Food Marketing System in the U.S.: New Product Introductions

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New U.S. food and beverage product introductions in retail outlets, as tracked by Datamonitor, have followed an upward trend since the early 1990s, exceeding those of nonfood grocery items. In response to competition from Wal-Mart and other nontraditional foodstores, supermarkets have increased their product choices.

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In 2009, however, the number of new food and beverage products in retail outlets fell to 19,047, from 22,566 in 2008 and 24,236 in 2007, falling below the trend in nonfood grocery items. This decline marked the first consecutive year-to-year reduction in new food product introductions since 2002, and only the third since 1993. As credit conditions have tightened, retailers have found that eliminating certain products could increase sales and profits, due in part to reducing inventories. In addition, the recession has prompted consumers to seek familiar products and avoid impulse buying. To appeal to bargain-seeking customers who want to simplify their shopping trips as well as purchase familiar products, retailers are reducing the number of products introduced. In response, some manufacturers are reducing their product lines.

In 2009, food categories with the largest shares of overall new product introductions include candy, gum, and snacks; beverages; condiments; and processed meat. However, the share of new candy, gum, and snack products introduced dropped from 2007 to 2009, as did the share of new condiments and processed meat.

Advertisements touting a product’s attributes are conveyed on packages and in supporting literature. Based on new product tags or claims (such as “organic”) tracked by Datamonitor, over 100 U.S. food and beverage new product claims or tags were identified in 2009. Health and convenience-related attributes accounted for 8 of the top 10 subject categories for ads on packages, and one-third of all new product claims. Five categories, including “natural,” “organic,” “single serving,” “quick,” and “fresh,” have ranked among the top 10 claims in every year since 2001. 

In 2007, the number of “low or no trans fat” claims surpassed that of “low or no fat” for the first time. A Federal law requiring manufacturers to list trans-fat on food labels by 2006 sparked reformulation of products to reduce trans-fats. In 2009, 572 “no- or low-trans-fat” products were introduced, compared with 238 in 2004, 64 in 2003, and 17 in 2002.

Private-label products, or store brands, also cracked the top 10 claims for the first time in 2007, an increase of over 75 percent compared with 2006. In 2009, store brands ranked fourth among product claims, accounting for 3.6 percent of new product launches. As retailers have become more adept at creating profitable store brands, these brands have expanded at a faster pace than costlier national brands. More consumers are turning toward private-label foods in the face of the economic downturn and higher gas prices. Demand has also risen due to other factors, such as increasing food-price inflation and the marketing efforts of retailers. Profit margins of store-brand items are, on average, 10 percentage points higher than those of national brands. Store brands can also add to retailers’ individuality by offering something new and different, as products are limited to their respective stores.