How many companies would want to invest $20 million (€14.4 million) on launching a new brand just to earn $15 million (€10.7 million) in sales – as Unilever did with its Adez soy protein drink? And it’s not just big companies that have this experience – one five-person company invested $1.2 million (€860,000) in a new product only to earn $1.7 million (€1.2 million) in sales, leaving them with only $500,000 (€359,000) to cover all their manufacturing and operating costs. In fact, that kind of gap between the cost of launch and the sales you earn is the most common story in functional foods and beverages.
It’s a market where more than 80% of new products fail within 18 months of launch. And while it’s tempting for industry to ignore this fact – many think it’s unhealthy to focus on the negative – looking closely at the failures can teach us some clear lessons about how to succeed.
The latest edition of Failures in Functional Foods, published June 2009, (first edition published 2007) looks at 15 examples of brands and technologies that have failed to live up to expectations. Using supermarket sales data, interviews with the companies concerned, and analysis of their marketing and distribution, we have drawn out seven simple rules for success:
1. Successful brands are expert brands
2. Offer a relevant benefit and be a credible brand
3. Aim for a benefit the consumer can feel
4. Remember that an ingredient is not a point of difference
5. A future of niches - focus on value, not volume
6. Differentiate using packaging design
7. Open new categories and segments – don’t be a me-too
Of the above, number 4 – an ingredient is not a point of difference – has proven to be one of the most important. Many of the failures involve a company choosing an ingredient that is new to consumers and overlooking the fact that consumers buy products only for the benefit to them personally, not because of the ingredient used. In fact, consumer acceptance of new and unfamiliar ingredients is usually a very slow process. For example:
· Unilever described the European launch of its Adez soy protein juice as its “first new major brand in 12 years”. But soy protein just wasn’t interesting to Europeans. In the UK, the company spent $23.5 million (€15 million) marketing Adez, only to earn sales of $16 million (€10.3 million) (Nielsen).
Number 3 – offer a benefit the consumer can feel – is also key. For example:
· In the US, Coca-Cola’s Enviga calorie-burning drink hit $30 million (€22 million) in retail sales in 2007 (IRI). But the following year, sales fell 65%. “Calorie-burning” isn’t a benefit that the consumer can quickly see or feel. It’s a benefit that’s too difficult to explain. Taking R&D and marketing costs into account, Coca-Cola is likely to have lost money on this brand.
It’s not just small companies that make mistakes; even the biggest and best resourced companies can get it wrong. This report contains examples of failures from companies large and small, including:
· Naturally Gorgeous
· Delamere Dairy