Caterpillar, for example, in popular variety (5)
I believe the answer is:
larva
'caterpillar for example' is the definition.
(caterpillar is a kind of larva)
'in popular variety' is the wordplay.
'in' says the answer is hidden in the clue.
'LARVA' is hidden in the letters of 'popular variety'.
(Other definitions for larva that I've seen before include "Insect's immature form" , "Manage" , "Insect in the first post-egg stage of its life" , "a developmental stage" , "Immature form of (insect) development" .)