You could say Diamond Foods Inc. is nuts about new product development. At a time when Nielsen says global snack sales are growing—and data show U.S. consumers prefer salty snacks—this San Francisco company enters the new year, its 10th anniversary, with an aggressive investment in innovation.

A public company, Diamond Foods expects this spring to open a 7,000-square-foot Innovation Center in Salem, Ore. The new two-story facility will support a growing global snacks portfolio that includes Kettle Brand, Pop Secret, Emerald Nuts and Diamond of California culinary nut products.

Interestingly enough, company officials took another important innovation step two years earlier, in 2013. That’s when Diamond Foods hired Holly Mensch as vice president of research, development and innovation. Mensch brought 28 years of experience from Kraft Foods, Pepperidge Farm, Dr. Pepper/7-Up, Cadbury Schweppes and Johnson & Johnson. At the time, she most recently had served as McNeil Nutritionals’ vice president of US Marketing, Global Innovation & Strategy.

Today, Mensch believes she’s exactly at the right place—at the right time.

“Macro trends associated with snacking are working in our favor,” she says. “We are a snacking culture and snacking now equals about half of all eating occasions. It’s also flexible in that the same product can serve as an in-between meal snack, or as a meal replacement or as a ‘TV munchie.’ That said, snacking is increasingly viewed positively—almost as necessary for a healthy lifestyle rather than the ‘empty calories’ or ‘treats’ of our youth.”

“Snacks and snacking behavior is on the rise and we, are at our core, a snack food company,” she adds. “This investment makes sense because the company also recognized that it had hidden gems in our brand line-up. All brands in our portfolio have incredible equities that could be strengthened from innovation. There is an incredible amount of untapped potential that wasn’t leveraged over the years—and now we are aggressively going after it.”

Mensch also knows product developers rarely enjoy opportunities to literally help design and equip an entirely new building—from the ground up. Asked if she’s been excited about the process, Mensch doesn’t hesitate in her response.

“Absolutely!” she says. “Most companies never have the opportunity to make such a lasting impact on a business. It is a clear sign of our executive team’s commitment to the growth of the company and the belief in innovation as a growth driver.”

Mensch says the new Innovation Center—attached to a Kettle Brand potato chip plant—will support three R&D principles.

“It needed to accommodate the core activities of the innovation team, which involved product development, sensory work, and concepting-brainstorming,” she says. “We also wanted a seamless traffic flow of the activities. This impacted everything from equipment placement in the kitchen to room adjacencies and even door placements. Finally, we also wanted to ensure that there was some room for expansion over time as we continue to build Diamond’s innovation discipline and the team.”

That team consisted of two Kettle Brand R&D specialists back in 2012. Today, Mensch says today’s multi-disciplinary innovation group includes dedicated marketers, more food scientists, sensory specialists and even packaging engineers.

Mensch says the Innovation Center will put a new public face on Diamond Foods’ Salem factory. The new building will include a pass-through into the plant. Meanwhile, she says the Innovation Center itself is designed to blend with the existing landscape and nearby wetlands.

“From an aesthetic standpoint, the building will have a distinctive Pacific Northwest feel, but at its core, this will be a true working facility,” says Mensch. “Our bottom floor will be the hub of activity. This is where the kitchen, sensory, and concepting rooms are located. The top floor will house our offices and cubes and where people can have quiet ‘head’s down’ time.”

That said, Mensch knows quite well that the new building is simply meant to facilitate better day-to-day development work.

“The Innovation Center will be another tool in our innovation tool box,” she says. “We have great relationships with our suppliers—both on the ingredient and on the manufacturing side—and we will continue to use them to support our development efforts. The new Innovation Center adds internal kitchen and sensory capabilities that will enable us to do more experimenting, rapid prototyping and enable us to quickly test ideas with consumers for faster front-end development work.”

She adds, “I don’t expect our culture to change significantly. Our team already is highly collaborative. In addition, the team falls under one organizational structure and each person on the team operates off the same goals and priorities—so we already operate as one cohesive unit. The Innovation Center does provide us with a dedicated ‘home’ with the tools to do our jobs better.

Again, some of those new tools include a state-of-the-art R&D kitchen and lab, allowing production of product samples and simulation preparation processes; a sensory evaluation center for real-time product testing with consumers; and a concept room designed for ideation and customer meetings.

“I believe the new center can be a ‘game changer’ and it will enable us to speed up the front end innovation process for two reasons,” notes Mensch. “We will be closer to the consumers at every step along the development process. This will enable us to get real-time feedback on the concept, the product, and the packaging that can be acted on immediately. All the disciplines associated with the product ‘design’ (the innovation team) can hear consumer feedback at one time, discuss implications, and take immediate action.”  

New 7,000-square-foot site will house multiple departments, new spaces for kitchens, labs, sensory work and consumer testing.

Source: Diamond Foods/ZGF Architects LLP

AT A GLANCE

Who: Diamond Foods Inc.

Where: San Francisco

When: Established in 1912 with Diamond Walnut Growers cooperative. The company went public in 2005 (NASDQ: DMND)

Products/brands: Diamond Foods manufactures, markets and distributes potato chips and RTD popcorn sold under the Kettle Brand label (US) and Kettle Chips brand (UK). Its Emerald brand includes trail mix, roasted, glazed and flavored snack nuts. It sells Pop Secret popcorn in natural kernel, microwave and ready-to-eat forms. Diamond Foods also sells in-shell nuts and culinary nuts under the Diamond of California brand. Culinary nuts are available at retail and foodservice to enhance salads, vegetables, pastas, baked goods and other foods. 

Top executive: Brian J. Driscoll, president, CEO

Financials: FY 2104 net loss of $164.7 million with net sales $865.2 million, a slight increase compared to FY 2013. Adjusted EBITDA increased 3.3% to $105.1 million

Visit: www.diamondfoods.com

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