Product innovation in the consumer packaged goods industry has become increasingly more challenging due to the ever-changing needs and wants of consumers, the impact of e-commerce on product assortment and pricing, and the success of smaller companies, which has levelled the playing field in the industry, according to the Point Of View publication from IRI. This article is copyright 2019 The Best Customer Guide.

Most of the new product success has been driven by smaller companies that can rapidly develop new and unique products to meet specific consumer and shopper needs. This has resulted in many of the larger CPG companies looking for innovation through mergers and acquisitions to accelerate their own innovation pipelines and capture some of this growth.

In fact, M&A activity among the top 50 CPG companies marked a 15-year high in 2017 - a 45% increase compared to the previous year. The spike in M&A activity isn't surprising, as consumers' needs and wants are very diverse and personal - and rapidly changing - and brands must move swiftly and surely to keep pace. For these reasons and others, making informed and strategic M&A decisions is critical. To win, CPG companies must invest in companies and brands that really hit the mark and bring sustainable incrementality to existing portfolios.

The report, entitled "Bigger Can Be Better: Maximize Speed and Impact With Benefits-Based M&A," examines how CPG companies can increase the chance of M&A success by shifting away from strategies that are based on traditionally defined categories to a benefits-based approach through a consumer and shopper lens.

By taking an unbiased, strategic approach to examining how, where and why shoppers look across categories, departments and aisles to solve for their needs and wants, CPG companies can quickly and accurately:

  1. Establish initial marketplace boundaries.
  2. Understand and size up the shopper-defined marketplace.
  3. Pinpoint incremental long-term growth opportunities and build a fact-based business proposition.

"Today's M&A strategy is no longer about increasing efficiency and cutting costs but is instead used as a tool for getting the right product on the shelf quickly in order to meet consumer demand and create high-potential growth opportunities," said Thomas Juetten, executive of Product Innovation for IRI. "In order to create those growth opportunities, CPGs need to keep an eye on consumer and business trends, but really home in on the benefits that are driving shopper loyalty, such as natural, organic and authentic."

"The market has indelibly changed, and consumers are unquestionably steering market evolution," said Robert I. Tomei, president of Market and Shopper Intelligence for IRI. "To win, CPG companies absolutely must adopt a shopper lens to M&A evaluation. By shifting from a category or type focus to a benefits-based approach, CPGs will see market opportunity more clearly. Then they can shift their strategies accordingly."

The full report has been made available for free download from the IRI web site, here: https://www.iriworldwide.com