Introduction to Food Development and Innovation PDF

Introduction to Food Development and Innovation JOHN MICHAEL B. YULA Course Instructor Introduction A good, idea, method, information, object or service created as a result of a process and serves a need or satisfies a want. It has a combination of tangible and intangible attributes...

Introduction to Food Development and Innovation JOHN MICHAEL B. YULA Course Instructor Introduction A good, idea, method, information, object or service created as a result of a process and serves a need or satisfies a want. It has a combination of tangible and intangible attributes (benefits, features, functions, uses) that a seller offers a buyer for purchase  Overview of Food Product Development Companies must plan extensively, work hard, and research for an extended period to produce new food products. Prior to starting a new development venture, it is imperative to develop specific objectives and timetables that integrate the future direction of the business Companies engage in new product development with the hopes of gaining new customers, expanding into new geographic markets, increasing profits, elevating brand excitements, or increasing market shares Overview of Food Product Development Food product development involves creating new food products and improving existing ones. Importance before Food Product Development The following points are very important before food product development a. To understand why new products are developed b. To note the key areas of product development in the past 10-15 years c. To understand why products may fail d. To understand the product cycle. Importance before Food Product Development The following points are very important before food product development 1. To Understand Why New Products Are Developed Purpose: Consumer Demand: New products are often developed to meet changing consumer preferences or emerging trends. For instance, a rise in health consciousness might prompt the development of low-sugar or gluten- free options. Market Opportunities: Identifying gaps in the market or areas where existing products are lacking can drive innovation. Companies might develop new products to fill these gaps or capitalize on new trends. Importance before Food Product Development Competitive Advantage: Developing new products can help companies differentiate themselves from competitors and maintain market share. Innovation can also provide a strategic edge in crowded markets. Revenue Growth: New products can drive sales and revenue growth by attracting new customers or encouraging existing customers to buy more. Brand Evolution: As companies evolve, their product lines may need to reflect updated brand values or expanded offerings to align with a modern image or new company goals. Importance before Food Product Development 2. To Note the Key Areas of Product Development in the Past 10-15 Years Trends and Developments: Health and Wellness: There has been a significant focus on health-oriented products, such as those with reduced sugar, high protein, or functional ingredients like probiotics. Sustainability: Increased awareness around environmental issues has led to the development of products with sustainable sourcing, eco-friendly packaging, and reduced carbon footprints. Importance before Food Product Development Convenience: Busy lifestyles have driven demand for convenient, ready-to-eat, or easy-to-prepare food products, including meal kits and single-serve options. Plant-Based Options: The rise in vegetarianism and veganism has spurred the development of plant-based alternatives to meat and dairy products. Technology Integration: Advances in food technology have led to innovations like lab-grown meat, enhanced food preservation techniques, and smart packaging with interactive features. Importance before Food Product Development 3. To Understand Why Products May Fail Common Reasons: Market Misalignment: If a product doesn’t meet consumer needs or preferences, it may fail. This can occur due to poor market research or misjudgment of trends. Quality Issues: Products that don’t meet quality standards or have inconsistent quality can fail to gain consumer trust. Importance before Food Product Development High Costs: If the production costs are too high, the final product might be priced too high for the target market, making it less competitive. Ineffective Marketing: Without a strong marketing strategy, even a well-developed product might not reach its intended audience or create enough buzz to drive sales. Regulatory Hurdles: Failure to comply with food safety regulations or labeling requirements can lead to product recalls or legal issues, damaging the product's reputation. Importance before Food Product Development 4. To Understand the Product Cycle Stages: Development: This phase involves idea generation, market research, product design, and prototype testing. It’s crucial to validate the product concept and refine it based on feedback. Introduction: The product is launched into the market. Marketing efforts are crucial here to create awareness and drive initial sales. This stage often involves higher costs and lower profits as the product is established. Importance before Food Product Development Growth: Sales start to increase as the product gains acceptance. Distribution channels expand, and marketing strategies may shift to build brand loyalty and increase market share. Maturity: The product reaches peak market penetration. Sales growth may slow down as the market becomes saturated. Focus shifts to maintaining market share and optimizing costs. Decline: Sales begin to decline due to market saturation, changing consumer preferences, or newer innovations. Companies may decide to phase out the product, update it, or find new ways to rejuvenate interest Key Stages in Food Product Development Planning: Research: Development: Launch: Investigating Introducing the Setting Creating market needs, objectives consumer prototypes and product to the and preferences, and testing. market timelines. technological feasibility. PLANNING RESEARCH DEVELOPMENT LAUNCH Key Stages in Food Product Development Planning: Setting Purpose: Establish the foundation for product objectives development. and Define Objectives: Set clear goals for the timelines. product, including target market, product features, and business objectives. Market Analysis: Assess market needs, trends, and competitive landscape. Feasibility Study: Evaluate technical, financial, and operational feasibility of the product idea. PLANNING Key Stages in Food Product Development Research: Purpose: Gather detailed information to Investigating guide product development. market needs, consumer Consumer Research: Identify target preferences, and consumers' needs, preferences, and technological behaviors. feasibility. Product Concept Testing: Develop and test initial product concepts to gauge interest and potential success. Technical Research: Investigate ingredients, formulation, and production RESEARCH processes. Key Stages in Food Product Development Development: Purpose: Create and refine the product Creating based on research insights. prototypes and Product Formulation: Develop the testing. product recipe or formulation and create prototypes. Testing and Refinement: Conduct sensory evaluations and make adjustments to improve taste, texture, and quality. Regulatory Compliance: Ensure the DEVELOPMENT product meets food safety regulations and labeling requirements. Key Stages in Food Product Development Launch: Introducing the Purpose: Introduce the product to the market and drive initial sales. product to the Marketing Strategy: Develop and market execute a marketing plan to create awareness and generate interest. Distribution: Set up channels to get the product to retailers or directly to consumers. Monitor Performance: Track sales, LAUNCH customer feedback, and market response to adjust strategies as needed. Key Areas of New Product Development Producing “convenience” foods- in response to changing lifestyles Food This approach to food production addresses the need for quick, easy, and accessible meal solutions CONSUMER while maintaining a focus on quality and taste. Convenience foods are involves creating food tailored to accommodate the products designed to busy schedules, diverse fit the fast-paced and dietary preferences, and often demanding evolving expectations of lifestyles of modern today's consumers. consumers. Key Areas of New Product Development Interest in nutrition, diet and health, e.g. low fat products reflects a growing awareness and concern among consumers about how their food choices impact their overall well-being. demand for food products that align with various health and dietary goals, such as reducing fat intake, managing weight, or addressing specific health conditions. Key Areas of New Product Development Increasing the variety of products available- to provide more choice is a strategic approach that businesses use to offer consumers more choices and cater to diverse needs and preferences. By expanding product lines and introducing new variations, companies can better meet the demands of a broad audience, enhance customer satisfaction, and capture a larger market share. Key Areas of New Product Development Producing “economy” lines - to appeal to people on lower incomes creating budget-friendly product ranges designed to appeal to consumers who are looking for cost-effective options. These products are typically priced lower than standard or premium products, making them more accessible to people with lower incomes or those who prioritize affordability in their purchasing decisions. Key Areas of New Product Development Appealing to the “luxury” market – to attract more affluent customers of those who wish to give an impression of status involves designing and marketing products or services that cater to affluent customers or those who wish to project a sense of status and exclusivity. This market segment seeks high-quality, prestigious, and often exclusive items that offer superior experiences or aesthetics. Brands targeting this segment focus on elements that convey opulence and refinement, aiming to attract customers who value prestige and are willing to pay a premium for it. Key Areas of New Product Development Maintaining and improving product quality – to retain customer loyalty is crucial for retaining customer loyalty and sustaining a competitive edge in the market. High-quality products meet or exceed customer expectations, leading to increased satisfaction, repeat purchases, and positive word-of-mouth. Consistent quality also helps build a strong brand reputation and trust among consumers. Essential Elements for New Product Development Talented Personnel Financial Extensive Investment Research Physical Facilities Essential Elements for New Product Development Skilled and knowledgeable teams drive successful product development. ✓ Having experts in various fields (e.g., food scientists, engineers, marketers) ensures the product is well-developed and meets industry standards. ✓ Effective teamwork between departments such as R&D, marketing, and production fosters innovation and problem-solving. ✓ Talented personnel bring creative ideas and innovative solutions, which are critical for developing unique and competitive products. Essential Elements for New Product Development In-depth research provides the foundation for informed decision-making. ✓ Understanding consumer needs, preferences, and market trends helps tailor the product to meet demand. ✓ Assessing competitors’ products and strategies aids in identifying opportunities and differentiating the new product. ✓ Investigating ingredients, formulation options, and production processes ensures the product is feasible and meets quality standards. Essential Elements for New Product Development Adequate infrastructure supports effective product development and production. ✓ Essential for developing and refining product formulations and conducting quality control. ✓ Facilities must be equipped for scaling up production from prototypes to full-scale manufacturing. ✓ Proper storage facilities are necessary for managing ingredients and finished products, while distribution capabilities ensure products reach the market efficiently. Essential Elements for New Product Development Sufficient funding is necessary to cover all stages of development. ✓ Includes expenses for market research, product formulation, and testing. ✓ Covers the cost of manufacturing, including raw materials, labor, and facility maintenance. ✓ Includes expenses for advertising, promotions, and distribution to introduce the product to the market. ✓ Financial investment also accounts for potential risks and uncertainties, providing a buffer to address unforeseen challenges. Why develop new products? 1. Gaining New Customers Purpose: Attracting a different or larger customer base. Diversification: New products can appeal to different segments of the market that were not previously targeted. Customer Acquisition: By offering something new, companies can attract new customers who are interested in the latest innovations or features. Broaden Appeal: New products can help a company reach audiences with different preferences or needs, expanding its customer base. Why develop new products? 2. Expanding Geographic Markets Purpose: Entering new regions or countries. Market Expansion: Developing new products can help a company enter new geographic markets where there is demand for the type of product being offered. Global Reach: Adapting products for local tastes, regulations, or preferences allows companies to grow their presence internationally. Diversify Revenue Streams: Expanding into new regions can reduce dependence on existing markets and provide new sources of revenue. Why develop new products? 3. Increasing Profits Purpose: Enhancing revenue through innovative products. Premium Pricing: Innovative or high-demand products can often command higher prices, increasing overall profitability. Revenue Growth: New products can generate additional sales and create opportunities for cross-selling or upselling. Enhanced Margins: Effective product development can lead to higher margins if the products meet customer needs and preferences well. Why develop new products? 4. Elevating Brand Excitement Purpose: Boosting brand visibility and consumer interest. Consumer Engagement: New products can create buzz and engage customers, keeping the brand top-of-mind. Brand Perception: Innovation can enhance a brand’s image as forward-thinking and responsive to market trends. Marketing Opportunities: Launching new products provides fresh content and campaigns to drive brand visibility and consumer interest. Why develop new products? 5. Increasing Market Shares Purpose: Gaining a larger portion of the market. Competitive Edge: Unique or superior products can help a company capture a larger share of the market from competitors. Customer Loyalty: Successful new products can build customer loyalty and increase market penetration. Strategic Positioning: By offering a range of products, companies can position themselves as leaders in their industry and gain a more significant market share.  Short-Term Developments: Line Extensions (6 Months - 1 Year) Overview: These involve adding new variations to existing products, such as new flavors or sizes. Timeline: Typically 6 months to 1 year. Process: Includes planning, formulation, testing, compliance, and marketing. Characteristics: Faster, lower cost, and lower risk due to leveraging existing infrastructure and knowledge. Timeline for Product Development  Long-Term Developments: New Products Requiring Custom Processing (1 - 5 Years) Overview: Involves creating entirely new products that may require new technology or processes. Timeline: Typically 1 to 5 years. Process: Involves extensive research, development, testing, compliance, production setup, and marketing. Characteristics: Longer, more costly, and higher risk, but potentially offers significant market impact and innovation. Timeline for Product Development Failure Rates of New Products 1. Early-Stage Failures: Many new product ideas fail before reaching the final launch stage. This happens due to issues in initial planning, concept development, or feasibility studies. Out of 100 new product ideas, a significant number, often 90%, may not progress to market launch due to these early-stage failures. Failure Rates of New Products 2. Launch and Post-Launch Failures: Even when a product is launched, its success is not guaranteed. Of the few products that make it to the market, only a small fraction remains successful long-term. From the 10 products that reach launch, typically only one will still be on sale and successful after several years. Failure Rates of New Products 3. Financial Risk Management: To mitigate the high failure rate and spread financial risk, companies often develop multiple products simultaneously. By having a portfolio of products in development, companies increase their chances of having successful products and reduce the impact of individual failures on their overall financial health. Why do some new products fail? Reasons for Failure: 1.No Difference Between New and Old Product (50% Failure) If a new product doesn’t offer a significant improvement or differentiation from existing products, it may fail to attract consumer interest. Lack of innovation can lead to market saturation and customer indifference. 2.Tough Competition Entering a market with established, strong competitors can make it difficult for new products to gain traction. Without a compelling unique selling proposition (USP), new products may struggle to stand out. Why do some new products fail? 3. Unsatisfactory Distribution (Very Popular) Even if a product is popular, poor distribution can limit its availability, reducing its market reach and sales potential. Effective distribution channels are crucial for ensuring product availability. 4. Rising Cost of Ingredients, Production, and Packaging Increased costs in raw materials, production, and packaging can erode profit margins, making the product less competitive or unprofitable. Why do some new products fail? 5. Low Profits If the product doesn’t generate sufficient profit due to high costs or low pricing power, it may not be sustainable in the long term, leading to failure. 6. Ineffective Advertising Poor or ineffective marketing and advertising strategies can result in low product awareness and insufficient consumer engagement, hindering sales. Why do some new products fail? 7. Poor, Unattractive Packaging Packaging plays a critical role in attracting customers. Unappealing or inadequate packaging can fail to draw attention and impact the product’s perceived value. 8. Food Scares Issues such as food safety scandals or contamination concerns can significantly damage a product’s reputation and sales, leading to its withdrawal from the market. Why do some new products fail? 9. Environmental Concerns Growing awareness of environmental issues can affect product success. Products that don’t align with sustainability trends or environmental expectations may face resistance from eco-conscious consumers. 10. Bad Timing Introducing a product at the wrong time, such as during an economic downturn or when consumer preferences are shifting, can result in poor market reception and failure Why do some new products fail? 11. Poor Product Positioning on Shelf If a product is poorly positioned or difficult to find on store shelves, it may not attract enough attention or sales, leading to failure. 12. Too Innovative (Ahead of Its Time) Products that are too innovative or ahead of their time might not resonate with current consumer preferences or be supported by the market infrastructure, leading to limited adoption. Team Composition for Larger Companies 1. Food Scientists Role: Research and Product Formulation Responsibilities: Develop and refine product formulations, conduct sensory evaluations, and ensure the product meets quality and safety standards. Skills: Expertise in food chemistry, microbiology, and sensory science. 2. Food Engineers Role: Process Design and Optimization Responsibilities: Design and optimize production processes, ensure efficient scaling from prototypes to full production, and troubleshoot manufacturing issues. Skills: Knowledge in process engineering, equipment design, and quality control. Team Composition for Larger Companies 3. Regulatory Specialists Role: Compliance with Laws and Regulations Responsibilities: Ensure the product complies with food safety regulations, labeling requirements, and industry standards. Handle documentation and certifications. Skills: Understanding of regulatory requirements, food safety standards, and legal documentation. 4. Marketing Experts Role: Market Research and Promotional Strategies Responsibilities: Conduct market research to understand consumer needs, develop and execute marketing campaigns, and create promotional strategies to drive product awareness and sales. Skills: Expertise in market analysis, branding, digital marketing, and consumer behavior. Team Composition for Larger Companies 5. Purchasing Gurus Role: Sourcing Ingredients and Materials Responsibilities: Source and negotiate with suppliers for raw materials and packaging, manage inventory levels, and ensure quality and cost-effectiveness of purchased goods. Skills: Procurement experience, supply chain management, and vendor relationship management.