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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Most research departments prefer to hire people with at least a bachelor’s degree. Larger companies hire master’s-level personnel, and quite a few hire more Ph.D.s. The supplier community, especially, seems to hire Ph.D.s in preference to others—quite possibly because most retail and foodservice companies ask for technical assistance from their suppliers. Technical assistance has gotten more complex, and companies need it faster, so more basic research is required to solve complex problems quickly. But most research directors and vice presidents of research are Ph.D.s, or at least master’s-level scientists with experience, sometimes plus an MBA.

While research departments generally are growing in headcounts, they also are taking on more responsibility and generally doing more. Seventy-four percent of the respondents expect to be asked to develop more products this year than last. Only 19 percent think they’ll develop fewer products.

Shorter and longer times

The development time for new products overall appears a little shorter than in our previous surveys – paradoxically, there also was notable growth in projects that take a full year. With 68 percent of respondents attacking a portfolio of new products (which scatters development times somewhat), 18 percent of the R&D teams say “most” of their products are developed in about three months (that number was 5 percent in last year’s survey—see infographic, attached as a PDF file), 14 percent of teams are wrapping up products in six months, another 14 percent are ready to launch in nine months and 54 percent have the luxury of working a whole year on a new product.

That increase in the full-year development process is explained by a number of research directors who tell us they are looking for more “outstanding” products, with clear differentiation from the mass number of new products. “We’re looking for home runs,” notes one research director, “products with technical content that can’t be reproduced immediately by competitors. It costs too much to make little products. They should be blockbusters that will be around for a while.”

So, how do you build a blockbuster? Most of those R&D teams get some help, and not just internally but also from outside the company. Every company surveyed said it will call on suppliers for higher levels of support this coming year.

(Supplier companies say they expect this, and may prioritize assistance for customers. Criteria for prioritization are complicated. Some say prioritization will be by special agreement, such as if the vendor is a preferred supplier, by profitability or by other financial relationships.)

When asked which organizations provide the most help in product development, 100% of the companies say they depend on suppliers, 62% depend on academic institutions, 32% on government agencies, 32% on industry and society meetings, and 62% depend on patent information. Consortiums are helpful to 32% of companies, and journals and trade publications are used by 48%.

While money has been tight during the past few years, a few companies have increased the size and complexity of their research campuses. H.J. Heinz Co. recently announced plans for an expanded international research and technical facility, moving the Heinz Food Innovation and Quality Center -- also known as the Heinz Food IQ Center – from downtown Pittsburgh to a suburb in mid-2005. It will focus on a broad range of products, including frozen foods and soups.

“The 100,000-sq.-ft. facility will become our international center for food and nutrition research, hosting some of the world's leading experts in nutrition, cuisine, quality assurance and product and packaging design,” according to Heinz Chairman William Johnson.

While money remains tight, capital equipment budgets don’t look as squeezed as they did at this time last year, respondents indicate. With a little more money in hand, companies and departments are looking ahead and, especially when planning for capital equipment, they try to predict the general types of products and projects they will be working on. A whopping 98 percent plan to be more involved with developing healthy products, while 82 percent expect to modify or reformulate existing products. Then there’s the drudgery: 88 percent expect to be more involved with regulatory questions and 44 percent will be attending to online analysis (see infographic).

The crystal ball for ’05

One interesting outgrowth of this question is that fewer companies expect to be doing more line extensions -– a two-thirds drop from last year’s responses. In several phone interviews, it became clear a growing number of companies have limited interest in line extensions anymore. While the timeline for new products has shortened and line extensions once were viewed as quick and safe base-hits, R&D teams and their upper management appear to have decided that endless line extensions cannibalize product lines and squeeze shelf-space. They are clearly looking for better products that will have longer life cycles, and they believe enhanced technical content staves off immediate competition.

On the other hand, some companies that have recently taken over smaller processors are still in the line-extension business, especially if the products gained from the smaller firms have strong brand name recognition and few extensions. Of the companies in the upper 30 percent (based upon sales), all had bought a company within the past few years and are in varying stages of absorbing the new members of these acquisitions.

Polishing their crystal balls, the R&D officials we surveyed have some definite ideas about what products would be popular in five years. We asked about new ethnic foods, microwavable foods, fortified foods, functional foods, reduced-fat foods, reduced-carb foods, fat-free foods, natural or “wholesome” foods. While most of the companies indicate their portfolio will include numerous new food types, the exceptions were most informative.

Less than 20% of the respondents believe they will be working on reduced-fat or fat-free foods. When questioned, several of the respondents say lipid technology is more likely to involve fatty acid ratios than fat content per se.

While nearly 60% of the respondents expect to working on lower-carb foods, several comment that quality of carbohydrates was more likely to be front and center than quantity of carbs, at least for longer-term development.

Microwaveable foods are on the drawing board for about half of the companies, but microwaveability seems to be a packaging concept, instead of being a primary descriptor. Functional foods evoke more interest than fortified foods. Said one research director, “If we’re fortifying, it’s more likely that we are aiming for a structure-function claim than a straight fortification concept.”

A question that we didn’t ask was the impact of nutrition policy. Nevertheless, an unsolicited comment describes this new concern, possibly triggered by the new Dietary Guidelines draft. “We’re looking for products that narrow the gap between what consumers like to eat and what they know they should eat,” comments the technical director of a large food company. “We think consumers are ready for those products that assist their health, but taste good enough to eat every day. Especially if they’re very, very convenient.”

Healthful, tasty, convenient. That’s all it takes.

Web Editor's Note: To see the five infographics that accompany this article, please click the "Download Now" button below.

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