By Valerio Nannini, CEO and Founder, Nannini & Partners

As the world continues to evolve, so do expectations for business growth. However, not all growth is created equal. Some sectors, like infrastructure, expand incrementally due to economies of scale, while others, such as consumer goods tied to basic human needs, align closely with population growth. Yet, in the dynamic realm of products and services driven by meaning—where value transforms from function to experience, and utility to identity—growth potential is limitless. This is the fertile ground of imagination, creativity, and collaboration, accessible through strategic innovation.

The Shift in Consumer Goods Growth

Over the last decade, consumer goods companies have faced unprecedented challenges. According to a McKinsey review (2021), nearly 70% of top players in this space reported stagnating or declining growth from 2018 to 2022. The reasons are multifaceted:

1. Economic Slowdowns: Developing markets, once the growth engine, saw substantial slowdowns. Countries like India and Brazil experienced GDP growth deceleration, compounded by global uncertainties post-COVID-19.
2. Disruption by Challenger Brands: Local and agile competitors disrupted traditional FMCG categories, eroding the dominance of legacy players.
3. Shifting Consumer Preferences: Consumers now prioritise sustainability, wellness, and social impact over price or convenience—a trend particularly driven by Millennials and Gen Z.
4. Digital-First Competition: Technology-enabled entrants harnessed direct-to-consumer models, leveraging data and agility to outpace traditional players.

The result? The once-untouchable giants of the FMCG sector are grappling with slower growth and mounting pressure to reinvent themselves.

Closing the Growth Gap with Innovation

Faced with this reality, the question isn’t whether innovation is necessary—it’s how it can be most effectively deployed. Companies must focus on:

1. Revenue Growth: Innovation should directly translate into new revenue streams. As Bain & Company highlights, companies that innovate effectively see 16% faster growth than their peers.
2. Cost Efficiency: Strategic innovation reduces waste and enhances operational efficiency, aligning creativity with profitability.

Strategic Innovation: Lessons from 2020–2024

1. Digital as a Core Business Strategy

Innovation today is synonymous with digital transformation. From AI-powered customer insights to blockchain-enabled supply chains, companies are redefining their value propositions. Gartner (2023) notes that 83% of executives now view digital-first business models as central to their innovation efforts.

Example: PepsiCo’s investment in AI-driven flavour creation helped them launch several hit products in record time, showcasing how digital tools can accelerate innovation.

2. Co-Creation with Customers

The most innovative companies collaborate extensively with customers and external partners. By 2024, leaders co-create twice as many new products as laggards, according to PWC. This collaboration fuels customer loyalty while enabling businesses to respond to market needs faster.

Example: Nike’s ‘Nike by You’ customisation platform allows consumers to design their products, blending personalisation with innovation.

3. Purpose-Driven Innovation

Modern consumers demand more than great products; they seek brands with purpose. Companies focusing on sustainability, equity, and wellness are outpacing those that don’t. A Boston Consulting Group (2022) study revealed that purpose-led brands achieve 9% higher annual growth than their peers.

Example: Unilever’s commitment to sustainability has driven a 70% revenue boost for its purpose-led brands like Dove and Hellmann’s.

4. Agility and Venture Capital Principles

Applying venture capital principles to innovation portfolios ensures resilience. Companies must adopt a long-term perspective, stage investments, and balance risk across a portfolio. Agility in execution is critical for adapting to market disruptions.

Example: Amazon’s culture of experimentation allows for rapid product launches while minimising risk exposure through a portfolio approach.

From Strategy to Execution

The debate is no longer about whether to innovate but how to spend innovation budgets effectively. Research indicates no strong correlation between sheer R&D expenditure and success. Instead, the focus has shifted to execution: aligning innovation strategy with business objectives and leveraging cross-functional collaboration.

Front-End Focus: Customer-Centric Design

By 2024, 92% of leading FMCG companies identified customer experience as their primary innovation driver (Deloitte). Today’s consumers demand transparency, ethical practices, and exceptional engagement at every touchpoint.

Key Takeaway: Successful companies integrate customer insights early in the innovation process, turning behavioural data into actionable strategies.

Innovation’s Future: Balancing Risk and Reward

Innovation is not without risks. However, by embedding agility, collaboration, and digital-first principles, companies can turn risks into opportunities. As global challenges like climate change and economic uncertainty loom, innovation will remain the secret sauce for growth.

For businesses seeking sustainable growth, the question isn’t just how to innovate but how to innovate effectively. By aligning strategy, execution, and purpose, companies can unlock unprecedented value for both shareholders and society.

To explore how your business can harness the power of innovation, get in touch for a tailored consultation.

Innovation is no longer a choice—it’s the future.