Savvy brands and innovation

It may not feel like it, but things could finally be looking up for food and drink brands.

April 18, 2023
Kathryn Race
Woman with shopping trolley in aisle
April 18, 2023
Kathryn Race

While much of the industry narrative continues to revolve around shoppers trading down to own label, the latest grocery market figures suggest the tide could be turning. In its March update, Kantar says branded sales were up 7.2% over the past four weeks – the fastest growth rate since February 2021.

Granted, own-label growth stood at 15.8% year on year, so brands may not want to pop the Champagne just yet.

But there are tentative signs of recovery. After consumer confidence fell to a 50-year low in January, GfK data for March shows confidence has now increased for two months in a row. While personal finances remain under pressure, it’s some much-needed good news that should give brands renewed spark as they prepare for the second half of the year and 2024.

To make the most of any recovery, however, brands will have to put in the work.

With supermarket inflation at a record high, shoppers will continue to be very careful with their spend. To make it into baskets, brands will need to offer a crystal-clear reason to buy and an obvious point of difference over own label.

Innovation is key to this. Kantar highlights NPD as a major factor driving sales for brands right now, with 10% of branded sales over the past year coming from new or updated products.

The Grocer’s recent special on Britain’s Biggest Brands makes a similar point. While many brands have cut back on NPD in the face of the cost-of-living crisis, some are outperforming the market precisely because they have continued to invest in ‘new news’.

This dynamic will only heighten as the recovery gathers steam. The winners over the next 12 months are likely to be brands that manage to come out of NPD hibernation ahead of others and get those innovation engines revving again in time to capture additional consumer spend.

Those with strong health and sustainability credentials could be especially well placed to benefit. While value is the undisputed priority for shoppers right now, longer-term trends around healthy eating and the environment aren’t going anywhere. WRAP’s latest consumer tracking survey shows issues such as animal welfare, the healthiness of food in diets, and food packaging have continued to be high on shoppers’ radar throughout the cost-of-living crisis.

Health-focused innovation in particular has driven sales for many successful brands over the past year, largely in response to the restrictions on HFSS products that came in last October. With further restrictions on HFSS promotions going live this October, healthy NPD will continue to be a priority for brands and retailers alike.

Crucially, it’s not just big-name brands with multi-million-pound R&D budgets that stand to benefit. Pioneering programmes such as Mission Venture’s partnership with Impact on Urban Health show that smaller and challenger brands have a critical role to play in improving the nation’s health – and can do so in a way that makes financial sense for brands as well as price-sensitive shoppers.

Finally, we also see a strong case for brands innovating around occasions. Even as they’ve tightened their belts, many shoppers have remained willing to splash out on special occasions such as Christmas, Valentine’s Day, Easter and royal celebrations. Such occasions are an increasingly important opportunity for premium brands to give shoppers an experience that own label can’t compete with, and demonstrate why they’re worth paying more for.

Make no mistake: the market remains incredibly tough and we’re not out of the woods yet. The next few months will continue to test the resolve of many food and drink brands. But the first buds of recovery are emerging. Now’s the time to ensure you have an innovation pipeline that will help you make the most of them.