SKU’d Thoughts 5: Are consumers missing the innovation happening in CPG?

I recently had a spirited discussion with a friend who is a former CPG marketer (to not reveal his identity, I will refer to him as Frank) about how innovation is viewed within various industries. Here’s what it boiled down to.

I define innovation through the lens of the consumer. I see it as a customer-facing value-add to services or product that consumers are already satisfied with. An example of this type of innovation is what Halo Top has done in the frozen dessert category. This startup was able to outsell Big CPG brands like Ben & Jerry’s and Dreyer’s by creating a product that was tasty, indulgent, and healthy; these combinations have been hard to come by in the food space as consumers had to sacrifice taste if they wanted something healthy. This is the type of product innovation that appeals to consumers in CPG.

Frank sees innovation as any substantial or novel improvement in the sourcing, manufacturing, and delivery of a product. In his own words, “industry outsiders overlook value chain optimization within CPG”. Defining innovation through a holistic lens is an interesting take. P&G’s CEO David Taylor noted in a recent CNBC interview, as a company, you have “to be able to innovate on all parts of your business model: the product, the package, how you communicate to consumers.” This type of innovation positions Big CPG in scaling startup brands they acquire.

As someone passionate about operations and efficiencies, I appreciate Frank’s take but I don’t think consumers see innovation in the same way. I recall during my time at Big CPG, I led an “easy to open” packaging initiative for one of the company’s largest beverage brands that was supposed to be innovative. After launching these new packages, the brand saw no significant uptick in sales which could indicate that consumers undervalue innovation they don’t perceive as a value-add to them. Often times what consumers see as innovation is an improvement on the product itself, like the aforementioned Halo Top example. But innovation is ultimately subjective and can come in other forms, like packaging which we have seen in the detergent category.

Cross-Posted on Medium