33rd Annual R&D Survey: More home runs, fewer bunts on tap for next year

Our R&D readers predict 2005 will be a year of truly novel new products backed by slightly higher budgets.

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By Frances Katz, Senior Technical Editor

The key word for R&D in food companies is more: more new products, more product improvement, more attention to regulatory detail, more variety, more excitement, and in some cases, more hands to share the burden.

Despite concerns about terrorism, their own jobs and the economy, almost 42 percent of the research and development officials who answered our 33rd annual Top 100 R&D Survey were able to add at least one person to their R&D department in the past year. Roughly 19 percent lost at least one person from the department, and about 39 percent remained the same.

Our survey was sent to all companies in the Food Processing Top 100 list of the largest food and beverage processors in the U.S. and Canada. Recipients were vice presidents of research and/or R&D, research directors, directors of quality control/assurance and managers of specific research projects. It was circulated in August and September, about the time most were heading into their companies’ last fiscal quarter with a pretty clear picture of where R&D would end up in 2004 and where the budgets would take their departments in 2005. A total of 250 surveys were sent out; 109 were returned, representing 87 of the Top 100 companies.

In addition to an extra body or two, it found research departments:

  • Focusing on truly novel products rather than safe line extensions.
  • Coping with shorter development cycles.
  • Making more use of outside resources, especially supplier expertise.
  • Expecting to develop more products next year than this year.

Kraft, for instance, served notice at an investor conference in early September that it will be cranking out more new products. “While we remain focused on driving out costs through productivity, the key to delivering sustainable earnings growth over the long-term in the food industry is consistent revenue growth,” said Roger Deromedi, CEO of the largest U.S. food company. “To that end, we continue to evolve our new product development process by focusing on fewer, bigger and better ideas and improving our speed of execution.”

Kraft has always formed close alliances with their select suppliers and has always had a fairly formal product development process. The number of new products on its plate is daunting, and the company’s interest in organic products, revealed by Deromedi at that conference, will further strain resources.

Still teams, but more virtual

The product development process, for Kraft and for most other large food companies, involves several departments and includes some international activity and outside suppliers, as well. But the process has changed somewhat, especially in the past year or two.

The concept of teams has been around for decades. As they evolved, these teams have become more wide ranging -- cross-functional -- but also virtual. Members in many of these groups no longer pick up a team notebook and attend a meeting. But these in-person or virtual members represent not only research but also (in descending order) marketing, plant operations/engineering and finance.

These collaborative teams have adopted a mind-set that takes them from the business of the team to the business of the firm. This means that a number of the R&D staff are no longer, strictly speaking, strictly food scientists. As they pick up additional credentials, those credentials are often in marketing, finance, engineering or information technologies.

The backbone of the team remains a group of similarly minded individuals who have to invent a product or fix a problem. About 85 percent of the groups use teams for cost cutting. About 60 percent use teams for improving product quality, with shelf-life extension an often-cited goal. Teams also are put to work for developing product prototypes (20 percent) and even developing package design (22 percent).

Teams or alliances are designed according to their uses. About half of the companies use more formal organizations, with all members starting work on a given project at the same time and continuing through a pre-decided end-point. The other half generally phase disciplines in as needed.

With so many different personalities from different backgrounds, the true R&D people we surveyed lodged an occasional complaint about personality difficulties on teams, but the members generally noted they worked things out -- usually.

What drives your company?

How do R&D personnel see their companies? We asked section leaders, research directors and chief research officers whether their companies are primarily technically oriented, marketing oriented, manufacturing oriented or finance oriented. Most of the research managers say their employers primarily are marketing oriented. Companies that were global, and especially those headquartered in Europe or Japan, generally feel their companies are financially oriented. The 10 percent of companies that were smallest in shipments generally believe their companies are manufacturing oriented.

Most of the research departments report to the CEO of the company or to the general manager of an individual operation. But 9 percent of the respondents report to marketing. If research occupies different positions within companies, its functions change, too.

We asked which activities were considered part of R&D. Of course, 100 percent say they primarily are involved with product development, but about 72 percent of the departments included pilot production, and 56 percent included initial plant production. Sixty percent of the departments have partial responsibility for regulatory activities, and about 17 percent have some responsibility for market research. Often, the top research officer or a representative is involved with strategic activities, but generally not as a representative of the research department.

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