'Natural' New Products and Brand Distribution

Abstract

Grocery retailers are investing in “natural” product offerings to compete for shoppers. At the same time, many brands’ new product offerings claim to be “natural.” Such new products appear to be congruent with retail customers’ goals. However, the term “natural” is not regulated by any U.S. government agency. Uncertainty remains regarding what “natural” implies to the marketplace and the value it brings to interorganizational exchange between brands and their retail customers. We investigate these issues with a multimethod approach involving in-depth qualitative interviews with 30 managers possessing extensive category management experience, secondary data compiled from 628 brands’ new product introductions across 18 consumer packaged goods categories over 11 years, and primary data from a survey-based experiment collected from 101 managers involved with category management.

Results indicate the extent to which a brand is using retailer shelf space productively can determine whether the relationship between a brand’s “natural” new product introductions and brand distribution is positive or negative. Category managers find the term “natural” is difficult to evaluate – especially in non-food categories. They navigate this uncertainty by turning to brands’ “shelf space productivity” (i.e. the brand’s category sales contribution relative to its share of in-store shelf space) as a critical decision-making heuristic. If a non-food brand is using its shelf space productively, it is in position to gain access to greater overall distribution by focusing on “natural” new products. However, if a non-food brand is underutilizing its shelf space, category managers perceive the brand’s focus on “natural” new products as more opportunistic, which lowers their trust in the brand’s use of the claim. This distrust ultimately results in a larger withdrawal of the brand’s access to retailers’ distribution resources than had the brand focused more on non-“natural” new products.

These results suggest non-food brand managers should proceed with caution when considering whether their new products will focus on “natural” (vs. non-“natural”) offerings. It may seem “natural” products can only help—or at least not hurt—brand distribution. However, we find “natural” claims can be detrimental to distribution if the brand underutilizes its in-store shelf space. It is difficult for brands to escape downward performance spirals, and emphasizing “natural” claims seems to accelerate the descent for unproductive non-food brands.

As part of our analyses, we also propose, validate, and use a novel and straightforward measure that category managers and brand managers will find useful for estimating brand shelf space and shelf space productivity.

Keywords: Natural new products, natural claims, shelf space, productivity, brand distribution

JEL Classification: M30