2005 Annual R&D Survey

In 2006, food processors will focus on cranking out healthful products.

2006 and the following couple of years likely will be a time of incremental product improvement with the emphasis on functional foods, fortified foods and natural/wholesome foods, according to respondents to our 34th annual Top 100© R&D Survey.As for day-to-day worries, R&D department heads will most closely be watching the development of more healthful foods in 2006, with an identical percentage also concerned about staffing and personnel issues.Our annual R&D Survey was sent to all companies in the Food Processing Top 100© list of the largest food and beverage processors in the U.S. and Canada. Recipients were vice presidents of research and/or R&D, research directors, directors of quality control/assurance and managers of specific research projects. (Editor's Note: To access all the graphics that illustrate the survey findings, click the Download Now button at the end of the page.)The survey was taken via e-mail in July and August, about the time most recipients were beginning budget planning for their departments in 2006. Our survey found research departments:

• Participating more on cross-functional product (and process) development teams.
  
  
• With slightly less of an emphasis on cost-cutting than our survey found last year and slightly more emphasis on incremental product improvement.
  
  
• Coping with shorter development cycles – nearly two-thirds indicated most product developments are expected in nine months or less.
  
  
• Making more use of outside resources, especially supplier expertise.

The R&D departments at the companies we talked to always are charged with product development (of course), but frequently also are involved with pilot plants for some engineering activities, and about half are involved with initial plant runs. A little more than half of the departments are involved with regulatory activities, and R&D departments at a few companies get involved with some market research. About half are involved with the research impact of food safety, but we did not consider quality control as part of the department (although some volunteered they were spending considerable time on it).Who's on the team?Most firms say they use cross-functional teams for a variety of activities: cost cutting, product improvement, new product development, developing prototypes and package design. There appears to be more product improvement going on and a little less cost cutting this year compared to last year's survey responses. That's certainly a good sign.A couple of respondents mentioned their companies sometimes develop the product outside and put a team together to bring it into the plant. When asked if this caused a problem with team members not knowing the product from the beginning, they didn't think so. "We're doing more outsourcing," noted one R&D head, whose company had entered into an agreement with a new firm that designs proprietary flavors, flavor enhancers and taste modulators for special products. While that's on the more aggressive end of outsourcing, it seems just about everybody does at least some.Who is on the product development team provided some interesting answers. Manufacturing is just as heavily represented as is R&D (about the same ratio as last year's responses) and marketing remains a close third, but finance appears to have gained some more representation and suppliers are now on a remarkable 46 percent of all these teams.There are a few more international companies in this year's panel, and a few more teams include international members. In addition to outsourced development, there are several companies that have entered joint ventures to develop proprietary ingredients, such as grains.We noted an increase in outsourcing of specific parts of a project, to identify flavors or textures that are unique to that product. "We're too busy to spend more team time on a problem than we have to," said one respondent. "Team members understand that and welcome the help." In some cases the outsourcing is outside the team structure, especially if the technology is proprietary. Cross-functional teams are evolving. According to at least one research director, cross-functional teams now take less time, as just about everyone is trained, and many team members handle multiple team assignments. "There's less bickering than there used to be."Where do researchers go for help?We know the sources of assistance are changing. The appearance of companies like Senomyx Inc., a firm that studies flavor receptors and similar work for selected companies, and Renessen, a joint venture between Monsanto and Cargill that is charged with developing specialty traits in crops, changes the supplier dynamic. Suppliers, too, commented on the changing dynamic: "We're more selective about who we work with. It's too expensive to provide specialty ingredients to companies that don't have a good track record of new product introductions." Further complicating the dynamic is suppliers who are also manufacturers.So while all of the panel members noted they consulted with suppliers, there also were notable gains in the use of government agencies and academics, especially for research in food safety arenas. Fewer indicated they were working with consortiums. Most panel members read patents or patent columns, and about half read scientific journals and trade publications. Part of the process involves gathering sources when there's pressure to develop new products faster than usual. Nearly all of the firms are working with multiple products. Whereas last year's survey found 54 percent of new products were requiring a year to develop, only 35 percent of products have that luxury in this year's survey. Three-quarters of the panel said they are looking at more products this year, despite the additional complexity of the products.The products being requested are more complicated. Many of them require major nutritional impact to differentiate them from a score of tasty, convenient and relatively low-priced products. More products are patented, requiring an ongoing scientific program that spins off generations of increasingly complex products along the way.

CocoaVia, the first "good-for-you" candy bar, was developed by M&M/Mars to make the most of research suggesting that certain polyphenols in cocoa may help ward off cancer and cardiovascular disease.

Healthy foods with a twistIn talking to the heads of research among our respondents, it's clear they regard nutrition as the trump card they need to improve market share. How this trump card is played may vary from company to company. Some companies and marketing departments are intent on providing foods that cure disease, others to more generally enhance health, youth and vitality.Almost all of last year's respondents expected to be working on more healthy foods and beverages. This year's respondents expect the same. Exactly what is healthier is partly revealed by answers to another survey question.Last year, 20 percent expected to be reducing fat in foods as a primary theme for the next five years, while 60 percent expected to be producing foods with fewer carbs. This year, again 20 percent expect to be working on reducing fats and about 50 percent on reducing carbs. But every single respondent expected to be working on fortified, functional and "wholesome" foods. Why so few expecting to reduce fat over the next five years? The answer we're getting is that reduced fat is nearing a mature market. Products are on the shelf and people are buying them. It's last decade's blockbuster, and time to move on.Reduced carbs? After Atkins? The Atkins diet may be dying but it's a slow death, and the spotlight it shone on carbs has turned people's attention to low-sugar, glycemic response and whole grain. The category is impinging on "natural and wholesome."Although slightly fewer companies noted they will be developing line extensions (roughly 20 percent last year, 18 percent this year), the research head of at least one baked goods manufacturer noted he "didn't consider new whole-grain products to be line extensions. They're fairly new, so there isn't the product recognition of, say, a Golden Oreo. They're not line extensions because there isn't a well established line yet. That's for later."What some of the leaders are doingNot all that long ago, when cholesterol numbers forced a dietary change, cheese was one of the first foods to be forbidden. Reduced-fat cheeses are now common on the market, but Kraft continues on a tear - filing patents and applications at a pace that must keep the patent examiners mighty busy. Kraft CEO Roger Deromedi announced in Crain's Chicago Business in August that Kraft was looking for "several new patent lawyers."A Kraft spokesperson said Kraft would have some "surprising new products" before the end of 2005. From the extensive list of new patents, these products could well be cheese with "surprising new flavors" based on nisin, a bacteriostatic material that will positively affect food safety. On the other hand, looking at their list of patents or applications, Kraft could be looking at a line of soy containing cheese, or in keeping with European statements on controlling salt, a line of reduced-salt cheeses. John Baxter, Kraft's executive vice president-global category development, told a British interviewer to expect more affordable cheeses for developing markets.Chocolate and cardiovascular health became intimately acquainted last year with the Internet introduction of CocoaVia, a product of M&M/Mars research on polyphenols. People wondered why Catherine Woteki left a prized dean's position at Iowa State University to join M&M/Mars as global director of scientific affairs. Woteki, formerly with USDA, was educated as a nutritional epidemiologist, so it was no surprise when a couple of Patent Cooperation Treaty applications popped up describing the use of specific polyphenols found in cocoa for preventing and treating cancer. Another was filed for using certain polyphenols for treating cardiovascular disease.CocoaVia chocolate bars have been on sale on the Internet for about a year, and traditional retail product were expected to appear by the time this article is published. During August, the trademark was filed for coverage of fruit drinks, smoothies, a wide variety of fruits and vegetables and salty snacks - most of the grocery store, actually. PepsiCo in August unveiled Quaker Milk Chillers, flavored milk products that are fortified with calcium, have less sugar than typical flavored milks and contain seven essential vitamins. They also got a technical boost from the processing guys: Milk Chillers are processed with leading-edge aseptic technology, giving them a six-month shelf life.

CHANGING FACES Research and development departments are changing. When we sent questionnaires to the top companies this year, more than half of the people who answered were different individuals – although they held the same titles as last year's addressees. Intrigued, we asked a number of the new folks what happened to last year's correspondent. We got a mix of answers: He or she was recruited by another company; he or she got promoted; a few retired. In pursuing this question, we found some new sources of talent for the food industry. People are being recruited from universities, regulatory agencies and companies outside those considered in the mainstream food segment. Even though many of the respondents to this year's survey are different, they report minimal changes from last year's crop of respondents. However, a few more companies have tightened down on the release of information, despite our promise of anonymity and the use of information only in the aggregate. A couple of last year's respondents who answered questions in detail told us they were forbidden to do so now.

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