Recession Cessation Means New Products

Many economic experts have said the recession that started at the end of 2007 is over, or at least taking its last gasps. Globally, the International Monetary Fund declared what’s considered the worst global recession since the Second World War over in August. We won’t get the official word in the United States for a while; the National Bureau of Economic Research probably won’t release an edict until late next year or early 2011. And most believe that the official end of the recession probably won’t show up in practical concerns for the average consumer for some time yet, since the recovery will be a long, drawn out process.

Everyone calls the food industry “recession-proof,” since everyone has to eat regardless of the economy. Moreover, on the plus side, for decades, the percentage of food spending vs. total income in American and European households has fallen significantly, so any rise in prices isn’t quite as painful as it could be. Still, the economic situation has been affecting what Americans eat, where they eat and where they shop.

What’s more, manufacturers are responding to the sluggish economy: Fewer new products are showing up on supermarket shelves, according to April 2009 data from the Mintel Global New Products Database (GNPD). It shows the number of total food and drink product launches has dropped by 51% from the first quarter of 2008 to the first quarter of 2009 (launches fell by a whopping 32% in the last quarter of 2008 alone). The report points out that some categories were hit harder than others: The Mintel GNPD found higher-than-average declines for nonalcoholic beverages (56%), chocolate (55%), sugar and gum confectionery (64%), and dairy products (60%). New product introductions did show a slight uptick in March 2009. This looks to be part of the normal trend. Through the three most-recent major recessions, Mintel has tracked new products and noted that new product launches decline at the beginning of a recession, but quickly increase as the economy begins to recover.

Conventional wisdom says that curtailing innovation and new product development doesn’t make sense for a company’s long-term growth. Cost-cutting measures in these areas prove detrimental to companies when they have fewer products in the marketplace to attract consumers as the economy starts back up and their purse strings loosen.

Still, there are questions as to how this recession will change consumer behavior, especially in light of continuing high unemployment numbers. Will trends like the shift to private labels that consumers perceive as offering more value than branded products continue and become a permanent fixture? Or will human nature take over and their memories of frugality shrink as their wallets grow?

No matter what, there’s always opportunity in new product development—especially if the products give the consumer incentive to purchase them. Products that fill a consumer need, are clearly differentiated from the competition and provide value will always be successful no matter what happens?

   -Lynn A. Kuntz