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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More on the web
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.

Let ‘er rip

With costs being such a trenchant concern in the new R&D paradigm, the decision-making procedure must move like clockwork. After all, whether creating a new product from the drawing board or reformulating an existing one, each aspect can make the difference between spending or saving thousands of dollars.

The key questions asked before the starting gate even opens include “Does it fit our brand?” “Does it fit our marketing strategy?” “Can we make money on it?” “Can we make it?” Without the right input, from the right people, a product or reformulation can be stymied before it starts.

Last year, processors’ responses to who answers these questions held a few surprises. The responsibility for “Does it fit our brand?” was equally shared between CEOs/CFOs/presidents and Marketing & Sales. This year, Marketing & Sales actually surpassed the CEO/CFO/president suite by two percentage points, 67 to 65.

 

Do you read me?
Where do processors get the crucial info they need for their R&D work? Here’s the breakdown:
Internal research/Focus groups
70%
Suppliers
63%
Trade journals
58%
Competitors
57%
Trade associations
45%
External Research Organizations
44%
Academia
35%
Patent information
25%
Government agencies
19%
Consortiums
11%
Great sources of information all, but a number of respondents reminded us by “write-in vote” that one of the best sources of information is their customers. We will be sure to include that option in next year’s survey.

A swing of the pendulum brought Marketing & Sales a hefty “return” to responsibility for deciding “Does it fit our marketing strategy?” Last year saw Marketing ahead of General Management by just one-third at 37 vs. 26 percent. This year, although we analyzed responses differently, the resulting 83 percent was much higher than General Management’s 56 percent.

The answer to “Can we make money on it?” was shared more or less evenly across the CEO/CFO/president, General Management, Marketing & Sales and Purchasing titles. And whether or not whatever it is can be made is answered predominantly by Manufacturing, with 89 percent choosing that title as the primary voice, with R&D a hot second at 81 percent. Last year, it was the suppliers who were the second string.

All that research and development legwork is wheel-spinning without someone dropping the flag. In last year’s survey, we weighted the importance of the final decision-making process across a spectrum from “very important” to not important for each title. Reducing it to a simple “does/doesn’t” (decide) response gave us a clearer picture of just who approves a project.

Surprisingly, the “go for it” decision falls to General Management (61%) more than the top dogs (CEO/CFO/President) (51 percent), with Marketing in a close third at 48 percent. R&D (40 percent) manages to beat only Manufacturing (14 percent) on this key decision-making power.

Team players

One of the aspects of R&D we noticed emerging over recent years as a key paradigm is that of the cross-functional team. When we asked last year about the benefits and hindrances to the team approach, we found them split two to one over whether cross-functional teams are successful with new products when there’s a common incentive plan. That is, two-thirds agreed and one-third disagreed. This year, the cross-functional team snagged an overwhelming endorsement at 80 percent.

So what changed? Let’s look at what our survey participants considered as benefits of the cross-functional approach. “The cross-functional team has a different set of eyes and mind-set, which contribute to a wider window in ideation processes,” is how one processor put it. “Team atmosphere allows for brainstorming, throwing ideas out in the open and allowing yourself and other to work off new ideas given by others,” a spice-blend manufacturer explained.

More comprehensively, cross-functional teams permit pre-emptive approaches to potential problems. “Projected weaknesses throughout the product development processes are revealed earlier and solutions are presented earlier to avoid or minimize future problems,” is how a Parañaque City, Philippines processor of health and wellness, power and energy products phrases it. (He reads our digital edition – do you?)

Other survey participants provided such descriptions of the cross-functional team’s benefits as, “All aspects of the product concept are kept in focus and all the expertise needed is easily available;”

“Everyone’s input is important — people have more buy-in to the project from the start and are more invested in seeing it succeed,” said one processor. Another noted, “Different viewpoints, better big picture, better discipline in developing what fits in with company strategies, more buy-in at launch of new products.”

As far as drawbacks to the cross-functional process, most of the comments ran to the typical: ego-driven or subjective components slowing down the process or power-protective behavior stalling progress. But one respondent focused on hindrances brought about by size. “Teams can become too big to be functional, flexible and efficient,” she points out. “Sometimes the teams spend more time working through the process of working together versus working on the project and problems at hand.”

 

 


 

Methodology
This year’s survey results are based on 217 responses. We sent survey links to Food Processing readers who cover both administrative and R&D titles. The respondents included vice presidents of research and/or R&D, research directors, directors of quality control/assurance, marketing directors and management. Some of the responses included verbatim comments, plus personal interviews were conducted with those who provided contact information. In all cases where individuals were quoted by name, permission was secured. As with all Food Processing surveys, personal information is kept strictly confidential and is used only for research purposes.

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