Background
Over a period of two years, the launches of 484 new products across six European countries were analyzed. The products included in the study represented six per cent of the total 8,352 products launched in the period but they accounted for 50 per cent of sales. Countries included in the study were the UK, France, Germany, Spain, Italy and The Netherlands.

The objective was to provide information on the characteristics of successful launches that could potentially be used for benchmarking purposes and also to determine whether there are any national characteristics that need to be understood when launching products in any particular country.

The products studied ranged from household cleaners to margarine. For the purposes of the study, re-launches, product replacements, new scents, flavors, sizes and colors were excluded unless they offered functional or perceived innovation. Brand extensions and new formats were included.

The store base for this analysis was the 'top-end' of the trade in each country (i.e. hypermarkets and supermarkets). Hard discounters were excluded in all countries. Drugstores, including Schlecker, were included in Germany as were Boots and Superdrug in the UK.

Methodology
The product categories analyzed included:

Sales were tracked for eighteen months from launch using IRI's InfoScan retail tracking service. Distribution, sales value, sales volume, pricing and promotional support were recorded. For details of the measures used, please see appendix.

Within the 484 product launches analyzed, there was considerable variation between the best and the worst performers. In order to gain further insight, the launches were divided according to their distribution, sales rate and share increase after one year, into 'the best' and 'the rest'.

Results
The study revealed that sales mainly follow one of five different patterns. These patterns are determined by the effects of distribution, rate of sale, pricing and promotions on a new product's sales, as well as its inherent attributes.

Typical Product Launch Shapes in Europe

Value sales per four weeks indexed versus average sales

Variances in the trade structure across Europe are so strong that the dominant sales pattern varies from country to country according to local trade infrastructure and practices. Understanding this effect is potentially very valuable when judging the performance of pan-European launches. For example, in some countries it is critical to gain very high distribution within the first eight weeks, while in others this is very difficult to achieve and has no impact on the long-term success or failure of the product.

Provided that the national launch characteristics are known, the sales patterns can give an early indication of whether or not a product is going to be successful.

The study showed very distinct national differences. In the UK and Netherlands new products most commonly have the 'Early Peakers' launch shape, reaching an early sales peak and then settling. In contrast, the dominant group in France is the 'Flatties', which grow more slowly and then level off. In Spain, the majority are 'Growers', gaining distribution gradually. In Germany and Italy, none of the groups is dominant but in Germany, 33 per cent of launches had either failed within one year or had sales that were dropping steadily at that time.

National characteristic launch shapes

Product availability
The distribution levels achieved after one year also vary enormously. This is largely a function of the retail infrastructure in the different countries and is critical to the progress of new product launches.

Average distribution levels of new products after one year

For example, the British retail trade is highly concentrated and well organized, with a small number of retailers accounting for the vast majority of sales. So, with a few major agreements in place, a new product can find itself stocked in the majority of the trade in just a few weeks. In contrast, in Italy, the trade is very fragmented with 11 retailer groups operating some 28 separate store chains to deal with. Distribution is therefore slow to build and on average, even after 18 months, is no higher than the 80 per cent that new products attain in the UK after 12 weeks.

In The Netherlands, there is also a relatively concentrated trade structure with four of the seven key retail groups operating some 85 per cent of the grocery business. Within these key groups there is still a large portfolio of individual store chains but the top six account for over 60 per cent of the trade. New products gain distribution quickly, very much as they do in GB but at a slightly lower level. However, when it comes to maintaining distribution, non-performing products in The Netherlands are de-listed more aggressively than in any of the other countries.

Distribution development by country

Despite the eventual distribution of new products in France being one of the highest, it grows on average much more slowly, taking 36 weeks to reach the 80 per cent level achieved in UK in 12 weeks and in The Netherlands after 24 weeks. Although the French trade is led by three major retailers with almost 50 per cent of the grocery trade between them, it is necessary to have regional as well as central agreements to expand distribution. Altogether, there are some 20 or more hypermarket and supermarket chains in France so achieving good distribution can be slow.

The situation is similar in Germany where distribution builds slowly and one third of new products exhibit the dropper profile or die within a year. In fact, in Germany, it was found that products achieving less than 35 per cent distribution by week 20 were unlikely to survive, such is the ruthless nature of some German retailers. The information used in the study from Germany includes drugstores. This is in order to increase the coverage and to make it as comparable as possible with the data available from the UK, where there is also a very strong chemist and drugstore sector for personal care products. The existence of 69,000 drugstores in Germany is one of the reasons why it is so hard for brands that would sell in these stores to reach high levels of distribution. Overall, new products in Germany achieve the second lowest level of settled distribution.

The lowest level of all, however, is seen in Spain, where the average new product distribution is still growing after 18 months and only tops 50 per cent after one year. Although dominated by the Carrefour group, the Spanish grocery trade is, arguably, almost as fragmented as Italy, with a large number of retail groups and store fascias. Another consideration in assessing the distribution information is store size, as there is clearly always pressure on shelf space and smaller stores inevitably offer a reduced range. The Spanish trade is well endowed with large grocery outlets but two thirds of supermarkets have less than 400 sq m of sales area. This is comparable with Italy.

Having gained distribution, the clear objective of a new product is to maintain or increase that level over time. It was clear from this study that some brands have difficulty doing this and that this correlates with a poor sales performance either in terms of absolute sales or growth trend. Those products performing less well will typically begin to lose distribution after nine to 12 months from launch, presumably to make space for the next round of new products. However, it was noticeable that in Spain and France this effect was not so marked. The distribution of those products performing less well in these countries remained stable over the period of analysis, up to 18 months, potentially reflecting a greater tolerance to under-performing new products, or a lack of awareness of the issue. It is also noticeable that in Spain and France particularly, the average sales performance for the whole group of new products analyzed was substantially lower than the average in their categories.

Given this general scenario, it is possible that any one poorly performing product is less easily noticed and so survives longer.

Sales
The variation between the five different launch shapes has already been discussed but it is instructive to notice the difference between the countries of one group in particular, the Early Peakers. Often driven by trade promotion, the sales of these new products peak as consumers try the new brand, generally settling thereafter as repeat purchasing takes over. Longer term, the brand will then grow or decline.

Early Peakers in the UK, The Netherlands and in Spain, are those with peaks most related to trade promotion. For the UK and the Netherlands this occurs most often during weeks 5 to 12. In Spain, this activity occurs later, at around 16 weeks from launch, once distribution has reached about 40 per cent.

In Italy, Germany and France, where trade promotion levels are not as high, the Early Peakers peak later still. These peaks occur between 20 to 24 weeks from launch and are not particularly associated with increased trade promotion activity.

Value sales trend by country - Early Peakers

In general, those new products classified as the Best, differ most noticeably from the Rest in their launch shape after 36 weeks. From this point, the Best new launches tend to show growth over the following nine months, whereas the Rest tend to decline by, on average, some ten per cent. In the UK and Spain, this growth averages 20 - 25 per cent; in the Netherlands and France 10 - 15 per cent and in France and Germany the Best launches only show a low level of growth or simply remain stable.

Value Sales Trend Index - 6 countries - Best vs Rest

Overall success does not seem to be associated particularly with any one launch shape. Amongst the Best group the largest group is the Growers, followed by the Early Peakers and the Flatties. However, in the UK where the Early Peakers are the dominant group and trade promotion is invariably used as a method of attracting trial, they account for almost 50 per cent of those in the Best group and less than 40 per cent of the Rest group. This suggests that early trade promotion works more often than not in the UK at least.

Overall, Early Peakers are equally represented in both Best and Rest but in the UK they are more successful.

Sales Rate
Whatever the country, most new products sell more slowly than established products. However, new products do better in the UK, Netherlands, Italy and Germany with one third of them selling better than existing products. This is much higher than in France and Spain where only 18 per cent and 13 per cent sell faster than existing products.

One third of new products in UK, Netherlands and Germany, sell better than existing products

Volume Sales Rate Index - First 18 months

This information suggests that the consumer's acceptance of new products is lower in Spain and to a lesser extent, France, than other countries. This could be a function of lack of awareness or a reticence to alter traditional purchasing habits by some parts of the population. Amongst the six major European countries, Spain and France have the greatest land masses and on average, the least dense population which might make word of mouth communication more difficult to achieve.

The other critical finding from the Sales Rate analysis is that those new products in the Best group, have on average double the sales rate of those in the Rest group and that this difference is exhibited from launch. The more successful new products usually sell at a rate similar, or slightly above, the average for their category.

Volume sales rate index - Best versus Rest

This finding is important as it constitutes a very early and significant difference between a product that will ultimately succeed and one that will not. Even in the very early phase of the launch, products can be seen to be under-performing, relative to their competition, in the stores where they are first stocked. This information suggests that, unless something changes in the offering to the consumer, this condition will persist.

Price
In all six countries, new products are on average premium priced and the prices gradually fall throughout the first year. It was noticeable, however, that this reduction in price was less marked in Spain, Germany and the Netherlands.

Those launches in the Best group were priced lower than the Rest, by on average 25 per cent. Both groups saw price reductions after their launch but the amount of reduction was slightly greater for the more successful group. This effect was particularly shown in the UK. One reason for this could be retailers using the popularity of a successful new product tactically in their pricing strategy. In Germany, where the pressure to succeed in the short term and not be de-listed is intense, the opposite appears to be the case with additional promotional activity used to perk up flagging sales among the Rest.

Price falls following launch are more exaggerated among the Best performing new products

*Maximum price in the first nine months indexed over average price in the next nine months

The current trend for launching at a premium price is not new. Manufacturers have always sought to exploit niches in the market and to introduce ever more innovative new products at a profit. However, more recently, it could also be in response to retailer pressure on prices and the difficulty that manufacturers have in increasing prices on established products. Premium NPD is one way of increasing the category price but, as shown by the results of this study, the more premium the price the greater the risk that the sales will be depressed, with the inevitable consequences.

Trade Promotion
The amount of trade promotion supporting new products varied widely between the countries. In the UK, it is normal for 60 per cent or more of the sales of a new product to be on promotion in the first three to four months. This level falls over time but at the end of the study over 40 per cent of sales were still being sold on promotion.

% new products sold on promotion - UK

In most other countries, the level of promotion is much lower. Even at the start, it is rare for more than 40 per cent of sales to be on promotion, and the level of promotion tends to fall over time. In France for example, trade promotions are low and fall after a moderate peak.

% new products sold on promotion - France

The new products in the Best group had, on average, slightly higher and more sustained levels of trade promotion than those in the Rest group although the differences were marginal. Trade promotion did not appear to be a key discriminator between the relative success of the two groups with each reflecting the local pre-eminence or not for this type of marketing activity. There was some evidence of the trade promotion activity amongst those in the Rest group being slightly more erratic in the second nine months as might be expected.

Best performing products receive marginally more promotion than the Rest

Conclusions
There are key local differences to be aware of when setting targets for new products or when making assessments of performance. What is acceptable in one country in not necessarily acceptable in another. Good distribution, the right proposition and the right price are all critical to success, as demonstrated by the sales rate, often in the first month or two of launch.

Germany, followed by The Netherlands, is the most difficult country in which to maintain distribution if this is not supported by good sales. In Germany, achievement of less than 35 per cent distribution by week 20 is usually followed by de-listings.

France and Spain are where new products are least well accepted as options to the established brands.

The price of a successful new product will fall fastest in UK.

Premium pricing works but can restrict sales if excessive.

With the exception of France and Spain, a new product's sales rate should be similar, or slightly above, the category average within 8 weeks of launch. On average, new products sell at a slower rate than the average for their category. If a new product maintains a sales rate at least as high as it's competition for the first six months, this is a good indication that it will be successful long term.

The Early Peaker profile seems to work in UK but elsewhere it is no more successful than the other launch shapes.

Manufacturers and retailers should be aware of the normal variations across countries exhibited when new products are launched. These results will aid planning, forecasting, target setting, benchmarking, tracking and post-rationalisation of new product launches in these countries.

This report has been compiled by Tim Eales, International Insights Director at Information Resources.

For further information, please contact Tim at IRI's International Office +44 (0)1344 746038.

Measures used in this survey