Smaller brands drive FMCG innovation as new launches drop 20%
The market for fast-moving consumer goods (FMCG) in Europe is experiencing a notable slowdown in new product innovation, with smaller brands outperforming their larger counterparts in driving sales from product launches. Recent analysis from Circana, based on over 75,000 new product introductions across key European markets, shows innovation has dropped to its lowest level since the pandemic, while consumer spending on products aligned with lifestyle preferences continues to grow.
Innovation decline
Across six leading European markets-France, Germany, Italy, the Netherlands, Spain and the UK-the number of new products entering the market fell by 20% compared to the previous year. This decrease in innovation is reflected in a 17% drop in sales from new products, which fell from EUR €28.9 billion in 2023 to EUR €24.1 billion in 2024. Only 5.2% of product lines were new launches, down from 6.2% previously, marking a significant contraction.
The UK and the Netherlands saw particularly steep declines. Sales from innovation in UK edibles categories dropped by 28%, while the Netherlands registered a sharper 43% decrease. Despite these figures, the UK remains the largest market for new edible product introductions, with 7% of sales derived from new product development-higher than in any of the other countries analysed.
Rising sales by smaller brands
Smaller manufacturers outperformed larger rivals in generating sales through innovation. Extra-small, small and medium-sized brands reported higher average sales per innovative product than large manufacturers. Some smaller firms saw new product development accounting for as much as 79% of their total sales, indicating a strategic focus on innovation to achieve visibility and growth.
Avícola Sánchez, a Spanish, family-run business that produces Avicosan Organic Chicken, led this trend, generating EUR €36 million in sales per innovation. Scotland's Glen's Vodka also posted strong results, with sales of EUR €22 million per innovation, by emphasising its local heritage and unique product appeal. These results suggest that smaller brands are able to connect with consumers seeking products that reflect local tastes or align with environmental and sustainability priorities.
Changing consumer attitudes
Shoppers are prepared to spend more on products that reflect their values and support personal lifestyle goals, even in an environment characterised by inflation and economic uncertainty. Consumers showed a willingness to try new products, with many launches gaining traction in their second year as distribution and pricing are optimised. Products initially classified as 'Rising Stars' or 'Mainstream' in their launch year often grew to become 'Superstars'-those generating over EUR €1 million in sales-by the end of their second year.
Heritage brand reinvention
Well-established brands have responded to market pressures by diversifying their portfolios and exploring collaborations. Many have sought inspiration from digital platforms, including TikTok, to refresh their image and expand into new categories. This approach aims to maintain relevance and attract new consumer segments in a competitive market.
Private label appeal
Retailers have also invested in developing private label products, with many now operating as standalone brands. These offerings are being supported by innovative packaging, new market approaches and pricing strategies, contributing to increased competition and greater choice for consumers.
"Innovation is the lifeblood of CPG, a proven source of growth and a way of delighting shoppers who are eager for new products at a time of cost cutting and uncertainty," said Ananda Roy, Senior Vice President and Industry Advisor, Consumer Goods, Circana.
