Get ready for an onslaught of truly new products – not safe line extensions or just "cleaned-up" products – from your product development team … as well as the R&D departments of your competitors.
At least, that's what the numbers seem to indicate in our 42nd annual R&D Survey. The 48 percent of respondents who voted truly new products as their top priority for 2013 (up 8 percentage points from last year) was the highest number for that subject since our 2010 survey, and, it's hoped, is one more indication that the nasty recession is behind us and food companies are ready to resume aggressive growth.
"Improving existing products is always mandatory, but new products are our focus," as one respondent put it. Wrote another: "We will continue to look for cost-saving ideas through our research, but this year we will focus more on expanding in a new direction to achieve future growth."
Not that you ever stopped growing. As our annual Top 100© list shows every year, food and beverage processors never stopped making money, undoubtedly because American and Canadian consumers never stopped eating. Maybe it wasn't enough money or maybe things just seemed too dicey to invest, but R&D departments had to suck it in over the past couple of years.
Which doesn't mean the corporate suite is throwing money at your team in 2013. One of the questions we ask every year is, "What's happened to your R&D department's budget this year?" While those answering "It's been increased" went down 2 percentage points from last year, respondents saying "It's been cut" also dropped, by 3 points (meaning more than half said "It's about the same").
So, net, maybe you've got the same amount of funding to work with, but at least you'll be spending it on truly new products. New products as a priority took 2 points away from "cleaning up" current products (10 percent). Improving existing products gained a little (18 percent, up 4 percentage points), while cost control was flat, at 13 percent. Product line extensions dropped the most, down 7 points to 8.6 percent.
Actually, they're all priorities, aren't they? "Although my main focus within the department is new product development, I still spend time on product improvement, cleaner product decs, ingredient consolidation and line extensions," said Teresa Kloch, a food technologist at Perry's Ice Cream, Akron, N.Y.
"Continued improvement should never be short changed; you must find ways to service your customer needs without increasing their cost," wrote a guy at a poultry company.
Cleaned-up or simplified ingredient statements were mentioned by several respondents. "Our No. 1 goal is clean labeling; another is reducing carbon footprint," said one respondent in the write-in portion of our first group of questions. "We need to convey the simplicity of our products' ingredients. We have narrowed them down well, we just need to get the word out," said another. "We've had noticeable and worthwhile success with R&D in 2012, which helped us to decide to push it further in 2013," wrote one optimist. Perhaps the real answer to what your priorities are for 2013 was written-in by No. 391: "It depends on how busy we are."
Before we forget: This year, we had 514 responses to the survey, quite an increase over last year's 409 responses, and the highest number since we went direct to the R&D people, rather than to company spokespeople, in 2006. This survey was taken via a web poll during March.
Priorities for the year
There's a tiny contradiction in our survey answers – maybe it's the way we constructed it -- when it comes to cost control. While that answer stayed flat in our "prioritize" question, it made a strong showing as No. 2 (behind food safety) in another question that asks, "How strongly will the following impact your R&D strategy this year?"
Food safety does tend to overwhelm any discussion of operational priorities. At least in one case, Figure 1 also shows how a subject (Sustainable/Eco-friendly/Fair trade) can draw fewer first-place votes than other subjects but score higher than them in second- and third-place voting – that's what our "total score" column is about.
As for bigger-picture issues that will impact your product development team beyond the current year, there were two significant changes this year: more concern over staffing and less concern over going global.
While healthier/better-for-you foods, following consumer trends and regulatory issues kept their same positions as last year, all around 50 percent (respondents could vote for more than one concern), "personnel/labor issues" shot up from 17 percent in 2012 to nearly 28 percent this year. "Going global" moved in the opposite direction, from 25 percent last year to 18 percent this year.
"Labor costs are of vital concern right now, and an increase in the federal minimum wage will be catastrophic," wrote one man, who earlier indicated cost control was his top priority for the year. "We are adding additional R & D resources, both people and bricks and mortar," commented another. "Our company spent more resources in the R&D function, and I got more training and opportunities to develop myself," said one appreciative product developer.
On the other hand, one person mentioned "increasing competition from China" as a concern.
Despite the fact the Dietary Guidelines are two years old, they still have an impact: 18 percent – 1.5 points more than last year – said the guidelines are "huge." But those noting they are "reasonably important" to R&D efforts dropped from 58 percent to 53 percent.
As for which ingredients you're most interested in adding or removing, salt/sodium remains public enemy No. 1 with 39 percent – that's 8 points lower than last year, perhaps indicating many of you already have made progress on that front. Reducing sugar was second at 27, about where it was last year. All three suggested additions – fiber, whole grains, fruits & vegetables – scored around 20 percent.
"We already removed transfat and reduced sodium. Other issues aren't a big deal," wrote one respondent.
There were quite a lot of write-ins and "others" for this question. Top add-ins were protein, probiotics and omega oils, while favorite removals were gluten and other allergens.
Who's calling the shots?
Our readership is pretty evenly split between larger companies (more than 100 employees at the location to which we mail the magazine) and smaller ones. That diversity is apparent in many of the organizational questions.
62 percent of you have a formal product development team, a number that has been shrinking, perhaps insignificantly, in recent years (it was 70 percent in 2011 and 68 percent in last year's survey). (By the way, 7.5 percent say "sort of.")
Likewise, the dominance of the R&D Dept. on that team shrank a little, too, although it's still powerful at 82 percent. "Who's on that team?" is one of those questions where you can select more than one answer and, ironically, every category except R&D increased. The big gainers were representatives from corporate management (up 12 points), purchasing (up 10), finance (up 7 points) and manufacturing (up 7).
As our February cover story attested, open innovation is catching on. 23 percent of you count multiple suppliers as parts of your product development team (up from 18 percent), and 17 percent include outside consultants (up 6 percentage points).
But all the remarkable numbers were merely returns to 2011 levels, so maybe last year's poll was an anomaly.
The same goes for who influences annual goal-setting in product development. The R&D Dept. dropped an insignificant bit, but every other category (top management, mid-level management, and manufacturing/plant operations) made significant gains. Marketing and sales scored the same.
If you have a formal product development team, you've got to have meetings, right? Well, yes, for three-quarters of you. The biggest plurality meets at least weekly (27 percent). And 5 percent of you say the meetings are often virtual because of so many offsite folks.
Internal research is still the main element of identifying new product ideas, but here, too, the open door is apparent. 42 percent of you rely somewhat on research provided by suppliers, and 16 percent use an external product development company. 43 percent say you practice open innovation.
So after all the research and meetings and input, how long does it take to get that baby from concept to the grocery store? Looks like the pace is quickening. The longer wait times dropped, but six months picked up 7 percentage points and three months increased 4 points.
Our final question is a catch-all: Is there anything we missed or anything you care to add? A couple of the answers are worth noting:
- Reducing product lead times.
- Communicating and measuring performance once the product is commercialized.
- Switching to natural colors and flavors.
- On the manufacturing side, reducing SKUs saves us on changeover times and waste and saves potential customers on cost.
- Self reliance on green power – we're looking at self generation, i.e., solar.
- Instead of looking for diamonds amongst the stones, we need to polish the stones first. We need to catch up and finish."
And maybe the best advice, from a guy at a North Carolina microbrewer: "Focus on core product and values, and don't get sidetracked."