Nielsen suggests R&D reason behind CPG launch failures. Here is the real reason.

“FMCG firms launched 15000-20000 new products last year.

Only about 31 products were well-received. ”

Nielsen suggests FMCG R&D failure - Gray Routes tells why
Nielsen suggests FMCG R&D failure – Gray Routes tells why

More here: http://www.business-standard.com/article/companies/most-new-consumer-goods-bomb-says-nielsen-report-114062600095_1.html

Each product launch can cost anywhere between INR 50 lakhs to 10 Crores upwards. That’s an astounding INR 15,000 – 20,000 Crores or higher worth of consumer surplus gone down the drain each year. That’s almost $ 3-4 Billion wasted – or what HUL or ITC used to do in annual turnover terms up until last year.

Experts suggest need to tweak product design, strategy and development, to fix these multi-billion dollar failures.

Experts mention “strategy” when they want a suave filler word that communicates nothing relevant yet “clicks” with its audience, which happens to be someone from the same industry with similar mind-maps.

So, then is it really down to design and development?

No, here’s why – Everyone in FMCG industry ought to know that new products are essentially 99% of the same old chemicals with a dash of “that special elixir-like herb or new chemical” and a new fragrance in a new package. Only development is in fetching that herb extract, or borrowing a chemical from another product, or changing the packaging vendor.

The real reason lies way deeper than simple design and development tweaks. There is an adage that in FMCG “Jo dikhta hai, woh bikta hai”. So, if in a particular month, smelly teenager boys are unable to find Axe Deos on the rack, they’re bound to swing majorly towards WildStone or Engage simply because its cooler, the ads are sexier, and its easily visible on the rack (serving as a POP or POS reminder) when they’re out shopping for college essentials.

Two things are worth noting in the above para – First, trending ads influence purchase decision, and Second, POP or POS reminders matter. Who implements and controls these factors?? Distribution teams of CPG players, and in particular the sales operations desk, typically manned by seasoned field workers and staff who are not particularly adept or capable of the analytical prowess required to handle this increasingly rising volatility, as recently cited by McKinsey.

Hence, when new launches are executed by sales teams, two of several issues prevail:

  1. Alignment of trending ads and stock availability is almost always amiss. So much so that, when the ad bursts really spike, the stores are out of stock or clueless about the presence of such a novelty. Even if the retailers are well informed, following their traditional approach, they’d rather dispose older product stocks before placing the fresh stocks.
  2. Visibility and promotional material meant to serve as POP or POS reminders are usually gathering dust or rotting in distributor godowns as they rarely reach their delivery destinations or even if they do, in a retailer’s stowage, waiting for delayed action by the firm.

There’s hope. At Gray Routes, the experienced and analytical FMCG and industry professionals work hand in hand with some of India’s best engineering talent from IIT Kharagpur, Roorkee, DAIICT, and VIT and leading analytical talent from IIMs at Ahmedabad, Indore, Shillong and Udaipur to invent, design, develop, test and deploy proprietary and intelligent industry tools and platforms which can rid the industry of these multi-billion dollar launch failures, and in the process making new products more affordable and consumers happier !

Read more about our related efforts on www.graydrop.com, www.gostocky.com or catch the latest updates from Gray Routes on www.grayroutes.in.

Advertisements