Innovation Survey of the FMCG industry, Food & Beverage report

The "Pulse of FMCG Innovation" report by LANTERN and IRI takes the pulse of senior executives from leading FMCG manufacturers, as well as Spain's leading retailers.
September 2021
Innovation Survey of the FMCG industry, Food & Beverage report

This report answers a series of questions about how to grow your business, where to innovate and other relevant strategic issues on the new social and economic stage.

Looking at the impact COVID-19 has had on business in 2021, the study reveals an improvement among retailers and manufacturers when compared to the previous year. This improvement in sales is more prevalent among the retailers surveyed, with 100% of retailers describing COVID-19’s impact on sales as positive or very positive (compared to 64% in 2020) but only 43% of manufacturers agree. Although fewer manufacturers have been impacted positively by COVID-19, there has been a decline of manufacturers that report a very negative impact on sales (11% compared to 21% in 2020). The study investigates the impact of COVID-19 on businesses in further detail, including its impact on sector sales, when a return to pre-covid levels is expected, and industry outlook.

The study also takes a deep dive into the status of innovation in the Spanish FMCG market, asking manufacturers and distributors about the impact COVID-19 has had on their innovation efforts, what areas of innovation they are currently focusing on, the type of research tools they are using, as well as which factors contribute to the success or failure of innovations. The study found that most manufacturers (68%) have recovered to pre-covid levels of innovation; with 52% reporting an increase in innovation efforts compared to the prior months. Interestingly, the study uncovered a disparity in perceived success factors between retailers and manufacturers: while most retailers (83%) believe collaboration between manufacturers and retailers is key to successful innovation, only 39% of manufacturers agree.

When it comes to manufacturers, the report contrasts which areas teams are currently working on with which areas of innovation they expect to invest the most in the next 2-3 years. Currently, most manufacturers are focusing on incremental innovations of pre-existing brands and products (70%), new products in their core business (64%), and new sales channels (46%). 2-3 years from now, more manufacturers (21%) expect to invest in buying complimentary brands or companies, compared to only 13% currently. This change signals a growing interest in buying brands/companies as a path to growth, going further than traditional growth levers.

Focusing on what types of innovation are being sought out by retailers, the study compares what manufacturers expect versus what retailers are actually looking for. Retailers and manufacturers agree that disruptive innovations from established brands are the most sought-after innovation by retailers. However, it was also found that manufacturers overestimate the attractiveness of slightly improved or disruptive products from emerging brands, as no participating retailer reported an interest in slightly improved products from emerging brands. 

The expectations of manufacturers and retailers when it comes to the types of products consumers are demanding and will demand in the future is also explored, revealing a difference in expectations between retailers and manufacturers. Most manufacturers believe that, once the pandemic is over, there will be increased spending on fresh and healthy products as well as an increase in social and relaxing moments at home (61% and 59% respectively). Most retailers also expect an increase in spending on fresh and healthy products (75%).

When it comes to pricing strategies, retailers and manufacturers agree that consumers will likely look for ways to save money in the next 12 months as 100% of retailers and 70% of manufacturers expect consumers to demand lower prices and more promotions. On the other hand, 13% of manufacturers believe consumers will demand more premium products in the next year, while no retailers expect the same. 

Finally, the study focuses on the how retailers and manufacturers are planning on managing and supporting their brands. It was found that majority of retailers and manufacturers have defined a brand purpose or are in the process of defining one: 84% of retailers and 93% of manufacturers. Both retailers, 92%, and manufacturers ,79%, have a positive outlook on media investments, expecting their investments to remain the same or increase over the next 12 months.

The study “Innovation in FMCG in the context of COVID-19”, provides a clear snapshot of the status of innovation in the Spanish FMCG industry, revealing what retailers and manufacturers foresee in the next 12 months, what products and innovations they will be focusing on, and how they will manage and support their brands. 

Innovation Survey of the FMCG industry, Food & Beverage reportJaime Martín
Founding partner & CEO