The stinkin’ economy is posing a lot of challenges to today’s snack producers and bakeries, and it’s putting a crimp on new product innovation, says editor Dan Malovany.

Stinkin' It Up

Because of the stinkin’ economy, consumers and businesses have turned up their noses when it comes to spending. Business travel has plummeted, forcing hotels to offer free nights and airlines to cut fares.

Vacations have become stay-cations as consumers fritter their lives away on Twitter because they can’t afford to go on vacation, they really don’t want to visit their dysfunctional relatives or they’re hoarding cash for a rainy day.

Ring-a-ling! It’s been pouring cats, dogs, pigs and warthogs since last September, and despite the wishful thinking of financial analysts, pondering pundits and clueless gurus, many businesses and homeowners still need an ark called the SS Geithner to keep them from going underwater.

Even new U.S. product introductions have nosedived to less than half of what they were last year as businesses cut back on anything that doesn’t have an immediate return on investment, according to data from the Mintel Global New Products Database.

“The first three months of this year was that shell-shocked reaction to the economy, and everybody kind of hunkered down,” notes Kristen Walker, an analyst for Mintel. “Consumers drew back and companies drew back, and there simply wasn’t as much activity as before.”

Maybe a late Easter was to blame. Last year, the holiday came in March, but this year it came in April, which means some new products like candy and other sweet goods didn’t roll out in the first quarter.

However, I asked Mintel to pull the numbers for the January through April period for 16 snack- and bakery-related categories. For the first four months of the year, new product activity still fell 52% to 1,093 from 2,277 introductions during the same period last year.

In April, specifically, there were 352 new products in snack- and bakery-related categories, the highest of any month this year. However, that amount pales to the 808 new snacks and baked goods that came out in April 2008.

Could the peanut recall be responsible for some decline in activity as companies focused on food safety and damage control instead of product innovation? It’s an interesting theory, but there’s no empirical evidence to support it, Walker says.

Rather, she says, companies are focusing on tweaking their product portfolios.

“They’re doing a few easy line extensions with new flavors and simple go-tos to keep their lines relevant without having to make huge investments and huge portfolio overhauls,” Walker says.

Others, she adds, are picking the proverbial low-hanging fruit by reshaping or redesigning their products to add value or to give them a much more upscale look but at the same low price.

There are exceptions, although few and far between. During the 1989 recession, Walker notes, ConAgra Foods launched Healthy Choice, which boldly revolutionized the nutritional profile of products in the freezer case. Recently in our current recession, the company again reformulated and revamped its wholesome line.

Even in the overall whole grain segment, she says, new product rollouts have reached a plateau for a number of reasons.

“One, it’s possible that we’ve reached a point of market saturation with whole grains. There has been a lot of activity for many years, and you just can’t produce products at that rate forever,” Walker says. “Two, consumers are asking more questions. We hear a lot with these new product introductions about ‘a good source of whole grains.’ Consumers are starting to ask, ‘What does that really mean? How is it good for me?’ I think that skepticism among consumers can have an effect on those products being introduced once consumers start asking those types of questions.”

Historically, when new products rebound after a recession, often the rate of activity is higher than prior to the downturn.

In these tough times, attendance at many conventions is down by 20%, prompting many organizers to explain that the “quality” of attendance was better than in the past.

Maybe the same can be said for new product introductions this year. Yes, the numbers aren’t there, but the quality is better than before.

Sniff. What’s that smell? Something stinks, and it’s not only the economy. Consumers and businesses can’t talk their way out of this recession.


Editor’s Note: Go to www.snackandbakery.com to read Dan’s exclusive online-only columns.