perform in the market, he further explained.
“It has been proved in the past that sometimes, sales actually improved by having a lower range in store because shoppers could make faster purchasing decisions,” Eales said.
Offering extra benefits
Confectionery manufacturers have been traditionally good at bringing new products to market, Eales said.
Even though NPD’s contribution to overall confectionery sales has declined from 4.1% to 3.8% over the past two years, these percentages are double for what we see for the total market, which decreased from 2% to 1.9% during the same period, he pointed out.
“Confectionery is an area where people are prepared to try new products. Generally speaking, new products are more expensive than existing ranges in store,” Eales added. “That little premium they (new products) have can help add disproportionally to their value sales.”
What is more important for manufacturers is bringing products with “extra benefits or something that can catch consumers’ imagination” instead of just being new, as they are still facing the product range-cutting pressure by retailers, Eales suggested.
Combining great taste with lower sugar, calories and fat can also lend candy makers a bigger chance to increase their products’ distribution, he added.