CPG Innovation: 7 Ways to Keep Your Competitive Edge in 2024
March 7, 2024
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Christine Smith
Innovation is no longer a nice-to-have in the consumer packaged goods (CPG) industry. Establishing innovative processes is an essential growth strategy for every CPG brand to stay competitive and adapt to changing consumer behavior this year.
Yet, many companies struggle to innovate effectively.
According to McKinsey, 84% of CEOs believe innovation is critical to growth, but only 6% are satisfied with their innovation performance.
CPG innovation isn't easy. It's risky and resource-intensive. And some brands lack a structured innovation process — making it hard to identify and experiment with creative ideas. Many brands don't even have a dedicated innovation function, so it doesn’t get prioritized.
But the benefits of successful innovation are undeniable. It builds customer loyalty, enables brands to compete in a saturated market, grows revenue, and improves brand recognition and value.
Whether you're an emerging startup, scaling your brand, or a leader at a well-established brand, it's time to embrace innovation for your brand's long-term success.
Learn why CPG innovation is essential and how to leverage it for growth and success.
The CPG industry moves fast. Success no longer just means quality products and effective product marketing. Retailers and consumers constantly seek new solutions that meet their evolving needs.
Failing to embrace innovation can lead to stagnation and ultimately loss of market share and relevance.
Consumers demand it
Consumer loyalty is increasingly volatile. In the face of inflation, cost-conscious shoppers are switching brands in search of products that better meet their needs to get more value out of every dollar they spend.
Consumers also want products that align with their values, like sustainability, accessibility, and convenience.
This has created demand for new product development in the CPG industry, putting consumer product brands under pressure to innovate and adapt in order to thrive.
The competition is fierce
Product differentiation is essential in a saturated market with limited shelf space in retail businesses.
The shift to online shopping gives consumers more options, making it more challenging to compete with indistinguishable products.
And more and more, retailers are opting for private-label products to increase their share of revenue. To earn any remaining shelf space, CPG brands need to provide new, trend-forward products.
So every brand in the consumer products industry needs to establish innovation as a necessary process within the business.
An Innovation Brand Manager in the Dairy sector told Sampler, “[We have to have] innovation at least twice a year. If you don’t do it your competition will take the shelf space.”
M&A hype is cooling
The classic CPG playbook relies on mergers and acquisitions for rapid growth. But M&A activity has slowed in the last several years — particularly in the CPG sector.
Recent figures from BCG show a change in course. M&A in the CPG sector declined at a compound annual growth rate (CAGR) of 15% from 2018 through 2022. This significant decline in M&A activity is largely attributed to rising interest rates, which have altered the risk profile of dealmaking.
So CPG companies must shift focus to in-house innovations in order to achieve business outcomes.
How can CPG companies innovate for growth?
You don’t need to be a massive corporation to innovate in CPG. Despite limited resources, smaller CPG companies are outperforming larger competitors in meeting consumer demand for innovative products.
Medium-size companies are succeeding in innovation, representing a 35% share of Circana's New Product Pacesetters Top 200 list. By focusing on different types of innovation and leveraging their unique strengths, CPG companies of all sizes can achieve business goals through innovation.
1. Diversify products beyond your core offering
Expand your product portfolio into new categories to tap into new consumer segments and meet more of your existing customers’ needs.
Skincare brand Dear Brightly launched with two products: a moisturizer and a prescription retinoid serum. This is an innovation in itself, allowing customers to get a dermatologist’s prescription online without an office visit.
However, after a successful launch, founder Amy Chiu saw an opportunity to innovate again by expanding into other skincare products: face wash, sunscreen, and vitamin C serum.
These essentials, along with the brand’s first two products, complete a dermatologist-recommended skincare routine. Many customers are probably already using them, too. So Dear Brightly can redirect demand from competitors by offering everything shoppers need in one place.
By innovating with new skincare items adjacent to their core product line, Dear Brightly can grow revenue with their current customers and draw in new customers who might not necessarily be interested in retinoids.
You can do something similar by considering the context in which your customers use your product. Build a whole routine for them with new products or launch add-ons that make their experience with the original product better.
2. Expand your collection by iterating on your core products
Another path to product expansion: Iterate on existing products to meet evolving demands. Change your product's form or add new features that enable customers to do more.
For example, supplement brand Emergen-C launched their Emergen-C Crystals mid-2023. The new product improved portability of their core offering to make it easier for customers to get their vitamin C on the go.
To support a successful launch, the brand used Sampler’s Kroger program to reach targeted customers with samples and gather insights into sales lift and product sentiment.
You can also iterate on an original product to inspire customer delight, like Ferrera did with NERDS Gummy Clusters.
The evolution from the original NERDS is simple, but this innovation has been a huge success for the parent company. The new treat has grown from $50 million to half a billion dollars in retail sales in five years.
The brand used Sampler to get the new product into the hands of Gen Z Canadians, gathering invaluable consumer insights, and ultimately won the Product of the Year award in Canada in 2024.
With new products and features, you can showcase your commitment to shoppers and set yourself apart from the competition.
3. Gear product development towards shopper values
CPG companies can build brand loyalty and relevance, attract new customers, and drive sales by aligning product offerings with consumer needs and preferences.
This can include developing products with health benefits, sustainability initiatives, or ethical product development practices. This innovation strategy allows brands to differentiate themselves from competitors and demonstrate their commitment to customer needs.
For example, Kraft Heinz launched a plant-based KRAFT Mac & Cheese to address the growing demand for plant-based products.
Beverage brand Crystal Light launched Mixology, Immunity, and Energy product lines in early 2024, based on a growing consumer trend in reduced alcohol consumption and functional health.
The Sampler platform helps our brand partners learn about their consumers’ evolving needs and values to innovate effectively and keep up with the market. When you test a new innovation with Sampler, you can ask consumers testing your products about their needs and values through post-product trial surveys to see if you’ve hit the mark.
4. Design products for underserved communities
Innovating products for underserved communities drives business growth while fostering a more equitable and inclusive society.
This positions your brand as socially responsible and helps you expand your customer base by meeting these communities’ unique needs. Ultimately, it elevates your brand reputation and increases customer loyalty.
Degree's accessible deodorant caters to consumers with motor impairment. The magnetic cap and enhanced grip design make it easier for those with limited dexterity to open and apply the deodorant.
As 1 in 4 Americans have a physical disability and the deodorant category lacked accessible innovation, this new product design allowed Degree to capture a significant share of an underserved market.
When developing new offerings for underserved communities, it’s crucial to work with the community to understand their preferences and challenges to create truly inclusive and accessible products.
5. Use personalization technology for custom products and recommendations
You can use personalization technology to develop tailor-made products for individual customers. This technology includes AI-driven product recommendations, custom product configuration tools, and personalized packaging options. This enhances the customer experience, earns you loyal customers, and gives you a competitive edge.
For example, Omy Cosmetics produces custom serums and moisturizers that address each customer’s skin concerns.
Omy worked with Sampler to target skincare lovers to test the brand’s personalized beauty products. This allowed them to gather feedback exclusively from their target customers.
Beyond product personalization, you can use customer data for customized product recommendations. That can help you encourage bigger orders and future purchases. But it’s not just for DTC brands. This technology is used by Sampler to match our 4.5M+ consumers with relevant brand offers and samples.
6. Engage shoppers with unique experiences
Unique experiences can help you stand out and connect with your target consumers. This could be an in-person event, an unexpected strategic partnership, building a community around your brand, or involving shoppers in the product development process. The lift in brand loyalty and sentiment can influence shoppers to buy.
In the cosmetics space, kiki.world asks customers to vote on the next product.
The innovation’s launch was supported with an activation on the Sampler platform with a custom Valentine's Day box, sent to their target consumer ahead of the brand’s key holiday.
This created a fun at-home dining experience for their target consumer, making it a memorable and unique experience that resonated with their audience and generated authentic UGC.
7. Try a new business model to keep customers coming back
The direct-to-consumer model creates new sources of value, consumer retention, and innovation by providing a direct line of communication with customers for feedback and product development. It also allows for quick adaptation and experimentation in response to shopper habits and needs.
While it’s not a fit for all brands, you could consider adopting a subscription-based business model to keep customers coming back. Subscriptions offer convenience and cost savings. In turn, CPG brands can build loyalty, predict future revenue, and gain valuable consumer data on buying habits and interests.
For example, custom hair care brand Function of Beauty lets shoppers subscribe to personalized hair products. So they don't have to remember to place a new order or worry about a trip to the store.
Business model innovations like these can have a tangible impact on product sales and consumer retention, which are crucial for sustained business success.
It’s time to invest in innovation
Investing in CPG innovation keeps your brand competitive and relevant. By incorporating innovation capabilities into your business, you can boost your market share, develop consumer loyalty, and maintain high profitability. Ultimately, you can keep your hard-earned spot on retailers’ shelves and in consumers’ minds.
Start by getting all business leaders on board with a culture that embraces innovation. Then you can allocate more resources to things like R&D talent and product development.
When it comes to product innovation, you can’t just launch a new product and hope it works. You’ll want to test it for market fit and drive demand with your target audience. That’s where Sampler comes in.
1,000+ CPG brands trust Sampler to distribute product samples to the right consumers. Split-test shopper segments, gather product feedback and insights, and drive demand when you’re ready to launch.
Sampler can help at most stages of product innovation, whether you’re researching, validating, or launching your new product innovation. Learn more here.
