A Closer Look at Contract Manufacturing

June 27, 2014
Contract product development services provide a starting point or the full solution for your next great food product.

The next big idea in food could be out there — perhaps written on the back of a napkin. An iconic but tired brand might be on the verge of a renaissance if it could get the attention of multinational's R&D dept. A successful snack product line could be kept from flat-lining if a gluten-free reformulation can be fast-tracked.

For each of these examples, contract formulators can provide a service that makes the difference between success and failure. Just as in contract manufacturing, there are numerous factors that determine when and where going outside the house for product development makes sense.

“Some of our smaller clients don’t have R&D departments, for example,” says Barb Stuckey, marketing manager at Mattson, Foster City, Calif., a full-service food lab and product development firm. “Our medium-size clients may not have in-house consumer insights, and our large clients often aren’t skilled at ideation and concept development. We work on both a short-term and/or longer-term basis.”

For any of those scenarios, Mattson and a small group of similar companies can step in and help nudge an entrepreneur or a food processor of any size off the starting blocks. They start by providing technical expertise and access to consumer trends. Once a concept is developed they can produce prototypes, and taste them with focus groups and tasting panels. Ultimately they can scale that up to and/or arrange for manufacturing.

Also as with contract manufacturing, contract product development probably is most successful when the client's own R&D folks embrace the idea of looking for outside help, and when that in-house team is able to stay involved in the process.

Who needs contract manufacturing?

There are three typical scenarios in which contract R&D makes sense, Stuckey says.

“Clients come to us at any and all points in the concept and product development process, but they usually come to us for one of three reasons,” she says. “The first reason a client hires Mattson is because they need thinking or development outside their current category or expertise.

"For example, a company like PepsiCo probably wouldn't hire us to create the next Pepsi [carbonated soft drink]. But for anything beyond that, we can offer them complementary skills.”

The second scenario is a client that has more good ideas than resources to execute them with, Stuckey says. “They know we’ll not only be a creative and strategic development partner, but that we are experienced professionals who bring opinions, suggestions, solutions and passion to their projects.”

The third reason has to do with what Stuckey said earlier: Some clients do not have R&D in-house or the ability to scale up. This often comes about with smaller and entrepreneurial companies.

Peter Salmon is the founder of International Food Network, Ithaca, N.Y. The 27-year old firm employs around 50 food science experts around the world and works with university pilot plants to develop and scale up food products. As with Mattson, food companies come to IFN with a variety of formulation needs.

Some years back the company worked with the owners of the Haagen-Dazs brand to create a line of ice cream flavors that were to be infused with and co-branded with liquors and liqueur brands owned by Diageo, Haagen-Dazs' parent company at that time.

IFN has helped companies reformulate successful products in order to meet changing consumer demands. “We have been doing that for many years,” Salmon says. “In our European labs we were very busy for a year or two removing GMOs. So many companies are now wanting to do that, and we were very busy taking them out. Sometimes it was just some minor changes that needed to be made to formula and in other cases, we need to completely reformulate.”

Salmon started the company in Ithaca to be close to the Cornell University food pilot plant and not too far from his former General Foods office in Tarrytown. He eventually opened an office in the UK to support a client launching there, and more recently located a lab in Naples, Fla., also to support a client.

Part of the process

Salmon uses the term "protocepting" to describe the front-end work IFN does, but the firm also provides the services that go beyond coming up with a great concept.

“We can do it all for a food processor – prototypes, scale-up, process specifications, HACCP (hazard and critical control points) analysis, shelf life testing, even overseeing final commercialization,” Salmon says.

“If it's a full turnkey product development, then it's a six-step process that begins with ideation. Sometimes the concept is already well-defined and validated, and then we can move to prototyping and to product development. We have culinary and focus groups at each location that help us get to the prototype, and then we can scale up.”

While those steps in the process are important, the most important thing is coming up with a unique idea, Salmon says.

“The most difficult part is finding those good new ideas — identifying concepts at the earliest stage that are appealing,” he says. “Once you have a well-defined concept, in many ways it's just a matter of going through the mechanics of putting the product together.”

A more production-oriented approach is the philosophy at Hearthside Food Solutions, one of two R&D Teams of the Year profiled in our June issue. A new product may start as a concept and a marketing plan – neither of which Hearthside gets involved in – but it quickly progresses to a formulation, a manufacturing process, a package and associated business processes; all of which are strong suits for Hearthside. All of those are interdependent steps and all of them impact cost, quality and time to market.

"We want to free up our customers to do what they do best: consumer research, marketing and brand management," says Bob Scalia, senior vice president of strategy for Hearthside. Perhaps Hearthside's biggest asset and value-add, he says, is shortening time to market.

Although it's positioned as a contract manufacturer, not a contract R&D service, "We're working with the R&D teams of many significant branded food processors in America," says Scalia.
Salmon says the emergence of culinology has made a huge difference in how food processors develop products.

“It's great having a chef on staff,” he says. "I can't believe we did what we did in the old days without having that.”

Mattson's Stuckey says some clients like to have a defined process to come to, but some are more likely to choose specific services.

“Some of our smaller clients don’t need or want a complicated 'set' process,” she says. “For them, we can start ideating internally or developing protocepts without a lot of input,” she says. “Some of our larger multinational clients need a more rigorous process to enable buy-in across global markets and multidisciplinary teams. So, we offer both.”

When asked about what makes product development hard, Stuckey's answer is different from Salmon's.

“Product development is easy,” she says. “It’s the scale up and commercialization part that’s hard! I always say this is the hardest thing we do. But it’s also the hardest thing anyone in the industry does.”

Not surprisingly, sometimes great ideas run up against harsh reality. A great idea is not so great if it won't work on the plant floor, or if the cost of ingredients makes it unrealistic. But in today's consumer environment, there is also room to reconsider cost concerns, Stuckey claims.

“Our job is harder when we’re working against a pre-set cost of ingredients,” she says. “This really constrains development. If our client gives us what we think is an unrealistic cost target, we’ll show them the product that delivers on that target. But we’ll also show them something that we feel the consumer wants to buy. Often, this is all it takes to make a point: It doesn’t matter that you’ve hit your SRP [suggested retail price] if consumers don’t want to eat your product. And consumers are willing to pay more these days for what they consider a good value.”

The National Food Lab, Livermore, Calif., is a testing lab and process authority that has been working with the food industry for more than 35-years. The NFL is an industry leader in aseptic, retort, and hot fill processing, and recognized as a leading authority in filings with the FDA.

In addition, NFL also provides new product development services that include:

  • Product Reformulation & Cost Reduction
  • Culinary Ideation & Consulting
  • Culinary Concepts & Gold Standard Prototyping
  • Technical Feasibility
  • Ingredient Applications
  • Shelf Life Evaluation
  • Process Development & Evaluation
  • Sample Production for Sales & Consumer Tests
  • Scale-Up and Commercialization

While contract product development is not likely to cause food manufacturers to abandon the development of their own R&D capabilities it continues to provide a complementary service.

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