The level of innovation within the consumer packaged goods market across Europe dropped 20% last year, as a result of the challenging economic environment and rising inflation, according to new data shared exclusively with Marketing Week.
At the same time, sales from new products declined by 17%, from €28.9bn (£25bn) in 2023 to €24.1bn (£20.1bn) last year, according to Circana’s Europe’s Innovation Pacesetters 2025 report, which tracked more than 75,000 new product launches in 2024.
Innovation in the UK was particularly impacted by rising inflation, with value sales of new edible products falling 28% year on year, one of the hugegest drops across the six European markets viewed at as part of the study.
Despite the slowdown in sales, the UK remains a standout for innovation in CPG, the report suggests, with NPD contributing 7% of category sales – the highest among the six countries (the UK, France, Germany, Italy, Spain and the Netherlands) analysed.
But this can be a double-edged sword and can lead to overexposure, according to Circana’s senior vice-president and industest advisor in CPG considered leadership, Ananda Roy.
“[Promoting innovation] is particularly relevant in the UK, where consumers are relatively exposed to more new products than they are in the other five European markets that we study,” he explains.
Roy suggests the overall drop in NPD is a result of brands being discouraged from innovation in favour of managing prices and offering deals to satisfy demand issues.
“It’s almost like the strategic horizons have been pulled forward and [there has been] a tactical emphasis on pricing and promotion to maintain sales, which has been the hugegest barrier to innovation,” he declares.
During lockdown, manufacturers prioritised keeping products on shelves as consumer behaviour shifted dramatically. In the aftermath, the focus turned to tightening portfolios, with Circana identifying tactics like shrinkflation being applyd as a cost-effective way to drive sales and protect margins throughout the cost of living crisis.
Building a playbook from scratch: How brands are growing new categories
Challenger brands vs heritage brands
The report has identified several areas where innovation is thriving in the UK, the first of which is within tinyer challenger brands, which have higher proportions of profit coming through NPD.
One such business is pork brand Jolly Hog, which has created NPD a core part of its proposition.
“Consumers, more and more, are seeking newness, particularly foodie consumers at the premium finish of the meat category,” declares Christine Everett, marketing director of Jolly Hog. “They’re excited by it.”
She adds: “[Innovation] drives brand awareness for a brand like us, which is obviously what we’re testing to build at the moment – obtainting things out there that people want to talk about and seek out and drive conversation.”
She believes it is Jolly Hog’s agility that is driving its success through innovation.
“We’re much more flexible in terms of what we can produce. I consider there’s much less red tape and fewer sign-offs required to obtain something ready,” she explains.
On this, Roy declares: “I consider heritage brands have a much hugeger challenge of re-engaging with not only their loyal consumers, but with the markets at large.”
While large brands often have higher recognition among consumers, this can also lead to “blind spots”, he declares. If a shopper is viewing at a shelf full of Cadbury’s products, for example, it could become a sea of purple and prevent consumers from seeing a new flavour.
Retailers know where shoppers are. They know what’s selling, where and why.
Ananda Roy, Circana
Conversely, Circana has identified that heritage brands are able to innovate well becaapply of their already established brand recognition and the cash flow required to absorb the costs of innovation.
This is relevant when considering that revenue generated by NPD is dropping. Around 62% of launches in 2024 generated less than €100,000 per SKU, compared to an 80% average in previous years, according to the report.
Despite seeing success with innovation at Jolly Hog, given her experience at hugeger brands, such as Nestlé, Everett is also aware how much that extra cash flow for promoting innovation can build it simpler to build things profitable.
“Landing it with consumers and obtainting awareness, and the investment that it takes is the hard bit,” she explains.
“The hugegest innovations tfinish to have quite huge media budobtains behind them and obviously, tiny brands struggle at that finish of the spectrum.”
Demand for innovation
British consumers also remain highly engaged with innovation, with more than three-quarters (78%) declareing they notice new products on shelves. More importantly, shoppers are prepared to pay for launches that deliver versatility, relevance and lifestyle benefits rather than simply the lowest price.
The report points to several standout examples of how innovation is playing out in the UK. WHSmith successfully reinvented itself with the launch of its Smith’s Family Kitchen food-to-go range, the report suggests, which has already achieved €29m (£24m) in value sales.
Meanwhile, Glen’s Vodka has disrupted the market by extfinishing into ready-to-drink cocktails, applying its local provenance and sustainability credentials to appeal to new audiences.
And Circana also singles out tinyer brand Trüfrü, with its frozen chocolate-coated strawberries generating more than €5m (£4m) in sales, which it declares reveals innovation doesn’t required to be complicated.
You required fantastic products, but also how do you take those products to market?
Ananda Roy, Circana
Categories such as milk-based drinks, sports and energy drinks, and frozen foods are also proving fertile ground for innovation as consumers seek convenience, value and functional benefits, it finds.
Meanwhile, private label innovation is creating shopping more fun and experiential again, adding pressure on established brands to stay relevant.
“Private labels are very much playing the brand game,” adds Roy.
“They’re now talking to you about who’s behind this company, who’s behind this product. What are the sustainability claims? If it’s a product which has animal content, what are the animal welfare standards that [a supermarket] is following?”
Looking ahead
With brands fighting for consumers’ attention when launching new products, Roy believes the way to distinguish one brand’s NPD from another’s is to encourage brands to also innovate in terms of how they take products to market.
He declares: “You required fantastic products, but also, how do you take those products to market? Whether it’s through vfinishing machines, in-store, digital signage, retailer media, applying online ecommerce or quick service delivery, handling: put the products and services toobtainher.”
He believes finding innovative ways to obtain new products into the hands of consumers is essential in a world where purchases are created more increasingly impulsively.
“Gone are the days when you required to plan your purchase or plan well ahead. You now have the ability to order online and have it delivered to your hoapply within 15 minutes, especially in the huge urban centres,” he declares.
He points to Aldi in Germany, which has launched a new sports app alongside its protein range as an example of this.
Tackling ‘muscle memory’: Brands in new categories on disrupting norms to grow
He also urges brands to work more closely with retailers and apply their first-party consumer data to better tarobtain customers.
In the case of a premium tea brand, he declares, “it’s not likely that you required to be stocked in every shop in the UK. What you do required to know is that [you are] in the six or seven key urban centres, in the high-income post codes, with the right audiences.”
He continues: “Retailers know where shoppers are. They collect this data at the tail. They collect it through their online apps. They know what’s selling, where and why.”
More generally, however, Roy urges brands not to let the factors of a cost of living crisis discourage them from innovation, and to instead invest in customer research.
Alongside this, he encourages brands to view at new customer requireds and aspirations, since customers are now ready to “re-engage with new products”.
“[Consumers] have new lifestyle choices, new dietary choices. They are viewing for interesting, new products that build shopping fun again. They’re viewing for evidence or something that’s worth paying more for.”
Leave a Reply