In their decision-making, consumers rely on “power tools,” as Wolf described them. Among these are education, sophistication and knowledge, technology, economic prosperity and a growing level of discretionary income. The modern consumer also has several ingrained notions:
- Everything can be negotiated.
Premium is available and possible for everyone.
Loyalty can be dangerous. Brands can betray them, so they are constantly evaluating.
“Fat-free” is not the route to skinniness.
- Simplicity is complicated.
Delivering products to meet consumer needs is essential for a new company's success, but John O'Neill, formerly of UBS Warburg, New York, and now a consultant to the food industry, offered further advice on growing a food company. Accounting for over $700 billion in annual sales, the food industry is a changing landscape that includes foodservice, consolidation on the retail level, alternative retail formats, plus the Internet.
Today's successful companies are measured by profitable volume growth, and as O'Neill stated, this is not simply profitability for its own sake, but a continual, sustainable growth. Such profitability can be gained several ways—through growing segments, gaining a larger share of a current category or, possibly, international expansion.
In addition to the obvious benefits of sustaining growth, improving a product mix and helping a company maintain/improve its position in a category, new products can energize a sales force and help to maintain visibility with retailers. Recent years have not been kind for new product introductions, however, as no major trend has emerged since the fat-eliminating efforts of the mid-1990s, says O'Neill. Further detracting from new product activity has been a decrease in investment budgets at major companies in the aftermath of recent mergers and acquisitions.
This is showing signs of change, though. The benefits from those integrations are beginning to free funds for investment. Plus, some trends have shown staying power, including the seemingly contradictory moves toward healthy/functional and indulgent foods.
However, Scott Lutz, formerly of 8th Continent, Minneapolis, warned of the threat inherent in trends. Citing convenience as an example, Lutz believes cereal benefited from its quick nature for years, but consumers have left cereal behind in their desire for more grab-and-go convenience. “The trend is your friend, but it can be your biggest enemy,” Lutz cautioned.
Developers face daunting statistics when introducing new products. According to Lutz, only 2% of ideas make it to market. Of those, 80% fail, including line extensions. Once a product has become successful, corporations tend to focus not on innovation, but rather on productivity.
He believes companies have souls, and when they fail to be true to that soul, they begin to fail. A real purpose is essential, as Lutz advised, “You can't be held accountable unless people know what you stand for.” The success of a product (and, by extension, its company) demands a degree of loyalty from the consumer.
Emotional RescueLutz believes there are two routes to building loyalty with the consumer—emotionally and rationally. Loyalty is a result of reaching the consumer emotionally, Lutz said. While a rational effort may work to reach the consumer for a while, a better rationale eventually will come along.
Bridging both the emotional and rational, the security of the food supply is a topic of growing interest among consumers, and Daniel Donahue, vice president of worldwide quality with Campbell Soup Co., Camden, N.J., addressed that issue in his presentation “A Food Security Primer for New Product Professionals.”
According to Donahue, the current food industry landscape has consumers facing a number of concerns, including GMOs, BSE, allergens, acrylamide and security post-September 11, 2001. That security question can be expanded to include the food industry. As Donahue explained, food terrorism (the deliberate contamination of food to cause injury or death) dates back to the Middle Ages. Such a terrorist act could have any number of goals: to kill or maim; disrupt critical events, create fear and diminish confidence; or impact economically.
A threat to the food supply would come in one of two forms:
Chemicals: Relatively easy to get and relatively stable in processed foods, toxic chemicals can be masked, and their effects usually are immediate and obvious. All humans are susceptible, and there is the potential for death and illness. They are likely to be targeted at an event, Donahue believes.
Biological: The most likely weapon of choice for any potential terrorist, a biological agent requires a susceptible target population, can be contagious and is relatively easy to get. Costing little to produce, this type of contaminant is usually stable after production. Relatively easy to disseminate, the biological types are difficult to detect.
Donahue said safety systems need to be addressed from concept to delivery. Icon brands could serve as a juicy target, he warned. Also, he cautioned that healthcare providers may be the first to know of any such terrorist activity, as detection technology at the back-end is lacking.
Common SensoryAddressing “Sensory Evaluation and the Consumer in the 21st Century,” Herb Stone, president of Tragon, Redwood City, Calif., told attendees that consumers worldwide have a similar range of sensory skills, but they are not homogenous about what they like.
An array of products served as the focus for Lynn Dornblaser and David Jago, editorial directors of the Global New Products Database with the Mintel Group, Chicago. As this was the 20th edition of the New Products Conference, they focused on three issues from that timeframe—products that translated well from one part of the world to another, concepts before their time, and advice for the future.
Fruit snacks hit U.S. shelves in the early 1980s and now boast a strong private label presence, as well as a diversity of flavors. While not a phenomenon in Europe, Kellogg's Fruit Wonders has created an environment for such products, diversified the snack category and created a new category in a new store area, Jago reported.
Probiotics are widely popular in Europe, where they have been copied extensively, including under private labels. Actimel, a dairy-based probiotic beverage, has been tested in the U.S. for the past two years and likely will not be going anywhere, Dornblaser predicted, as the bottles presented are too small. Some opportunity rests in retaining Actimel's nutritional advantages but in a bigger bottle—a full-serving size.
A number of concepts have debuted before their time, and one such example is in the healthful/functional arena. BioSoup in Europe is a fortified instant soup, and different flavors contain different ingredients. Jago reported these have not had great success, but a Wellness soup has been introduced that may further the concept.
When considering developing a product for the future, Dornblaser and Jago offered several pieces of advice:
Just because a product concept did not work in the past does not mean it will not now.
Identify products that are a catalyst for change.
Innovation is less a matter of duplicating and involves asking: “What were they thinking? What made it work?”
Valerie Skala, vice president of analytic management and development with Information Resources Inc. (IRI), Chicago, believes the odds clearly do not favor introductions in the U.S. Five years ago, new product introductions represented 33% of manufacturer sales. Now, that number is closer to 50%, but less than half of new product introductions succeed.
Echoing the trend toward convenience, Skala noted that consumers are willing to pay two or three times as much for a more-convenient version of a product. Other hot trends to watch are foods geared to weight loss, energy enhancement, anti-aging, ethnic variety, women and the boomlet (children of Baby Boomers).
Proving GroundsMany view foodservice as an influence in retail introductions, and a panel of foodservice experts explored the trends affecting that area of the industry. Not surprisingly, many of these are similar to those confronting the retail side, with a few exceptions. Leslie Maclin, senior director of innovation and business development with Kellogg's Food Away From Home, Battle Creek, Mich., cited a number of influences: aging populations, rising incomes, growth in the number of working women, ethnicity, time challenges.
Foodservice products accounted for $141 billion in sales by food manufacturing in 2001, when it grew faster than the retail sector, but this segment does have several characteristics of note, cautions Maclin. Among these are a highly fragmented and segmented market, the absence of retail-type data, an initial selection made by the trade and operator (not the consumer), and a tremendous influence from distributors.
A growing opportunity on the foodservice side rests in outsourced products. Chef J. Hugh McEvoy, executive director of culinary development with a multi-national organization, lauded outsourced items, as these “products are to spec every time, which is what chefs want.” As Tom Miner, vice president of marketing with Lettuce Entertain You Consulting Group, Chicago, noted, outsourced items typically taste better, are better packaged and easier to use. He also cautioned that suppliers should seek to provide products that can be customized, as an operator cannot sell exactly the same product as a competitor.
Having FunctionSteve Allen, vice president of new business with the nutrition division of Nestle USA, Glendale, Calif., noted that trends in functional foods are similar to those facing the rest of the food industry—taste, cost, convenience, safety, the wellness factor and brand. The competitive pressures in this fairly small portion of the food industry are magnified when considering the number of new competitors from other areas, i.e., agriculture companies, biotech/genomics firms, pharmaceutical companies, consumer product companies and alternative health companies.
Allen believes there is a need for consumer insight as, presently, consumer needs are not leading the science. In addition, these products have met with varying degrees of acceptance from the healthcare community. Put simply, Allen said science has a key role to play in the future of functional foods: “Food companies want proven science, as this offers better prospects from a regulatory standpoint.”
Advice from the TopLeading off this year's Presidents' Panel, Paul Vadevoulis, president of Venetian Bakery, Springfield, Mass., noted that his company has the philosophy of the “small fish.” The “big fish” is a predator with more money and power. The small fish should stay lean and mean, with a low profile, capitalizing on speed of implementation. Smaller fish should focus on niche markets, avoid shark-infested areas and be aware of competitive products and development. Furthermore, Vadevoulis said a company should regard its product as a child and cherish it. He had one warning, though: too many SKUs can choke a company.
Peter van Stolk, president of Jones Soda Company, Seattle, related the effort it takes to build a brand. Creating a brand, he said, results from an emotional connection with consumers in a positive, fun way. Focusing on the future, Jones has created an emotional connection with youth.
Jones is trying to make the majors “play our game,” said van Stolk. As such, Jones has a patented interactive technology—My Jones—which allows consumers to submit their own photos to be displayed on the Jones Soda label. While this marketing effort is unique and expensive, van Stolk advised that small companies have to play by the rules they set, not by what the majors want to play.The youth of generation Y (Echo Boomers, Boomlets, etc.) will grow at twice the rate of the U.S. population. They affect more than $500 billion annually (up to $116 per week). Jones listens to these kids, explained van Stolk, and has learned they want to discover and interact.
As noted by Brian Urbick, director of research with Consumer Knowledge Centre, Edgware, Middlesex, U.K., today's kids are tomorrow's consumers. Nonetheless, no matter how hard a company may try, Urbick warned that food tends to be the first thing that drops off the list when other factors demand a young person's attention. “Design a product to fit in their life,” he advised, while also encouraging free sampling. “When kids are familiar with it, they like it,” said Urbick.
To gauge a group of such young people, Urbick had a panel of sixth graders from Mesquite Elementary School in Gilbert, Ariz., sample a number of the products available during the conference's Global New Products Tasting Session. One overwhelming fact rose to the surface: if they liked the product, they wanted more of it in a larger container.
The elements behind creating successful products brought more than 300 attendees to this year's conference, and they walked away with a better understanding of innovating and reaching the consumer, the ultimate goal of any new product. That focus will be on display again at next year's conference, to be held at the Four Seasons in West Palm Beach, Fla., from September 14-17, 2003.