The world’s biggest consumer goods groups are planning a new generation of products for supermarket shelves – from heated razors to intelligent toothbrushes – as they accelerate efforts to win back shoppers who have ditched mass-produced brands.
Executives behind household staples including Colgate toothpaste and Fairy washing-up liquid have pledged in the past week to step up innovation as investor concerns mount over anaemic sales growth and the threat posed by upstart competitors.
The commitments come as new figures show legacy consumer packaged goods companies have ceded $27 billion in sales in the US alone within the past six years.
Revenues at producers with annual sales of less than $5.5 billion, together with private label suppliers, surged almost 15 per cent to $400 billion between 2013 and 2018, according to market researchers IRI. That was more than twice as fast as the 6.5 per cent rise to $415 billion recorded by the bigger groups.
Wall Street is questioning whether the traditional companies are doing enough to respond, as rapidly shifting consumer tastes, changes in advertising markets and the rise of ecommerce allow nimbler operators to grab market share.
Companies including Procter & Gamble have developed products that promise to revolutionise everyday household products, such as camera optics-powered skin care.
However, most of the industry’s plans involve more modest improvements to existing offerings, making them more healthy, efficient or environmentally friendly.
Ian Cook, chairman and chief executive of Colgate-Palmolive, told investors on Friday that the company's innovation plans for 2019 were "uniquely and especially strong".
“This is the opportunity to accelerate our growth,” he said.
The world’s biggest toothpaste maker, which spent about $285 million on research and development in 2017, did not quantify its investment plans.
However, Mr Cook said a new version of Colgate Total toothpaste was the “biggest breakthrough” to the formula since its launch more than 20 years ago. “It has been many years in the making,” he said.
Colgate said the new version had superior enamel protection and would combat bad breath. The update will also remove triclosan, a chemical that has raised some health concerns.
"As we talk to our investors, there's some degree of scepticism on whether or not this can really move the needle," said Jason English, analyst at Goldman Sachs, of the new Colgate Total.
Recent innovations from P&G include Gillette SkinGuard, a razor for men with sensitive skin, and Crest Gum Detoxify toothpaste, which uses a “cooling activated foam” to help penetrate hard-to-reach areas.
Jon Moeller, the company's chief financial officer, said: "Our competition is not standing still. Nor are we."
Investors are also concerned about how much the companies will need to spend to stay relevant.
Shares in Henkel, whose brands include Pritt stick, Right Guard deodorant and Schwarzkopf hair products, dropped 13 per cent last week after the German company said it would boost investments by €300 million.
CEO Hans Van Bylen said Henkel was planning to "relaunch the entire hair care portfolio". He planned "the biggest innovation offensive" for its Persil line of detergent, promising an "all-new deep-clean formula".
Other companies have provided little detail about their plans. Mike Hsu, newly installed chief executive of Kimberly-Clark, told investors last week that the company was planning "more meaningful" innovation.
The game has changed. Others have innovated much more, whether it's in blades or diapers. The larger players have struggled to keep up
He mentioned baby care as an example, but the company, which makes Kleenex tissues, Huggies nappies and Andrex toilet roll, said it would not “comment specifically on future product innovation”.
To deal with the threat from smaller rivals, the legacy companies have set up so-called incubators to fund start-ups and turned to M&A. Deals include Unilever's acquisition of Dollar Shave Club and Procter & Gamble's purchase of Native deodorants.
"The game has changed," said Krishnakumar Davey, president of strategic analytics at IRI . "Others have innovated much more, whether it's in blades or diapers. The larger players have struggled to keep up."
P&G takes a gamble in Las Vegas
Las Vegas is known for its high stakes and razzmatazz. Procter & Gamble is known for its Ohio conservatism and products such as nappies, tampons and mouthwash. Yet P&G's executives took the stage at the city's Consumer Electronics Show this month to showcase the company's bet on innovation. Here are three of the products they spotlighted:
Oral-B Genius X toothbrush. Artificial intelligence tracks how users are brushing, and gives them feedback to suggest better technique.
Heated Razor by Gillette Labs. Features a "warming bar" that heats up in less than a second and claims to emulate the sensation of a hot towel shave.
Opté Precision Skincare System. A wand-like instrument that combines camera optics and printing technology to scan the skin and treat spots.
– Copyright The Financial Times Limited 2019