CPG Fundamentals: What is product innovation? 


CPG Fundamentals: What is product innovation? 

  • Learn what product innovation is and how CPG companies use different types of innovation to grow and survive in a fragmented market.
  • See which product innovations are worth watching.

What is product innovation?

On the surface, Diet Coke, oat milk, and Flamin’ Hot Cheetos don’t have much in common. But all our favorite products have the same origin story as innovations.  

Product innovation is the business process of creating and introducing new or updated products to the market—often with the help of experts, analytics, and lots and lots of data. It’s also a business imperative that CPG companies need to grow and survive. 

CPG manufacturers and retailers are constantly innovating to stay ahead of shopper needs in new ways (even in times of crisis). The results of the process can look different—from new variations of old favorites that disappear after a limited run (or don’t: see, Falmin’ Hot Cheetos) to entirely new food groups like plant-based milks and meats. 

Types of innovation

Whether they’re producing the grocery staples of tomorrow or fun but forgettable novelties, CPG players are striving to meet our needs while remaining profitable. 

Successfully expanding a product portfolio is a complex process and requires different strategic approaches to account for a brand’s goals and limitations, shifting consumer demands, and the state of the economy: 

  • Targeted Plays: Small, strategic wins that are not intended to appeal to the mass market. 
  • Short-term Plays: Innovations that are executed as quick hits to drive excitement among consumers and new news for the brand. 
  • Emerging Plays: Innovations that transform their categories by offering new or improved benefits before they were mainstream. 
  • Crowd Pleasers: Products with proven benefits that will help maintain brand sales in the short term.  
  • Brand Grower: Long-term plays that grow the brand.  
  • Superstars: Products that disrupt their categories and grow their brands.  
chart showing BASES activation profiles

Successful CPG product innovations 

In today’s market, successful CPG product innovations typically need to do more, cost less (or both) to get our attention.  

Here are a few standout examples of North American innovations that aimed to make our lives simpler, healthier, more accessible and enjoyable in the last two years: 

  • Mountain Dew Flamin’ Hot, a PepsiCo brand crossover extravaganza, was popular enough during its limited run in 2021 to make a much-hyped return in 2022 as the official drink of Hell (Michigan)
  • Lysol’s laundry sanitizer, launched in the early days of the pandemic, promised consumers extra protection against any germs that survive the wash cycle. 
  • Degree Inclusive, launched in 2022, makes stick deodorant accessible to people with visual or upper body impairments with new features including a braille label, magnetic closures, and a roll-on applicator.  
  • Milk Bar batter bites are the latest offering from chef Christina Tosi, who successfully steered distribution of her baked goods empire from chain stores to direct-to-consumer and national grocery chains.  

How to innovate successfully  

The key phrase: Innovation with rationalization.