Top Editors ... Changing approaches to NPD

Title: Changing approaches to NPD
Date: 27/01/2008
Autor: By Lynda Searby

From outsourcing to supplier collaboration, food manufacturers are taking various different approaches to new product development (NPD)

In a retail climate where competition is cutthroat, loyalty is transient and supply agreements can be terminated before the ink has even dried, aggressive NPD is vital for survival.
How food manufacturers ensure they have a healthy supply of this metaphorical lifeblood pumping through their veins varies. At one end of the spectrum are companies that are ardent about carrying out all their recipe development work in-house, while at the other end are companies who entrust third party organisations with their entire NPD activity. Between these polar opposites are those firms who have their own in-house R&D departments but are not averse to picking the brains of academics, consultants, research institutes and ingredient suppliers occasionally.

Do it yourself
UK beverage manufacturer Radnor Hills is one manufacturer that takes the view thatNPD is best carried out in-house.
“We try to do everything ourselves,” said company secretary, Penny Butler. “At the end of the day it’s our sales force that has to sell the product and our production people who have to manufacture it so they all need to believe in it. If we rely on someone else to create our products the enthusiasm isn’t there in the same way. With 52 staff we’re quite a small company - we don’t have huge budgets for each process so we work as a close-knit team.”
Radnor doesn’t have a dedicated NPD team, so it approaches NPD as a companywide effort. “People from sales, QA, senior management and production all put their heads together - it’s very organic,” said Ms Butler.
Inspiration comes from trade shows like SIAL, Anuga and Alimentaria, or from marketplace trends, and recipe development is carried out in-house. External assistance is only sought when dealing with unfamiliar or difficult flavours - then the flavour house assists with blending.
Two recent products to emerge from this process are the Aqua 50 range of preservative- and sugar-free mineral waterbased drinks for schools and GI Fruitades - the first low-GI drink on the UK market. Outsourcing is in However, the number of food and beverage companies that seek no input whateoever from third parties is declining. This shift is driven by a number of factors, including growing intra-category competition.
“If you look at the structure of the industry - particularly in highly developed markets - it’s very hard to increase your market share when you’re a big player, so people are pushing towards new areas that are quite often unfamiliar to them,” said Terry Sharp, head of department, baking and cereal processing, at CCFRA (Campden Chorleywood Food Research Association), a research organisation that carries out R&D services for members. “Take the global biscuit producer who wants to branch out into cakes: the likelihood is they have very little internal knowledge, whereas we work across the whole field of bakery so we can apply our expertise to areas that are unfamiliar to them.”
Another market force that is pushing food companies in the direction of outsourcing is the obesity crisis. Under pressure from regulators and anxious to demonstrate a responsible approach, many companies have pledged to reformulate products to contain less salt, sugar or ‘bad’ fat. Leatherhead Food International (LFI) reports an uplift in business on the back of the reformulation drive. LFI’s reformulation expertise includes reducing salt and fat in products, evaluating ‘healthier’ oils in foods emulsions and conducting sensory evaluation of reformulated products.
UK NPD consultancy Beetroot & Orange has also benefited from the industry’s focus on reformulation. “With more than 60% of NPD actually consisting of recipe redevelopments for reduced salt or sugar or removal of hydrogenated fats, NPD teams often don’t have sufficient resource or time to look at real new product developments that will increase their market share and add real value to the bottom line of their businesses,” said creative product developer Angela Mitton.

An approach for all
So is it multi-nationals or SMEs that are turning to outsourcing? According to Ms Mitton, it’s both. “Typically we find SMEs have little or no in-house NPD resource and need support the whole way through the process. Multi-nationals often have specific briefs with clearly defined parameters they need us to work on.”
Similarly, at LFI, Paul Berryman, director of research, says: “Unilever, Nestlé and Kellogg’s clearly have their own research functions, but they are still members of LFI as they use us for specialised projects where they don’t have the expertise in-house or prefer to use someone independent, for example for taste tests that benchmark their
products against the competition. We have other clients who are much smaller and don’t have their own research facilities: they use us much more widely, so we almost become the scientific arm of that little company.”
Another reason many larger organisations choose to outsource NPD is that their R&D departments are buckling under the weight of pressure to innovate.
“We have one client at the moment with a very switched on NPD manager, but she has 17 projects on the go and the marketing people are still loading her with more. So she’s given us four or five of these and all she needs to do is keep in contact with us,” said Mr Sharp of CCFRA.

Best of both worlds
Welsh dairy Rachel’s Organic is an example of a firm that, despite having an active inhouse NPD team, takes advantage of third party organisations on occasion.
“This might range from ingredient or packaging suppliers to organisations like CCFRA, of which we are technical members,” said Jo Tett-Davies, technical director at Rachel’s Organic. “It might also include known manufacturers with whom we might be partnering to develop NPD, if we don’t have the internal capacity to produce; or Food Centre Wales, which provides technical support for the food industry in Wales and with whom we have a relationship.”
The company says it uses CCFRA primarily in an advisory capacity, on matters such as product formulation, risk assessment, shelf life determination and legislation, and its ingredient suppliers for advice on ingredient performance and application, to conduct formulation work/bench-top development and to provide ideas for NPD projects.

A third way?
Meanwhile, some of the multi-nationals have been busy sharpening their competitive edge by increasing their collaboration with third party organisations. Last year, industry giant Unilever announced plans to restructure its European foods R&D organisation in order to ‘further enable differentiated innovation’. The reorganisation is part of
the ‘One Unilever’ programme designed to increase leverage of its scale, improve its marketplace competitiveness and create a more competitive cost-structure.
The new structure brings all Unilever’s worldwide R&D under one umbrella, headed up by Emmo Meijer. It also sees NPD concentrated in six centres of excellence across Europe. Each of these centres is establishing technical capabilities that can be applied across categories for global, regional and local innovations.
“The whole organisational structure is now designed to stimulate and boost our innovation in foods,” said Mr Meijer, speaking exclusively to FBI.
The foods division is focusing its innovation on ‘vitality inspired innovations’, in line with Unilever’s corporate mission, and, following the restructure, says it is ready to ‘move its innovation to a level that will profit the company’. Mr Meijer says it hopes to achieve this by moving its portfolio to ‘differentiating platforms’ where the emphasis is on key benefit areas: beauty, brain health, heart health, weight management and immunity, and on five key ingredients: milk, fruit and vegetables, tea, salt and oils.
Recognising that much of the knowledge needed to develop products on these platforms is found on the outside rather than on the inside, Unilever is adopting an NPD approach that involves greater collaboration with external parties within what the company calls an ‘open innovation framework’.
“We work together in open cooperation with suppliers, supporting the ambitions we have for our products, so we are moving from a more opportunistic approach to more strategic collaborations,” explained Mr Meijer. “It’s very different to what we did in the past. It used to be a one-way initiative whereby we would ask suppliers for certain innovations and that was it. Now we talk on a different level with these companies. It starts with in-depth discussions about the complementary capabilities of those companies with the aim of building a common portfolio.”
Unilever’s partners in ‘open innovation’ range from flavour suppliers to ingredient suppliers, academia and start-ups.
“We work with flavour houses and ingredient suppliers, but we also work with new start-ups, so corporate venturing is an important part of our way of working; it’s at the heart of open innovation.
Sometimes we work with smaller start-ups that provide us with a new technology platform, sometimes with suppliers who have capabilities,” said Mr Meijer.
Some of the open initiatives with flavour houses are already coming to fruition. The reformulation of Unilever’s Pot Noodle brand to reduce salt by 50% was the result of an open innovation initiative, as was the development of Doriana – a margarine containing essential nutrients to help support mental development. Similarly, an Extra Light version of Hellmann’s mayonnaise that uses citrus fibre to deliver the same mouthfeel and taste as regular mayonnaise is another outcome of an open collaboration with an
ingredient supplier.
Mr Meijer says Unilever has also signed three agreements with suppliers of ‘vitality ingredients’.
“We are opening up to the outside world and our ambition in foods is that at least 40% of our projects and programmes are linked to open innovation initiatives. We are already close to that target,” said Mr Meijer. Unilever isn’t the only multi-national to be embracing third party collaboration.
Earlier this year, Peter van Bladeren, Nestlé’s director of science and research, talked about collaboration being key to innovation at the Nestlé Research Center.
Nestlé has three types of collaboration: contract work carrying out clinical trials or analytical work, small collaborations with universities and research institutes and big alliances. One such alliance, and Nestlé’s largest collaboration with a university or research institute, was signed in November of last year with the Swiss Federal Institute of Technology to investigate the role of nutrition in cognitive function.
Dutch dairy firm Campina is another example of a major food company that is tapping into the knowledge of ingredient suppliers.
“We are still developing products as a company on our own, but we’re also working with third parties to develop new innovative products,” said the company’s Karen Nitschke. “I think a good example of that is Optimel Control, which we launched last November and which contains the ingredient Fabuless from DSM.”
Another example of external collaboration cited by Ms Nitschke is Café Fresco, the cold coffee drink introduced last year with Douwe Egberts.
“These innovations tend to capitalise either on innovative knowledge or the combination of two very strong brands. It’s something we have been doing for the past two years and I believe in the future we will continue this approach,” said Ms Nitschke.
It is not surprising that the larger food companies are looking outside for inspiration.
In most food and beverage categories, private label is growing at a rate that will put many category number twos and threes out of business unless they up their game in innovation. Food manufacturers need new ideas – and fast. And in the area where most firms are focusing their NPD ie health, no-one knows more about the properties, benefits, behaviour and functionality of active ingredients than their creators. The multinationals have taken the lead on third party collaboration, and it won’t be long before the rest of the industry follows suit.