One of the big takeaways from Food Processing’s 48th annual R&D survey is...taking away.
In a trend that’s been going on for a few years, a priority of product development is removing ingredients that interfere with the clean labels so desired in today’s market.
Our survey was taken online from March through early April, with 258 total responses. Regarding priorities, “cleaning up current products” came in at 16 percent, behind “really new product development” (37 percent) and “existing product improvement” (20 percent). Another 13 percent said their biggest priority was “product line extensions,” while 10 percent named “cost control.”
When asked which specific types of ingredients they expect to work on most this year, the first four named by our respondents were things they wanted to remove: added sugars (27 percent), GMO ingredients (21 percent), sodium and synthetic colors (19 percent each). The top ingredient category that R&D teams want to add, fruits and vegetables, came in at only 16 percent. Others included fiber (10 percent) and vitamins (9 percent).
Who’s on the team?
As for how innovation comes together, our respondents reported working from a variety of models. Almost two-thirds (62 percent) of our respondents have a formal product development team; 28 percent don’t, and 8 percent say “sort of.” These were mostly small companies, some of them very small, like the one who wrote “we are a small company of 6, so there is only 1 PD [product development] person.” Another wrote, “Myself, sales, plant manager and QA manager as needed.”
The most common members of the product development team, after R&D personnel, were the ones who tend to be on either side of R&D: marketing (55 percent) and manufacturing (50 percent). Other common team members include corporate management (32 percent), purchasing (27 percent) and finance (18 percent). Write-in choices included quality assurance and, in the case of a private label manufacturer, “R&D staff from our clients.”
Several respondents remarked that R&D’s priorities, or lack thereof, were directly affected by management. “Many items are due to major changes in executive structure,” said one. Another poor fellow said only, regarding his department’s objective, “It was not disclosed by management.”
This attitude is sadly common, according to many industry observers. Yoon says flatly: “No one really fully understands how important R&D is in food – even the R&D community.”
Yoon says that truly disruptive technology often gets rejected precisely because it’s disruptive.
“I have seen some amazing technologies the R&D community has that CEOs ignore,” he says. “Or even, the level below the head of R&D will share with me some amazing stuff that the head of R&D will not pass along out of job security or fear of rejection or whatever, because they know it will disrupt the core business and the CEO has no interest in doing that.”
Cardello says more food company managers need to think of R&D as an equal partner. That’s not always easy, since not many of them have direct experience with R&D.
“For packaged goods companies, the pathway to senior executive positions generally runs through brand management, marketing, etc.,” he says. “The marketers’ instinct is 'How do I squeeze a little more business out of my brand?' as opposed to 'How do I make the next leap?'”
The structure of the development team, both internally and in the sense of how and to whom it reports, reflects how many food companies are having a hard time innovating, says Rick Slayton, CEO of Slayton Search Partners, an executive search consultancy. Slayton says many food companies are struggling to reinvent themselves, to keep pace with rapidly changing consumer preferences and to achieve truly breakthrough innovation.
“The challenge is pace – often these acquisitions aren’t keeping pace with the slow growth of their core business, creating significant pressure within research and development teams,” Slayton says. One trend he sees among companies that succeed at product development is having the R&D leader be responsible for all functions of a new product, including “product development, process development, and often packaging and quality functions.” This is easier in small companies than in larger ones, he says.
Meet and fitting
R&D teams vary, not only in composition, but in the frequency with which they meet. The most common schedule apparently is no schedule at all; 26 percent said their teams don’t meet regularly. About as many said they meet weekly or more often.
“A big part of this is whether the company has formal processes and just how structured they are,” Slayton says. “Some companies tend to be less process oriented, loose, and non-structured, and feel product development teams should meet [only] when there is cause. In other instances we see companies pull together cross-functional product development teams that pair R&D, sales, marketing, and supply chain with the intent of visibility across the entire product life cycle (from concept through to commercialization and all touch points).
"In many instances, these companies set quarterly and monthly progress updates to track with formal stage gate ownership,” Slayton continues. "These companies often develop a ‘fail fast’ methodology whereby they can get buy-in and anticipate in a timely manner (versus the shock of ‘what comes over the wall’).”
Ideas, as they are wont to do, come from multiple sources. The most common is “general market research,” at 78 percent. Other popular choices are “internal research,” 53 percent; “open innovation,” 40 percent; “focus groups,” 36 percent, and “research provided by suppliers,” 35 percent.
If budgets are any indication, R&D remains at least a significant priority for the industry. Half said their R&D departments’ budgets remained the same as last year, and 20 percent more said it had increased. Another 19 percent said they didn’t know. One respondent said it’s not about budgets: “Our R&D department operates on projects dictated by the owners/sales/marketing regardless of budget.” Similarly, a respondent from a small company wrote: “I do R&D, quality control, customer complaints. We don't have a set budget, we usually go with what is needed.”
But Cardello is emphatic that food R&D tends to be underfunded. He points out that according to research by PwC, the biggest food companies spend only 1.4 percent of their revenues on research.
“Marketers tend to have the most money in the company – buying the media and everything else, there’s a lot of money for that, for market research, etc.,” he says. “And we know that the innovation R&D side doesn’t have nearly as much capital to work with, and I think that has to be brought back to balance. From the CEO and board level, I think they need to ensure that if they want to be successful going forward. The old model’s not going to work.”