A new study conducted by Sevendots, a global leader in CPG strategies, sheds light on the untapped potential of investment in innovation as a driving and underutilized force for growth within the CPG industry. This pivotal research, part of the Sevendots Growth Series, draws from the extensive input of more than 100 brand owners worldwide, a thorough review of existing literature, and a deep dive into numerous case studies to provide a robust framework for enhancing ROI from innovation efforts.
The study uncovers a critical insight: Innovation remains an underutilized activity by many players in the CPG industry, showing a worrying trend of diminishing momentum. This is evidenced by a significant decrease in the number of genuine innovation launches.
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Over half of brand owners identify lack of strategic thinking as the key barrier to fully leveraging innovation
The underlying reasons are multifaceted, including limited budgets due to a lack of confidence in ROI compared to other activities, the absence of a visionary and systematic approach, and inadequate measurement practices. Consequently, a staggering 78% of brand owners believe that the current management of innovation within the CPG sector is only somewhat effective or not very effective at all. Furthermore, the research highlights that 54% of brand owners identify the absence of strategic thinking and a clear framework as the primary barriers to achieving disruptive innovation.
Yet, there could be a silver lining: several studies suggest that brands perceived to be highly innovative grow much faster than others while companies that prioritize innovation also report superior short-term EBIT growth and long-term total shareholder return.
CPGs require a clear framework for innovation success
The study calls for a paradigm shift in how CPG companies approach innovation. It advocates for a strategy that transcends traditional product innovation and category definitions, urging firms to develop and implement a clear, effective path for innovation that balances short-term wins with long-term goals.
“In a rapidly evolving marketplace, returning innovation to the core of strategic agendas is not just an option but a necessity,” said Andrea Bielli, Managing Partner, at Sevendots. “Our findings underscore the immense growth potential for CPG companies willing to rethink their approach to innovation, leveraging it as a powerful engine for growth, differentiation, and long-term success.”
