Special Report: 2008 R&D Survey

Our annual survey finds R&D adapting to tighter economic times.

By David Feder, Contributing Editor

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There were 28 questions in total on our survey, and infographics from all 28 are on our web-based version of this story; click here for entire survey. You can also see prior years’ R&D Surveys by going to www.foodprocessing.com and typing “R&D Survey” into the search bar.
Note: Our past four R&D surveys were reported in the fall of each year, usually October or November. 

Faced with seemingly opposing demands of increased emphasis on health and market demand for lower prices, processors appear to be changing the way they approach research and development. At least this year.

Of all the things R&D departments could be told to prioritize for this year, “manufacturing cost reduction” was in a virtual tie with the obligatory food safety for first place. That’s among the findings of our 37th annual R&D survey.

Actually, after the year we’ve had, food safety shouldn’t be dismissed so easily. It got 40 percent of the first-place votes with cost reduction pulling 24 percent of the ballots (those were the only two of the eight answers to garner more than 10 percent of first-place votes). But when a weighted multiplier was assigned to each vote, the score was even closer. With the low score winning, as in golf, food safety got a 2.69 to cost reduction’s 2.71. The next closest response was formulating products for preventive health, way back at 4.18.

According to Nathan Morris, director for R&D-snacks, at Minneapolis-based General Mills Inc., the dictum will be “margin management — supporting cost reductions in all areas of the business, not just manufacturing.”

“Economic issues will hit us all very soon,” adds Michael Garza, director of product development for Tulocay & Co., a Napa, Calif.-based gourmet sauce and condiment manufacturer. “The ability to stay relevant in an economic downturn will make or break many companies.”

Ingredient prices are through the roof. Rising costs for commodities is having a ripple effect felt throughout the industry. And now consumers in Haiti, Senegal and Pakistan are rioting over high food prices. (And any relief in fuel prices expected by the diversion of corn to ethanol ain’t happening yet, folks.)

"The rapid escalation in labor, energy, transportation and raw materials costs -- compounded by increased demand for the same resources from the proliferation of biofuels manufacturing -- are issues important to the health of the food processing industry in the near future,” says Mark Miller, plant manager of L.F. Lambert Spawn Co., a Coatesville,Pa.-based supplier of products to the mushroom industry.

“If these trends continue, it’s inevitable we’ll see much more of our food production going outside the borders, especially for commodities such as fresh fruits, vegetables and grains." Miller then adds, "While this might be good for some big, global businesses, it's bad for small domestic food and supply-related industries.”

Who’s involved

The last two years saw a mad rush to appeal to consumers seeking the “good-for-you” added value of healthier formulations across the board. Whether it was retooling recipes and processes to get out trans fats or adding nutraceuticals such as antioxidants, food and beverage makers had their hands busy, and everyone was involved on some level.

Two-thirds of our respondents report they have a formal product development team and another 21 percent say it’s less than formal. Only 13 percent said they don’t have a team.

The key trend we identified in last year’s survey remains: Marketing & sales is right behind R&D in terms of being most involved in setting the company’s product development goals. However, the R&D dept. did gain 7 percentage points this year. CEOs and General Management gave up 18 and 12 points, respectively, and Manufacturing lost 10 percentage points.

While Marketing is little further behind R&D in numerical representation on the product development team it outranks R&D in deciding which product ideas to explore further. Figure 4 shows increased power for both Marketing (up 6 percentage points) and R&D (up 11 points). R&D actually ranked just behind General Management on this question last year.

As you’d expect, R&D titles make up most of the product development teams -- 93 percent of respondents have ’em. After Marketing, a tad more than half involve Manufacturing and General Management – 52 percent for each. Purchasing and financial departments are a part of the R&D team to the tune of 29 and 28 percent, respectively.

One-fourth of those polled say their suppliers also are involved in helping develop and reformulate products. That’s good news for ingredient companies, proving the increasingly popular trend of providing “solutions” vs. “ingredients” is having a positive impact. One interesting point of contribution is that of outside consultants: 14 percent of those responding said they include such third-parties on the R&D squad.

The push for cross-functional teamwork continues, but where last year saw a 64-36 split of centralized over decentralized decision-making regarding new product development, this year the balance tipped toward more greater centralization at 70-30.

Once a company’s product development goals have been set, of course, it has to identify new product ideas. Internal research and focus groups are how the vast majority — 92 percent — say they accomplish this. Still, 42 percent rely on research provided by suppliers. Interestingly, nearly a quarter go outside, relying on an external product development company.

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