Foodservice New Product Benchmarks
These aren’t just pie-in-the-sky numbers; these are real performance results realized by real companies. These, plus many other innovation performance realities, are revealed in IFMA’s newest research publication, “Foodservice New Product Development Process: Performance Benchmarks,” a ground-breaking research initiative.
The Center of Innovation Excellence for Foodservice (CIE) is a collaboration involving the International Foodservice Manufacturers Association; product innovation experts Stage-Gate International; and numerous founding member companies that are providing funds, time and talent (see founding members list).
The benchmarking research, which is the second phase of work launched through CIE, uncovers a great deal about foodservice new product innovation and provides understanding of what separates high performers from low performers. Researchers learned that a purpose-built process is key to successful innovation, especially a process that includes the “voice of the customer.”
Refer to Success Metrics, a “Playbook”
To be successful in product innovation, processors need to understand what success looks like. Most businesses use multiple metrics (the average company uses 2.5 different ones). Sales-related metrics are the most popular, combined with a profit metric, as seen in the chart, “Top Four Metrics Used to Measure Innovation Program Performance.”
So, a “commercial success” is defined as meeting or exceeding the sales/profit objectives during a three-year period. As mentioned earlier in this article, the best-performing companies had seven-times-higher success rates compared to their lower-performing counterparts. This means more profit and sales, and fewer wasted resources.
Now that the basic metrics are understood, it’s important to talk about the practices top performers employ to drive better success rates.
Of specific importance is the process used to take intangible, creative ideas and develop successful and profitable new products. (See chart “Impact of Having a Systematic Product Innovation Process in Place.”)
Having an innovation process in place is a good start, but not significant enough to truly impact performance. However, a purpose-built process–one containing certain practices—indeed separates the best from the worst performers. These companies employ …
…Clearly defined stages: a set of predefined activities that are performed in each stage;
…Clearly defined “go” and “no go” decisions: Gates where decisions are made whether or not to continue. This requires management to meet with the project team to review the project and evaluate it on its merits;
…A process that is flexible and scalable: An innovation process must be able to change based on the size, type, complexity and risk of the project.
It’s here that readers might say, “English please!” This translates to a process that is documented with clear metrics; is used and modified over time; and is best for the entire organization.
Stages, Gates and Flexibility
Most foodservice organizations employ a more rigorous pro--cess for high-risk products than for low-risk items. These processes include stages and gates; stages are where specific information is collected and tested, and gates are where the executive team makes decisions whether to “go,” “hold,” “recycle” or “kill.” (See chart “Typical Five-stage Innovation Process.”)
This often is employed for top-line innovations that are “new to the world” or “new to the company.” The rigors and resources used in this process yield a more thoughtful output and also will provide the largest return of investment over time.
Foodservice organizations also employ a three- or two-stage process with some projects, where stages and gates are consolidated for low-risk projects, such as product enhancements, modifications and line extensions.
This flexible approach enables the organization to more effectively adapt to the needs of their various types of projects. Close to half of the manufacturers in the benchmarking study (46%) said they flexibly tailored their processes to manage project risk and complexity.
Collaboration as a Success Component
Foodservice innovation is different from retail models. Not only does foodservice often drive new flavor trends and preparation techniques, it also has a level of complexity regarding the customer.
In foodservice, the manufacturer makes a product that is distributed to the operator—then prepared, presented and eaten by the consumer. Thus, there is a whole other element to creating a successful product in foodservice, one which has its own brand identify, limitations and ideas regarding menu offerings.
Forward-thinking innovators realize effective collaboration is important in new product development. As seen in the chart, “High Degree of Collaboration Achieved Higher Success Levels,” top-performing manufacturers not only are more successful at collaborating with operators, but their innovation projects are more successful as a result. Collaboration in this study concentrated on operators. But overall, communication, ideation, and collaboration with suppliers and trading partners are beneficial for all parties, as long as good governance is employed.
Innovation is a big buzz word. In a mature or struggling environment, it is the difference between product life or death, and possibly company sustainability. The quality of execution—from start to finish—matters. Moreover, those companies that are flexible and diligent in the new product process will reap huge benefits, not only for their organizations, but also for customers and end-user consumers. Visit ifmaworld.com for more CIE information and details about upcoming work that will engage IFMA’s members, industry suppliers and customers.
Dr. Scott J. Edgett is internationally recognized as one of the world’s top experts in product innovation and is the pioneer of portfolio management for product innovation. Edgett is chief executive officer and co-founder of Product Development Institute Inc. and Stage-Gate International. He is a former professor of the Michael G. DeGroote School of Business, McMaster University in Ontario, and is a faculty scholar at the Institute for the Study of Business Markets (ISBM) at Penn State University.
Devon Gerchar is a foodservice professional with more than 20 years of industry experience in market research, marketing, strategy and database analysis. She has worked for branded foodservice companies such as Unilever Food Solutions and Reynolds Packaging Group. In 2010, Gerchar joined IFMA as director, Member Value.
Center of Innovation Excellence: Founding Members*
Aryzta (Otis Spunkmeyer)
Basic American Foods
The Bama Companies Inc.
Coca-Cola Foodservice & On Premise
ConAgra / Lamb Weston
CSM Bakery Products
FoodHandler (BarrierSafe Solutions Intl.)
General Mills Foodservice
JM Smucker Company
Kellogg’s Food Away From Home
Land O’Lakes Inc.
Proctor & Gamble Co.
Rich Products Corp.
Sara Lee Foodservice
Schwan’s Foodservice Inc.
Sweet Street Desserts
Unilever Food Solutions
*Companies contributing funding, committee personnel
IFMA sent an electronic, 60-question quantitative research survey to U.S. foodservice manufacturers. A total of 128 businesses responded. However, further refinement of the data led to a useable sample of 106 respondents. Although these companies represented a variety of categories (including foods, beverages, disposables, sanitation, equipment and other), 70% were in the food sector.
A majority of respondents (63%) reported sales in excess of $500 million, and 70% had 100 or more employees. In terms of title, 78% of respondents were director-level, vice-president or higher. Another quantitative survey of operator respondents also was sent during the same time period. These results are not highlighted in this article.