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52nd Annual R&D Survey: Ingredient Prices Up but Supply Chain Kinks Worked Out

June 16, 2023
Our annual survey finds product development professionals dealing with cost and supply issues, returning to their offices but still being encouraged to swing for the fences.

This report contains infographics for just four of the 13 questions we asked in our R&D Survey. For a PDF of the full report with all the questions, click here.

We’ve been doing this R&D Survey for 52 years, but this year’s results are particularly interesting. It may be due to the timing, coming after Covid was put to rest, supply chain issues were being worked out but inflation suddenly drove up the cost of everything. Some of the topline results:

  • Ingredient costs went up for 95% of our respondents in the past year; 57% said by 5-25% and 32% by 26-50%. A handful saw even higher increases.
  • Supply chain kinks apparently have been worked out. Two-thirds currently are having no trouble sourcing ingredients.
  • Despite all the bad financial news earlier this year, 64% said economic conditions have not changed the way their company develops products. 62% are not having trouble finding new hires for their R&D departments.
  • As part of the “return to the office” movement, only 1.4% said their product development team meetings were virtual. That number’s been 12% each of the two previous years.
This year’s survey was fielded in April and early May. We had 175 people share their answers to 19 aspects of their jobs and their R&D departments. Most responses came from email blasts to our known magazine subscribers and registered website users, with a link to the online survey.

Before we get into the details, there were a number of places for respondents to enter random comments, many of them giving a glimpse into the general state of the lab and their companies.

“Throughout my career, even pre-pandemic, margin improvement has been a reoccurring goal for the company’s pipeline,” said one product developer.

“We've been finding more ways to reduce food waste by repurposing it into other products and/or initiatives,” said a California respondent.

“Continuous enablers and cost optimization have become the focus of our base business,” said another.

Still swinging for the fences

One of the first questions we always ask, and this goes back years, is “Which of the following targets will be most important for your R&D efforts this year?” “Really new products” has perennially come in first, and this year’s response (34%) was in line with those of recent years (Fig. 1).

One respondent said the cure for financial pressures was “by creating more new products.”

A meat processor qualified that somewhat: “We’re working on really new products but also looking to ‘clean up’ current products.”

But not everybody has been given the green light to swing away. “Innovation is more restrictive than usual due to pricing concerns,” said a respondent at a Chicago-area processor.

“There is decreased risk-taking,” said another. "Despite current low unemployment, we feel consumers are looking to cut food costs in many different ways. ‘Experimenting’ with relatively expensive new-to-the-market consumer foods and beverages is more of a luxury now.”

“We are more focused on improving the existing product line and less focused on new product development,” said a beer-maker.

And, “Cost reduction [is] now significant priority” at a potato products company.

Another perennial is “What ingredients will you be working most on this year?” (Fig. 4). Here there were some changes. Removing sugars was still first (39%), but adding fiber shot up 5 points to second place with 22% (that’s double what it got in 2021). Other notable moves were removing sodium (down 5 points), removing bioengineered ingredients (half what it was last year) replacing synthetic colors (down 4 points) and replacing refined grains with whole grains (down 6 points). We asked about removing allergens this year for the first time this year, and it pulled a strong 16%.

Responses about R&D budgets were about the same as in past years, with 22% seeing an increase and 15% seeing a cut. Most said it’s about the same this year as last.

However, “Corporate R&D has been trying to tweak the exiting product formulations and/or trying to find inexpensive and easily available ingredients as replacements right away to keep rolling with production.”

“There has been more focus on using cheaper ingredients, sometimes at a cost of being less ‘clean label,’” said another.

Finding and affording ingredients

The cost of ingredients was mentioned by many. As we said, ingredient costs went up for nearly all you R&D folks. Those ingredients mentioned most often (in order) were sugar and sweeteners, eggs, wheat, starches, sunflower products (oil, lecithin, vitamin E), all oils and xanthan gum.

The goal for many was, “Finding suppliers with good price points but can also deliver consistent ingredients,” according to a Los Angeles-area respondent.

For the one-third that are having trouble sourcing ingredients, those most often mentioned were sugar, sesame, starches, xanthan gum and oat products.

Not surprisingly, most of those inputs were named when we asked respondents which ingredients have gone up the most in cost. Those that came up most often were (in order): sugar and sweeteners, eggs, wheat, starches, sunflower products (oil, lecithin, vitamin e), all oils and xanthan gum.

One of the bigger changes was in the time it takes to get products from concept to shelf – it seems to be lengthening a little. Three months may seem quick, but that answer garnered 13-14% of respondents in the past two years. This year, only 6.8% were that fleet. Six months took a dive, too. Nearly a year increased and was this year’s preferred answer at 37%, 13-23 months doubled and 24 months or more nearly tripled.

One respondent complained, “Faster development timelines often don’t allow enough ‘experiments.’”

But this is a team sport, at least for 72% of you, and a cross-functional one at that. As we found in all past surveys, R&D, presumably food scientists, are on nearly all product development teams, but marketing is not far behind. Marketing overtook manufacturing (47%), which itself is about neck-and-neck with management. Outside consultants and multiple suppliers each have input on 21% of teams.

As is the case with team efforts, “Sometimes there is a need to compromise over some aspects -- it could be cost, quality, quantity, etc.” wrote a maker of Indian foods.

Our thanks to all of you who took the time to share your product development thoughts with all our readers. The $50 gift card incentives are on their way.

As we said up front, this report contains infographics for just four of the 13 questions we asked in our R&D Survey. For a PDF of the full report covering all the questions, including ones about who's calling the shots, budgets, time to shelf, click here.

About the Author

Dave Fusaro | Editor in Chief

Dave Fusaro has served as editor in chief of Food Processing magazine since 2003. Dave has 30 years experience in food & beverage industry journalism and has won several national ASBPE writing awards for his Food Processing stories. Dave has been interviewed on CNN, quoted in national newspapers and he authored a 200-page market research report on the milk industry. Formerly an award-winning newspaper reporter who specialized in business writing, he holds a BA in journalism from Marquette University. Prior to joining Food Processing, Dave was Editor-In-Chief of Dairy Foods and was Managing Editor of Prepared Foods.

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