The R&D Budget Is Not a Growth Signal. We Checked.

34 FMCG companies, 365 company-years, 2016 to 2025. The correlation between R&D intensity and organic growth: zero.

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Zero.

That is the correlation between how much a consumer goods company spends on research, as a share of revenue, and how fast it grows organically. Not small. Not positive but noisy. Zero.

This started with a question from a client. An R&D director sent me a study Henkel commissioned from Frost & Sullivan in 2020, on whether companies with R&D directors at board level perform better. His real question was sharper: does R&D spending predict growth at all, and does debt get in the way? Fair question. Nobody in the industry seemed to have answered it with actual filings rather than survey decks.

So we built the dataset. Every 10-K for the US names. Every 20-F for the cross-listed Europeans. Annual reports and registration documents for the rest: Nestlé, L’Oréal, Henkel, Beiersdorf, Danone, Reckitt and their peers. That produced 365 company-years across 34 companies, from 2016 to 2025. We matched it against organic growth, not reported revenue. The distinction is the whole game. Reported revenue moves with acquisitions and currency; organic growth is what the underlying business actually did. When we first ran the tests on reported figures, the KDP merger of 2018 alone manufactured a beautiful, entirely fake correlation between R&D increases and next-year growth. Organic data killed it. More on killed conclusions later.

The answer changed how I think about innovation budgets. It should change how your board discusses them too.