2010 R&D Survey: Recovery in Development

After two years of economic limbo, our annual R&D Survey shows things might just be picking up as promised.

By David Feder, Technical Editor

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Seeing the light
Great ideas don't just come out of thin air. Well, OK; sometimes they do. But who's having them? In asking which elements your company uses to identify new product ideas, we learned there's a lot of internalizing going on. More than 80 percent of respondents say their team gets its ideas from internal research. Still, almost half of you — 44 percent — recognize your customers can be a big help in planning the next move, and so you turn to focus groups for input.

Almost as many (42 percent) get that info second hand in the form of research from outside suppliers. And just over 17 percent of you say you get this crucial direction from an external product development company. That number is actually down by about a third over last year's 24 percent.

Once the idea is on the board, someone has to either pull the trigger or drop the hammer. This means answering some key questions: Does it fit our brand? Does it fit our marketing strategy? Do we have the assets to make it? Can we make money on it?

If you are the CEO/President/CFO, you spread your energies across all those questions, with your strongest interests on whether the new or re-imagined product fits your brand and company, as well as on the bottom line. Marketing & Sales is right there with you on deciding if fits, and those guys really take over in considering the overall marketing strategy, of course. R&D is most concerned with whether or not the new idea can be built, as is Manufacturing/Plant Ops.

In spite of the upward creep of exuberance, the length of time it takes for a product or revision to get from brainstorm session to the retail shelves is slowing. Last year, 90 percent made it in less than a year. This year, those manufacturers launching in that time span dropped to 69 percent. Almost a quarter are taking 13-23 months and 7.6 percent require two years or more.

When we inquired what big issues processors expect to face, there was only a slight shuffling of the deck. For the immediate year ahead, food safety held its perennial place as No. 1, cost reduction stayed at No. 2 and going organic/natural remained third.

Sustainable/eco-friendly/fair trade issues moved up from the No. 5 position in 2009 to fourth this year, unseating preventive health, which dropped to last of our six possible answers. Palliative health was fifth.

Looking further down the road (and to a different set of pre-set answers), developing healthier/better-for-you products rose to first place from second as a long-term priority, with 54 percent of you ranking it prime, a 9 percentage point increase over last year. This pushed consumer trends from No. 1 to No. 2, at 52 percent (although still a tick higher than last year's 51 percent). One place the economic downturn seems to have helped processors is that labor issues are slightly less of a concern than last year, dropping nearly 2 percentage points.

In third place, regulatory issues rose slightly as a concern for the future, from 35 to 40 percent. Green issues remained fourth. But going global more than doubled, from 8 percent in 2009 to 19 percent in 2010. Said one R&D expert in our survey, "Most of our R&D budget is allocated to international expansion and meeting the product needs of global-based clients. Challenges include expanding organizational resources — .i.e. IT, infrastructure, marketing, distribution and set-up costs — to support international expansion."

Looking to 2011 and 2012, we can hopefully expect the financial health of the U.S. to pick up more steam. The need for wholesome and flavorful ready-to-eat meals, healthy foods and multifunctioning beverages will only grow as Americans find themselves adapting to new realities of a tightened economy.

However slow or fast progress occurs, food and beverage companies can hardly err by taking advantage of competitive pricing and stabilizing energy costs to invest more capital and effort into research and development of products that consumers demand and need. As the director of R&D for a global food & beverage giant sums it, "Innovation is more important then ever. As for our company, we're launching major initiatives in several key categories this year with line extensions being planned for 2011." In other words, move forward or get left behind.

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