In recent years, it seems to have been a challenge for the makers of household foods and other household goods – that is, the consumables – to innovate with any great success. As a consequence, the S&P 500 consumer staples subindex is down 5.2% this year, as compared to an 8% rise in the broader index.
Conagra Brands is one of the few companies in the packaged-food industry to be successful in revamping old brands. Through the improving of Banquet frozen foods, for example, Sean Connolly, CEO of Conagra, has said that the company also managed to “liberate” the brand from its old price points of around a dollar – in other words, they improved the brand and can now reasonably expect a higher price point. Ian Cook, CEO at Colgate-Palmolive, in acknowledging the need for innovation, has announced that a new line of Colgate Total toothpaste will be introduced in 2019. Inexplicably, this product has been ten years in development. Come on – we can prepare to send people to the moon in shorter periods of time! The new product is expected to command a higher price when it hits the shelves. Certainly, something will be needed in order to make up for the years of R&D expenses! Such excessive amounts of time in the development of new products tells us just about all we need to know about why there’s such a dearth of innovation among standard brands in the consumables market segment. It goes back to the unfortunate story of CEOs mistakenly deciding to let the older, proven brands carry themselves – they haven’t in recent times and they won’t in the future – they need upgrading and they need new marketing to tout the upgrades. Even the WSJ has noted the problem and comments that, “Brand value is not automatic or permanent. In the era of rapid change, investing in constant product improvement is more important that ever. Companies that fail to do so will keep facing hard times.” This is absolutely accurate – and something that I have been cautioning CEOs about in these pages for some months now. It’s possible that the light is beginning to dawn.