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New Products Trump Brand Extensions

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More than 1,700 consumer packaged goods brands were launched last year, the largest single-year number in the past decade. Of equal importance, the list of best-selling first-year nonfood CPG products has more "new" brands than in recent years versus what were defined as "extensions," per a study from Information Resources Inc., Chicago.

Though the 1,700 figure is a fraction of the more than 35,000 CPG shelf-keeping units on the market in 2005, it is the third consecutive year there has been an increase in brand introductions.

"Prior to 2002 we saw an average of about 1,000 brands launched a year. Since then it has risen [significantly]," said Valerie Skala Walker, vp, analytic product management at IRI. "It's clear that it's an ongoing trend."

IRI said the increase in what it defines as new brands shows that companies are downplaying brand extensions in their strategies. (IRI did not provide statistics to indicate the total number of what it defined as "new" products versus "extensions.")

"Manufacturers realized that just adding new flavors to existing products was sustaining their revenues, but not growing them," said Skala Walker.

Companies also seem more willing to nurture and grow brands instead of expecting them to be huge sellers right from the start, according to IRI. While some products do rack up impressive sales in their first year on the market—P&G's detergent Tide with a touch of Downy had $266 million in sales in the 52 weeks following its 2004 launch, per IRI; Gillette's M3Power razor had $100 million in 52-week sales after its 2004 launch—they are the exceptions. More than 80 percent of products launched in 2005 did or will do less than $10 million in actual or projected sales for the first 52 weeks, per the IRI study.

It is frequently the products that don't make the top 10 that ultimately are the most successful. Skala Walker believes P&G will have success with its new Crest Pro Health mouthwash. However, Al Ries, chairman of Ries & Ries Consultants, Roswell, Ga., has his doubts: "Crest mouthwash is a line extension in the wrong direction. It's like Listerine toothpaste. Who would want that?"