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Understanding the product innovation process in the fast moving consumer goods (FMCG) industry: towards a comprehensive model of product and packaging development

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This paper explores the findings of the second phase of research that form part of a three year Ph.D programme of research sponsored by Chesapeake Corporation an international packaging manufacturer, and one of the largest in Europe. The paper focuses largely on the Fast Moving Consumer Goods (FMCG) industry, as well as investigating the packaging industry, in order to develop an understanding of the product innovation process as a whole. The paper investigates the product innovation process used within the FMCG industry, an industry that is significant in size being responsible for £125 billion of consumer expenditure and contributes over 8% of GDP (Bourlakis and Weightman, 2004). The study focuses on developing an understanding of how the development of new packaging is incorporated into the innovation process. Packaging is a critical part of the product offering (Anselmsson and Johansson, 2009; Wansink and Huffman, 2001; Rundh, 2005), that can be use to gain competitive advantage (Rundh, 2005), and influence consumers product choices and perceptions (Prendergrast and Pitt, 2000; Wells et al., 2007). Furthermore, with increasing competition within the sector, both presently and into the future, developing innovative new packaging represents a significant and important issue for firms within the industry (Anselmsson and Johansson, 2009). The FMCG industry is a highly competitive industry dominated by international brands, such as Coca-Cola, Procter and Gamble, Unilever, Colgate-Palmolive, etc. Store brands or retailer-own-label products also contribute to the competitiveness within this industry. New product development is a major activity of FMCG brand owners, in fact over a thousand new products appear each month on the shelves of British 99 supermarkets (Nancarrow et al., 1998), and retailers development volumes alone are typically measured in thousands per annum (Francis, 2004). Yet, despite this, relatively little has been written about innovation and new product development within this industry. The literature that does exist in this area is mainly derived from consultants rather than empirical research (Francis, 2006; Grunert et al., 1997), Likewise the limited research that has been undertaken (for example, Francis et al. 2008; Rudder et al., 2001; Rudolph, 1995; Morris, 1993), has focused on the development of the core product itself and offers little insight into packaging development. This is despite the fact that packaging is an integral part of the product offering that is arguably inseparable from the product itself. For example, the bottle forms a large part of consumers perceptions and the effectiveness of the product for roll-on deodorants, Guinness relies on its in can 'widgets' to product a product that is of sufficiently high quality, and microwave meals rely on their packaging for product heating. Likewise a great deal of success has been achieved by a few packaging innovations, for example in the beverages sector innovations such as Tetrapak, PET bottles, and in-can systems (such as the Guinness 'Widget'), all of which have achieved high levels of success. Based on the gaps identified in the existing literature, this paper focuses on answering the following research question: What is the model of the innovation process within the FMCG industry, and what role does packaging play within this process? Thus the research focuses on developing an understanding of the wider new product development process, as well as the process being used to develop new packaging.The paper presents the findings of a number of detailed case studies providing insights into the product and packaging development process used by firms in the sector. The case studies undertaken explore both the development of own brand products, and branded product manufacturers products, which are the two most common types of products within the sector. The case studies are developed from a number of semi structured interviews, conducted with product and packaging managers within FMCG firms, and R&D and marketing managers within packaging manufacturers. Because of the exploratory nature of the research, this initial investigation used a semi-structured indepth interviewing technique. The aim was to get the participants to talk as freely as possible and to discuss the area in their own terms. This technique aims to gain the perspectives of informants so that the research topics could be explored (Daymon and Holloway 2004), and this would allow the interviewees to express their perceptions and feelings at length in their own words, leading the dialogue, thereby 100 obtaining insight and understanding. In addition to the data gathered through the interviews, the case studies are also derived from observation, and internal reports and documents. The results of the research identify a number of different product innovation models that currently exist within different firms within the industry. In particular differences are evident in the processes used by both private label brands, and the own brands of the retailers. The study explores the reasons behind these different models, and the implications of this. In particular it is found that in the case of own brand products their manufacture is typically outsourced, which means that much of their new product development is undertaken by suppliers, and this negatively impacts on the relative attention packaging receives and creates a particularly heavy focus on costs. The research uncovers a number of issues and possible inadequacies in the models used, particularly in regards to the role external suppliers within the packaging development process. The findings also highlight the fact that packaging receives relatively little attention within the FMCG new product development process in general, despite its critical importance. Furthermore the key decision makers within the innovation process are risk averse to changing the format of packaging, and thus the attention packaging does receive is largely focused on costs and basic graphics changes and improvements. Indeed there are few packaging focused staff within new product development teams, which exacerbates this focus on cost and aesthetic design. Based on these findings this paper concludes that the new product development process of FMCG firms is largely market-driven, and focused on the development of the core product. It has a myopic view of packaging. Consequently, packaging receives relatively little priority and any that it does is largely focused on incremental graphic design changes and cost savings, rather than pursing longer-term improvements or new product opportunities. This leads to a risk averse, incrementally focused new product development process that incorporates relatively minor technical input. Furthermore it seems that the structure of the supply chain for own brand products in some respects further exacerbates these issues. Considering the variety of roles that packaging performs on behalf of the marketing function, this is of concern, as it seems that packaging innovation may be being stifled within these models of innovation currently used within the industry. Furthermore, the lack of involvement of packaging suppliers negatively impacts on the research and development activities of these suppliers, 101 with possible long-term implications on packaging technological innovation. Based on these key conclusions, a number of recommendations are generated. In particular it is suggested that FMCG firms should; develop stage gate models that integrate product and packaging decision making at each stage, separate packaging buying from development, and ensure packaging staff with a strategic outlook are employed and that they are incorporated into NPD teams. It is also recommended that companies should develop closer more collaborative relationships with packaging suppliers, and the staff within NPD teams to whom packaging responsibility is assigned should be responsible for developing these relationships. In addition, where external agencies are used in design, it is important that these relationships with suppliers are still developed in order to ensure effective technical input.
Original languageEnglish
Publication statusPublished - 2010
EventThe 5th European Conference on Innovation and Entrepreneurship - Athens, Greece
Duration: 16 Sep 201017 Sep 2010

Conference

ConferenceThe 5th European Conference on Innovation and Entrepreneurship
CountryGreece
CityAthens
Period16/09/1017/09/10

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