Why the tortoise, and not the hare, holds the key to success in new product development

By Elaine WATSON

- Last updated on GMT

Chobani has been a runaway success story, but of the 29 highest-profile food products launched in the US between 2003-2007, only a third now have sales larger than they achieved in year one, none are both larger and growing, and the majority are in decline.
Chobani has been a runaway success story, but of the 29 highest-profile food products launched in the US between 2003-2007, only a third now have sales larger than they achieved in year one, none are both larger and growing, and the majority are in decline.

Related tags: New product development, Food

Blast out of the starting blocks with your hot new product at high ACV distribution and pile in the promotional cash, and you’ve got a fighting chance of reaching that magic $100m in year one sales. You’re innovation dynamite: an IRI new product pacesetter.

But what happens in year two, three, four and five?

More often than not, nothing good, according to a sobering new report which reveals that while the majority (72%) of the 29 highest-profile food products launched in the US between 2003-2007 are still on shelves today, only a third now have sales larger than they achieved in year one, none are both larger and​ growing, and the majority are in decline.

The food industry is great at fast-build distribution, but not so good at building long term sustainable growth engines

The real success stories (Chobani, 5-hour Energy, Pita Chips), by contrast, tap into new consumer trends and nearly always start small, building momentum gradually, claims James Richardson, senior vice president at Hartman Strategy and author of the new report, Riding the Killer Curves of Food Innovation​.

“The food industry is great at fast-build distribution, but not so good at building long term sustainable growth engines”, ​he told FoodNavigator-USA.

“Nearly all of the new product success stories from the period I looked at were not developed by large mainline food companies, but smaller more entrepreneurial companies that can see where the food culture is going in the future, not where it is right now.

”If you can generate $100m in sales in year one, you’re probably meeting the needs of existing consumers or a niche of heavy users, not tomorrow’s consumers. Launching big is not the definitive way to sustainable growth.”

Meanwhile, for many large companies that need to retain shelf space, “most innovations are more about trade management than about creating completely new consumer needs”​, he observed.

“It’s line extensions to preserve shelf-space.”

Speed is not everything when it comes to winning

tortoises

He added: “Speed is not everything when it comes to winning. Blasting out product launches at high ACV distribution in order to achieve impressive Y1 revenues - and dazzle investors - is still the gold standard launch strategy in the industry.

“But the industry is setting a ridiculously high bar for itself; playing the Hare is not the only way to win the race for consumer dollars. And, in the past ten years at least, it is unclear what has really been won over the long term with this well-worn strategy.”

So should big companies just throw in the towel and leave new product development to more innovative smaller companies - that they can invest in at the early stage, and then acquire if they come up trumps - rather than coming up with the next big thing in house?

It’s not either or, said Richardson. “They need to do both.”

Some big companies will have no appetite for the kind of patience a Tortoise go-to-market model requires

He added: “The ultimate challenge this all poses for senior leaders today is this: Are they willing to build a separate organization to manage premium ‘tortoise’ businesses? Kellogg’s did this with Kashi in 2000, and what Coke has done with Honest Tea and to some extent what Campbell’s has recently done in its acquisition of Bolthouse Farms.

“While some food companies will have no appetite for the kind of patience a Tortoise go-to-market model requires, others with swiftly declining core categories in food culture should look very carefully at bringing this option into the mix. The Tortoise will yield rewards, but needs a head start.”

Traditional go-to-market assumptions and techniques fail to generate results

Hartman-new-product-launch-trajectory

He added: “However, we do not believe that Skate Ramp disruptions [see below] can be managed internally to core business units within established CPG organizations. This is because everything in the Core is a finely tuned machine oriented to churning out strings of Sand Dunes, less frequent Plateaus, and the occasional Ski Jump with the help of legacy brand awareness.

“Going to market without a high awareness brand is what the Tortoise excels at, and this is precisely where traditional go-to-market assumptions and techniques fail to generate results.”

What’s your new product development growth curve?   

His report takes a closer look at five different growth curves in the food and beverage market:

THE BUNNY SLOPE:​ (eg. 2007 launch of Golden Grahams Treats).  

bunny-slope-hartman

Pace/Scope of distribution:​ Small, in a specific channel or region, less than 20% ACV in year one.

Promotions:​ Virtually no promotions or A&M spending.

Consumer pull​: The product may be disruptive or unique, but lacks the resources to promote and distribute itself properly. In many cases, though, it either targets a tiny consumer niche (e.g., vegans) or is chasing a growth occasion with a relatively weak equity (e.g., Golden Grahams chasing snacking occasions among those who like the cereal).

Consequence​: Businesses exhibiting this growth trajectory often ride structural tailwinds such as emerging channel growth or shifting eating patterns in the broader population, but don't set the world on fire.

THE SAND DUNE:​ (eg. 2003 launch of Breyer’s Carb Smart)

Sand dune hartman

Products on this curve typically get out of gate because of a health fad, and then gradually decline to niche status or are pulled from the market altogether.

Pace/Scope of distribution​: Rapid in year one, up to 75%+ of max ACV and year one revenues of $50m+.

Promotions​: Low.

Consumer pull​: Weak, often overestimated consumer demand means velocities won’t hold at many outlets of initial distribution. This results in rapid delisting.

Consequence​: The business loses footing, but may retain it in certain markets/regions where a niche has been found.  

THE GREAT PLATEAU:​ (eg.  Hormel Compleats).

Growth curve can sustain initial launch velocities by serving a niche audience of consumers, but generally cannot continue to grow beyond this niche.

Great-plateau-hartman

Pace/Scope of distribution​: Moderate, up to 50%+ ACV in year one. High year one revenues.

Promotions​: Minimal, mostly focused on trade plays to win at the shelf quickly and gain traction with a defined audience.  

Consumer pull​: While the product may be incremental to the category, often it is barely so and based on targeting a simple convenience benefit or is just ‘late to the party’.

Consequence​: These launches sustain initial velocities well, but because there is a very limited number of consumers who will ever find the product compelling, become niche businesses very quickly.  

THE SKI JUMP​: (eg. Activia yogurt )

activia-hartman

Pace/Scope of distribution​: Rapid, up to 75%+ ACV or higher in year one with revenues of $75m+.

Promotions​: Very strong support to drive trial.

Consumer pull​: Moderate to strong demand means velocities are strong initially and hold over time, although the heavy use of promotional dollars may exaggerate how authentic consumer demand/preference really is.  

Consequence​: Either a new segment has been born in the category or a new powerhouse brand has been unleashed.  However, the challenge with this curve type is that the ramp up can be very expensive, and if the consumer proposition is weaker than originally envisioned, the company will find itself stuck with an expensive proposition to fund on an annual basis, because the curve’s exponential growth after year one was essentially ‘purchased’ with marketing.

THE SKATE RAMP:​ (2007 launch of Chobani Greek Yogurt )

Hartman-Chobani-growth-curve

A slow but steadily growing growth curve that is often used by makers of premium food products and is a potential disruptive force that can overturn established category leaders.

Pace/Scope of distribution​: Low distribution launch in a specific market or region or in one incubator channel. These are businesses that build slowly, like a Tortoise, into exponential growth engines, often with much lower ACV after five years than most Hares achieve in their first year. Year one revenue might be under $5m, and is often under $1m for brands launched in the natural/specialty channel.  

Promotions​: Virtually none at launch, but growing later in the distribution cycle, emphasis on PR, grassroots promotions, tradeshow appearances.

Consumer pull​: Huge. In the absence of heavy promotions or distribution, growth is driven by genuine demand. 

Consequence​: By sneaking up on the market, under the radar, these premium businesses often are market disruptors, capable of overturning categories, or launching new segments seemingly out of nowhere.

And the lesson from the above?

Patience, said Richardson.

“Like Chobani, none of these killer businesses ​[on the skate ramp curve] will ever appear on a Symphony/IRI Pace-setter list. This fact shall give one great pause, because it means that today’s CPG leaders need to be scouring the market for disruptive businesses and product designs that aren’t actually making much money today.

“In this universe of the small and tiny there are some hard-working Tortoises, packing on scale at a phenomenal rate (i.e., in $ CAGR). Learning to filter through the white noise of Bunny Slopes to find them is the challenge that few food companies are truly taking seriously today.

“Yet, this growth curve has generated the biggest long-term scale wins in packaged food.”

Skating Tortoises have almost exclusively launched at the premium end of the market

Although some products that ‘launch big’ go on to achieve significant scale, Tortoises typically achieve greater scale with less investment capital, because they have “allowed themselves to build slowly within food culture, rather than racing ahead of food culture with the required help of hefty A&M and promotional dollars​”, he added.

Meanwhile, skating Tortoises have almost exclusively launched at the premium end of the market, he observed. “This is where we consistently find the most underserved consumers, ready to give hefty premiums to innovators able to satisfy their increasingly demanding orientation to food and beverage.”

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