New Food Product Development: From Concept to Marketplace

New Food Product Development From Concept to Marketplace THIRD EDITION New Food Product Development From Concept to Marketplace THIRD EDITION Gordon W. Fuller Boca Raton London New York CRC Press is an imprint of the Taylor & Francis Group, an informa business CRC Press Taylor & Francis Group 6000 Broken Sound Parkway NW, Suite 300 Boca Raton, FL 33487-2742 © 2011 by Taylor and Francis Group, LLC CRC Press is an imprint of Taylor & Francis Group, an Informa business No claim to original U.S. Government works Printed in the United States of America on acid-free paper 10 9 8 7 6 5 4 3 2 1 International Standard Book Number-13: 978-1-4398-1865-7 (Ebook-PDF) This book contains information obtained from authentic and highly regarded sources. Reasonable efforts have been made to publish reliable data and information, but the author and publisher cannot assume responsibility for the validity of all materials or the consequences of their use. 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CCC is a not-for-profit organization that pro- vides licenses and registration for a variety of users. For organizations that have been granted a pho- tocopy license by the CCC, a separate system of payment has been arranged. Trademark Notice: Product or corporate names may be trademarks or registered trademarks, and are used only for identification and explanation without intent to infringe. Visit the Taylor & Francis Web site at http://www.taylorandfrancis.com and the CRC Press Web site at http://www.crcpress.com This edition is dedicated to my wife, Joan, for her patience and encouragement. Contents Preface......................................................................................................................xv Acknowledgments.............................................................................................. xvii Author.................................................................................................................... xix 1. What Is New Food Product Development?................................................ 1 1.1 Introduction............................................................................................1 1.2 Defining and Characterizing New Food Products........................... 2 1.2.1 New Products............................................................................ 2 1.2.1.1 Line Extensions.......................................................... 3 1.2.1.2 Repositioned Products.............................................. 6 1.2.1.3 New Form of Existing Products.............................. 7 1.2.1.4 Reformulation of Existing Products....................... 7 1.2.1.5 New Packaging of Existing Products..................... 8 1.2.1.6 Innovative Products................................................ 10 1.2.1.7 Creative Products.................................................... 11 1.2.1.8 Genetically Modified Products............................. 11 1.2.2 Customers and Consumers................................................... 12 1.2.3 Added Value............................................................................ 13 1.2.4 Markets and Marketplaces.................................................... 14 1.3 Marketing Characteristics of New Products.................................... 15 1.3.1 Product Life Cycles................................................................. 18 1.3.2 Profit Picture............................................................................ 19 1.4 Why Undertake New Food Product Development?....................... 20 1.4.1 The “Why” of “Why Undertake New Product Development?”........................................................................ 25 1.4.1.1 Corporate Avenues for Growth and Profitability.....25 1.4.1.2 Opportunities in the Marketplace for New Product Development............................................. 27 1.4.1.3 Technological Advances Driving New Product Development............................................. 29 1.4.1.4 Government’s Hand in Influencing New Product Development............................................. 30 2. The New Product Development Team: Company Organization and Its Influence on New Product Development.................................... 35 2.1 Structure of Organizations................................................................. 35 2.1.1 Types of Organizations.......................................................... 35 2.1.1.1 Committee Politics.................................................. 36 2.1.1.2 Hierarchical Politics................................................ 37 2.1.1.3 Court Politics............................................................ 38 vii viii Contents 2.2 Organizing for Product Development.............................................. 38 2.2.1 Organizing for “the What”: The Physical Plant................. 40 2.2.2 Organizing for Whom: The Human Side............................ 41 2.2.3 Organization and Management............................................42 2.2.4 Creativity: Thinking Differently..........................................43 2.3 Research for Creativity: What Is It?................................................... 45 2.3.1 Characterizing Research........................................................ 45 2.3.2 Organizing for Creative Research........................................ 47 2.3.2.1 The “Unhabitual” as a Tool in Creativity............ 48 2.3.2.2 Cross-Functionality in Product Development...... 49 2.3.2.3 Fluidity as an Organizational Tool in Creativity............................................................. 50 2.4 Constraints to Innovation................................................................... 51 2.4.1 The Corporate Entity.............................................................. 52 2.4.1.1 Risk Capital.............................................................. 52 2.4.1.2 Company Ego........................................................... 52 2.4.2 Communication.......................................................................54 2.4.2.1 Multiplant Communication...................................54 2.4.2.2 Technology: Its Management and Transfer......... 56 2.4.2.3 Personnel Issues...................................................... 56 2.5 The New Product Development Team.............................................. 58 2.6 Phases in New Product Development.............................................. 60 3. What Are the Sources for New Product Ideas?........................................ 67 3.1 Getting Ideas......................................................................................... 67 3.1.1 General Guidelines for Ideas................................................. 68 3.1.2 Sources of Product Ideas........................................................ 69 3.1.2.1 The Many Marketplaces......................................... 70 3.1.3 Getting to Know Them: General Techniques..................... 72 3.1.3.1 Census and Economic Data................................... 72 3.1.3.2 The Fallacy of Privacy............................................77 3.1.3.3 Data Mining............................................................. 78 3.1.3.4 The Internet: Social Networking, Blogging, Tweeting, and All That Buzz.................................80 3.1.3.5 Just Looking and Being There............................... 82 3.1.3.6 Using Acquired Knowledge to Source Ideas......90 3.1.3.7 Using Retailer/Distributor/Manufacturer Interfaces for Ideas................................................ 102 3.1.3.8 Other Environments as Sources of Ideas........... 104 3.1.3.9 Internal Sources of Ideas for Development....... 111 3.2 Criteria for Screening Ideas.............................................................. 116 3.2.1 Environment in which Criteria Are Applied.................... 117 3.2.1.1 Conflict between Marketing and Research and Development.................................................. 118 3.2.1.2 Conflict between Production and Marketing........119 Contents ix 3.2.2 Applying the Criteria........................................................... 120 3.2.2.1 Reality of New Product Development Ideas........121 3.2.2.2 Caution about Copy-Cat Products...................... 122 4. Strategy and the Strategists....................................................................... 125 4.1 Strategy................................................................................................ 125 4.1.1 Defining the Company......................................................... 126 4.2 The Strategists.................................................................................... 127 4.2.1 An Involved Senior Management....................................... 128 4.2.2 Shaping the Company’s Objectives.................................... 131 4.2.2.1 Company Objectives That Shape Product Development.......................................................... 132 4.2.2.2 Sanctioned Espionage or Competitive Intelligence?........................................................... 133 4.2.2.3 Benchmarking....................................................... 138 4.3 Finance Department: The Cautionary Hand in Development.... 138 4.3.1 Finance’s Not So Passive Role in Development................ 138 4.3.2 Financial Realities of Product Development..................... 140 4.3.2.1 Slotting Fees........................................................... 141 4.3.2.2 Financial Criteria................................................... 142 4.3.3 Financial Tools....................................................................... 144 4.3.3.1 Comparing Costs with Anticipated Revenues........................................................... 144 4.3.3.2 Probability Index................................................... 146 4.3.3.3 Other Tools............................................................. 147 4.4 Strategy: Marketing’s Perspective................................................... 147 4.4.1 Marketing’s Functions.......................................................... 148 4.4.2 Market Research................................................................... 149 4.4.3 Time: A Critical Element in Marketing Planning and Development.................................................................. 151 4.4.4 Nature of Market Information............................................ 153 4.4.5 Qualitative and Quantitative Market Research Information............................................................................ 155 4.4.5.1 Focus Groups......................................................... 156 4.4.5.2 Beyond Focus Groups: Neuromarketing— Invading the Consumer’s Inner Space............... 157 4.4.6 Marketing’s War Room........................................................ 160 4.4.7 Marketing and Sales Departments..................................... 162 4.4.8 Marketability and Marketing Skills................................... 163 4.4.9 Summary................................................................................ 163 5. The Tacticians: Their Influence in Product Development.................. 165 5.1 Science and Technology in Action................................................... 165 5.1.1 Research and Development: Meeting the Challenges..... 166 x Contents 5.1.1.1 Recipe Development and Recipe Scale-Up: Meeting the Challenge......................................... 166 5.1.2 Spoilage and Public Health Concerns................................ 169 5.1.2.1 Food Spoilage Concerns....................................... 169 5.1.2.2 Microbial Spoilage................................................ 174 5.1.2.3 Naturalness: Minimal Processing....................... 176 5.1.3 Maintaining Safety and Product Integrity........................ 177 5.1.3.1 General Methods and Constraints to Their Use.....177 5.1.4 Summary and a Caution...................................................... 200 5.2 Role of Engineering in the Development Process......................... 201 5.2.1 Engineers............................................................................... 201 5.2.1.1 Process Design....................................................... 202 5.2.1.2 Scale-Up.................................................................. 202 5.2.1.3 In-Process Specifications...................................... 204 5.3 Manufacturing Plant: A Stumbling Block or an Asset in Development?................................................................................. 205 5.3.1 The Plant................................................................................ 205 5.3.1.1 Concerns: Space, Facilities, Labor, and Disruptions..................................................... 205 5.3.1.2 Co-Packers and Partnerships............................... 206 5.3.2 Roles of the Purchasing and Warehousing Departments.......................................................................... 207 5.3.2.1 Purchasing Department’s Activities.................. 207 5.3.2.2 Activities in Warehousing and Distribution............................................. 209 5.3.3 IT Department’s Contribution............................................ 210 5.3.3.1 Information Management and Retrieval........... 211 5.3.3.2 Number Crunching.............................................. 211 5.3.3.3 Graphics.................................................................. 213 5.4 Commercial Feasibility..................................................................... 214 5.4.1 The Loop: The Interconnectivity of Questions with Indefinite Answers...................................................... 214 5.4.1.1 The Art of Guesstimating.................................... 216 5.5 Summary............................................................................................. 218 6. The Legal Department: Protecting the Company—Its Name, Goodwill, and Image.................................................................................. 221 6.1 Introduction........................................................................................ 221 6.2 The Law and Product Development...............................................222 6.2.1 Nongovernmental Organizations...................................... 223 6.2.2 Advocacy Groups..................................................................225 6.2.3 Geopolitical Groups.............................................................. 226 6.2.4 Expert Panels......................................................................... 226 6.2.5 Industrial Sector.................................................................... 227 6.2.6 Summary................................................................................ 228 Contents xi 6.3 Food Regulation and the Development Process............................ 228 6.3.1 Legislation, Regulations, and Safety: A Dilemma........... 228 6.3.2 Role of Lawyers..................................................................... 231 6.3.3 Legislating Quality and Safety........................................... 232 6.4 Environmental Standards................................................................. 233 6.5 Summary.............................................................................................234 7. Quality Control: Protecting the Consumer, the Product, and the Company......................................................................................... 237 7.1 Introduction........................................................................................ 237 7.2 The Ever-Present Watchdog............................................................. 237 7.2.1 Sensory Analysis in Product Development...................... 238 7.2.1.1 Sensory Techniques.............................................. 238 7.2.1.2 Objective Sensory Testing.................................... 240 7.2.1.3 Subjective or Preference Testing......................... 241 7.2.1.4 Panelists.................................................................. 242 7.2.1.5 Other Considerations in Sensory Analysis....... 244 7.2.1.6 To Test Blind or Not?............................................. 244 7.2.1.7 Can All Tasters Discriminate?............................. 246 7.2.1.8 Using Children...................................................... 247 7.2.2 Using Electronics: The Perfect Nose?................................. 247 7.2.3 Shelf Life Testing................................................................... 248 7.2.3.1 Selecting Criteria to Assess Shelf Life................ 248 7.2.3.2 Selecting Conditions for the Test........................ 250 7.2.3.3 Types of Tests......................................................... 252 7.2.3.4 Guidelines to Determining Shelf Life................ 255 7.2.3.5 Advances in Shelf Life Determination............... 258 7.3 Designing for Product Integrity...................................................... 262 7.3.1 Safety Concerns.................................................................... 264 7.3.2 Concerns in Designing for Food Safety............................ 264 7.3.3 New Concepts of Safety....................................................... 265 7.3.4 Costs of Quality and Safety Design................................... 267 7.3.5 Hazard Analysis Critical Control Point Programs.......... 270 7.3.6 Standards Necessary for Safety.......................................... 270 7.3.7 International Standards....................................................... 271 7.4 Summary............................................................................................. 272 8. Going to Market: Success or Failure?...................................................... 275 8.1 Final Screening................................................................................... 275 8.1.1 Test Market: What It Is......................................................... 275 8.1.1.1 Examples................................................................. 276 8.1.2 Test Market: Its Goals........................................................... 277 8.1.2.1 Some Cautions....................................................... 279 8.1.2.2 Costs: A Deterrent................................................. 279 xii Contents 8.1.3 Considerations for a Successful Traditional Test Market...... 280 8.1.3.1 Where to Introduce............................................... 280 8.1.3.2 When to Introduce................................................ 282 8.1.3.3 Length of the Test Market Period....................... 283 8.1.3.4 Disruptive and Unexpected Elements in Test Markets....................................................... 283 8.1.3.5 How to Introduce..................................................284 8.1.3.6 What Product to Market....................................... 285 8.1.4 Evaluating the Results.......................................................... 285 8.1.4.1 The Market: Misinterpreted and Misunderstood............................................... 286 8.1.5 Judgment Day: The Evaluation........................................... 291 8.1.6 Failures in the Marketplace................................................. 292 8.1.6.1 Causes of Failure................................................... 295 9. Why Farm Out New Product Development?......................................... 301 9.1 Introduction........................................................................................ 301 9.1.1 A Rose Is a Rose Is a Rose.................................................... 302 9.1.1.1 Outsourcing........................................................... 302 9.1.1.2 Outsourcing, Consulting, Partnering, and Joint Venturing...............................................304 9.1.1.3 A Classification of Consultants........................... 307 9.2 Going Outside for Product Development....................................... 311 9.2.1 The Need................................................................................ 312 9.2.2 Finding and Selecting the Appropriate Consultant........ 313 9.2.3 Some Caveats in Selecting and Working with Consultants................................................................... 316 9.2.3.1 Exposure................................................................. 316 9.2.3.2 Loss of a Collective Learning Opportunity...... 317 9.2.3.3 Employee Growth................................................. 318 9.2.3.4 Dissension.............................................................. 318 9.2.3.5 Other Obligations: Problems in Academe......... 318 9.2.4 Advantages and Disadvantages......................................... 319 9.2.4.1 Utilization of Resources....................................... 319 9.2.4.2 The Need to Monitor............................................ 321 9.2.4.3 Does the Client Understand Consultantspeak? Communication.................... 321 9.3 Summary............................................................................................. 323 10. New Food Product Development in the Food Service Industry........ 325 10.1 Understanding the Food Service Industry..................................... 325 10.1.1 Food Service Marketplaces.................................................. 325 10.1.2 Customers and Consumers in the Food Service Industry.................................................................................. 328 Contents xiii 10.2 Characteristics of the Food Service Market................................... 329 10.2.1 Clientele.................................................................................. 330 10.2.2 Food Preparation and Storage Facilities............................ 331 10.2.2.1 Equipment.............................................................. 331 10.2.2.2 Storage Facilities.................................................... 332 10.2.2.3 Labor....................................................................... 333 10.2.3 Price, Quality, Consistency, Safety, and Sometimes Nutrition................................................................................. 335 10.2.3.1 Standards................................................................ 339 10.2.3.2 Health Care Sector of the Institutional Market.................................................................. 341 10.2.3.3 Military Sector of the Institutional Market.......342 10.3 Developing Products for the Food Service Sector.........................343 10.3.1 Physical Facilities of the Customer.....................................343 10.3.2 Energy Requirements...........................................................345 10.3.3 Labor.......................................................................................346 10.3.4 Waste Handling.................................................................... 347 10.3.5 Customers and Consumers................................................. 347 10.3.5.1 Consumer and Nutrition: An Oxymoron............ 348 10.4 Quality in the Food Service Market................................................ 349 10.4.1 Safety...................................................................................... 349 10.5 Development of Products for the Food Service Market............... 350 10.6 Criteria for Evaluating a Test Market.............................................. 352 11. Product Development in the Food Additive and Food Ingredient Industries.................................................................................. 355 11.1 Additive and Ingredient Market Environment............................. 355 11.1.1 Characteristics of the Food Ingredient Industry.............. 356 11.1.1.1 Chain of Customers and Consumers: A Welter of Identities and Needs........................ 356 11.1.1.2 Similarities and Dissimilarities to the Food Service Industry.................................................... 357 11.1.1.3 The Ever-Present Government............................ 358 11.1.1.4 Proliferation of New Ingredients........................ 359 11.1.2 Focusing on the Customer Who Is Also the Consumer..................................................................... 360 11.1.2.1 Customer Research............................................... 361 11.1.2.2 “Consumer” Research: “Yes” and “No” Possibilities............................................................. 362 11.1.3 Development Process...........................................................364 11.1.3.1 Development Process and Food Legislation..... 365 11.1.3.2 What Are the Criteria for Screening?................. 365 11.1.4 Looking to the Future for Developments in Food Ingredients............................................................................. 368 xiv Contents 11.1.5 Meeting the Challenge: New Ingredients......................... 370 11.1.5.1 Marketing’s Impact on the Direction of Research and Development............................. 370 11.2 Ingredients and the New Nutrition................................................ 380 11.2.1 Opportunities Provided by the New Nutrition............... 381 11.2.1.1 Biologically Active Nonnutrients........................ 381 11.2.1.2 Other Ingredients: Some with and Some without Nutritive Properties............................... 388 11.2.2 Challenges for the New Nutrition...................................... 392 11.2.2.1 Problems Presented by Enriched Foods............ 392 11.2.3 A Cautionary Summary...................................................... 393 12. Dancing but Uncertain of the Music....................................................... 397 12.1 Introduction........................................................................................ 397 12.2 Looking Forward and Backward..................................................... 398 12.2.1 The Changed and Changing Scene.................................... 398 12.2.1.1 The Past................................................................... 398 12.2.1.2 Recent Times and the Present............................. 399 12.2.1.3 The Future..............................................................400 12.2.2 Being Sure of the Concept...................................................404 12.2.2.1 Value of the Earlier Literature............................. 406 12.2.2.2 What Customers and Consumers Want or What Purveyors Want?....................................408 12.3 What Food Science and Technology Have Wrought.................... 409 12.3.1 Impact of Food Science and Technology........................... 409 12.3.1.1 How Food Savvy Are People?............................. 409 12.3.1.2 Impact of Technology........................................... 412 12.3.1.3 Trends as Social History....................................... 418 12.3.2 Factors Shaping Future Product and Process Development.......................................................................... 429 12.3.2.1 Influences: Known and Unknown...................... 429 12.4 What I Have Learned So Far about Product Development.......... 438 12.4.1 My Mentors............................................................................ 438 12.4.1.1 New Food Products of the Future...................... 438 References............................................................................................................443 Index...................................................................................................................... 473 Preface After I left Imasco Foods Ltd., Montreal, Quebec, Canada, I taught courses on new food product development and agricultural economics at McGill University, Montreal, Quebec, Canada, as an outside lecturer. I also taught a course on communication at Concordia University, Montreal, Quebec, Canada, as a guest lecturer. This book has its origins in notes developed for these courses. The book took form after I began my consulting firm and the lecture notes became embellished with experiences at Imasco Foods and its several companies as well as experiences gained as a consultant working with com- panies whose products failed somewhere in the process. I was called in to correct errors but first had to find where errors might have been made. In the course of these adventures, I met many of my ex-students at trade shows and food fairs who encouraged me to put everything together in a book—thus, this book. In this edition, contents have been reorganized and much new material added, especially on marketing and electronic communication and their combined effect on market research. Where possible, I tried to use peer- reviewed marketing journals, but seldom do companies announce their activities in these publications; thus, resorting to business, marketing, and trade newspapers was necessary for references. Any material used had to make a substantial intellectual or technical contribution to an understand- ing of new food product development or illustrate a novel and innovative approach to the new product development process. The material had to describe the “real-world” environment of product development, and hence, more resort to business newspapers was necessary. I studiously avoided “worked fictional examples” of new product devel- opment, as some reviewers suggested I include—this is a style of presenta- tion developed by many business schools. True examples are more blatant in illustrating the elements contributing to the success or failure of a particular product situation. Real life is ever so much more educational. I have kept the confidences of my clients in the experiences I relate, but, as stated in an earlier edition, if my clients do see themselves, they should be ashamed. The anecdotes, mostly errors in the development process, illustrate particular misadventures in new product work. The age of some of my references has been criticized, but where nothing new has been added to that provided by the older literature, I see no reason to use later works simply because they bear a later date. Besides, the older literature is often written more clearly so that principles are easily grasped. For those who may disagree, I suggest they read some older marketing literature and the later literature. There is a further defense of my literature choices in Chapter 12. xv Acknowledgments I am deeply indebted to my wife, Joan, for reading the text and making many helpful suggestions; to my son, Grahame, senior technical writer for Autodesk Canada Co., Montreal, Quebec, Canada, for preparing many of the figures, for many interesting and stimulating discussions regarding the text, and also for correcting and emending my notes on computers, com- munication technology, and the Internet; and to my son-in-law, Dr. David Gabriel, professor in the Department of Physical Education and Kinesiology at Brock University, St. Catharines, Ontario, Canada, for his suggestions for, and assistance with, figures. I am especially grateful to Christine Coombes, U.S. Public Relations Coordinator of Mintel International, for the data on new product introductions. Chapters 10 and 11 benefited largely from helpful discussions with Timothy Beltran—who, at the time of our discussions, was executive chef of the J. P. Morgan-Chase dining room on Wall Street, New York City, and has now formed his own catering com- pany, Culantro Caterers, in New Jersey, and with Henry B. Heath, MBE, BPharm (London), MFC, FRPharmS., FIFST (United Kingdom), and retired president of Bush Boake Allen Corporation, Dorval, Quebec. To both of these gentlemen, my heartfelt thanks. Much is owed to James W. Baldwin for many interesting discussions on marketing and with whom I worked on the communications course at Concordia University, Montreal, Quebec, Canada, and travelled extensively in Europe looking for new product ideas for Imasco Foods; to Dr. Charles Beck, a good friend and colleague with whom I exchanged many ideas; to Dr. Sylvan Eisenberg of MicroTracers, Inc., San Francisco, California, for his thoughtful advice; and to the library staff at the University of Guelph, Guelph, Ontario, Canada, especially Judy Wanner and Michael Ridley, chief information officer and chief librarian, respectively. To all, my sincere thanks. xvii Author Dr. Gordon W. Fuller has a wide variety of training and experience that he has used successfully in his consulting practice for over 30 years. He received his BA and MA in food chemistry from the University of Toronto, Toronto, Ontario, Canada, in 1954 and 1956, respectively. He also received his PhD in food technology from the University of Massachusetts, Amherst, Massachusetts, in 1962. His work experience includes stints as a research chemist with the Food and Drug Directorate in Ottawa, Canada, and as a research food technolo- gist working on chocolate products for the Nestlé Co. in Fulton, New York. He conducted research on tomato flavors and products at the H. J. Heinz Fellowship at the Mellon Institute for Industrial Research, Pittsburgh, Pennsylvania for two years. Dr. Fuller served as associate professor in the Department of Poultry Science at the University of Guelph, Guelph, Ontario, Canada, where, in addition to teaching and research responsibilities into added value meat and egg products, he carried out extension work for food processors in south- ern Ontario. He also held a fellowship at the Food Research Association, Leatherhead, England, where he worked on water binding and reducing water losses in meat products. Prior to forming his own consulting company, Dr. Fuller was, for eight years, vice president of technical services, Imasco Foods Ltd., Montreal, Quebec, Canada, where he was responsible for corporate research and prod- uct development programs at the company’s subsidiaries in both Canada and the United States. His consulting practice has taken him to the United States, South America, Europe, and China. He has lectured on the topics of agricultural economics and food technology in North and South America, England, Germany, the Netherlands, and China. As an outside lecturer, he presented courses at McGill University, Montreal, Quebec, Canada, and was a guest lecturer at Concordia University, Montreal, Quebec, Canada, for many years. Dr. Fuller is presently semiretired and works mainly with his old cli- ents. He keeps himself occupied growing different varieties of hot peppers and developing new formulations of hot sauces. He now lives in Guelph, Ontario. xix 1 What Is New Food Product Development? …The production of a new food commodity might seem to be a trivial matter unworthy of serious consideration; this is not necessarily so. The technological expertise upon which any one item depends may require the full depth of scientific understanding. Magnus Pyke (1971) 1.1â ‡ Introduction To be profitable and to survive, food companies seek new products. These, if successful, give new life to a company, replacing products no longer sell- ing well. Old bell-ringer products cannot be relied on year after year to be profitable. New product development or finding new uses for old products is essential for continued growth of a company. New products are one of a few ways a company can follow for increased profitability. Developing new products requires talented personnel, extensive research, suitable physical facilities, and money. Such human and physical resources are expensive. Nevertheless there is no promise that any new products developed through these resources will be successful enough to justify their expense. The obviousness of the need for new product is apparent to any novice food technologist. For the novice food technologist entering new product research and development, what is difficult to appreciate is that there is a finite amount of money available within any company and an infi- nite number of demands to use that money. Management must see that its money is allocated to those areas in the company where the money is used to best advantage. The marketing department wants to expand markets into new geographi- cal territories with its bell-ringer products. It reasons that there would be per- haps some language or other label changes and no developmental expenses, and the company would be moving products with a proven customer appeal and sales record and hence the risk would be small. The finance depart- ment sees opportunities in various investment instruments that would contribute to the profitability of the company without the associated risks and costs of new product development or expansion into new market areas. 1 2 New Food Product Development: From Concept to Marketplace The manufacturing department would put forward its argument that with newer, faster equipment, it could lower the cost of established products, reduce energy costs, and be a better corporate citizen with a smaller carbon footprint, and more profitability for the company would result. There are other areas of critical activity in the company that will have their own promises of how they could use the money available to best advantage: each will argue their case with senior management as to why they and they alone would succeed. And the shareholders or partners in the company also have their ideas how best to use the money. This is the world of new product development, one where there is compe- tition for money from within and uncertainty regarding the success of any new product that is introduced into the marketplaces. 1.2â ‡ Defining and Characterizing New Food Products The new product development process introduces many new terms, and these terms must be defined and understood for complete understanding of the process. 1.2.1 New Products A new food product is one that has not been presented before in any market- place anywhere. This is a rare occurrence. A food product may be new to a company that has not sold it before but is not necessarily new to a marketplace: other companies elsewhere might have sold it or a product conceptually similar to it before. Some characteristics of a food product providing newness for a company are tabulated in Table 1.1. Table 1.1 Characteristics of a New Food Product as Introduced by a Specific Food Company Product has never before been manufactured by that company. Product has never before been distributed by that company. An old established product manufactured by a company is introduced into a geographically new area by that company. An old established product manufactured by a company is introduced in either a new package or a new size or a new form. An old established product manufactured by a company is introduced into a new market niche, i.e., positioned as one with a new function. What Is New Food Product Development? 3 Defining a new product to encompass all the characteristics listed is dif- ficult. Two simple definitions of a new product are as follows: 1. A product not previously manufactured by a company and intro- duced by that company into its marketplace or into a new market- place, or 2. The presentation or rebranding by a company of an established product in a new form, a new package or under a new label into a market not previously explored by that company. No-name or store brand products, even those as famous as President’s Choice®, are hard to pigeonhole by a definition. No-name or store brand products are purchased from a food manufacturer by a retailer or by a com- pany that then either leaves a No-name label on them (rare but not unheard of) or puts its own branded label on it and sells it to a retailer. This company may be no more than an office with a telephone. A label owner visits manu- facturers and purchases product to the grade or standard he or she wants (often very high standards—cf. President’s Choice or S & W Fine Foods™): he or she has not developed, manufactured, or market-researched the prod- uct. In effect, these products piggyback on the research and development work of the original food manufacturer. Tables 1.2 and 1.3 tabulate new food products, describe some general char- acteristics of each type, and provide some examples. 1.2.1.1 Line Extensions A line extension is a variant of an established line of food products, i.e., one more of the same. Line extensions represent a logical extension of similarly positioned products. Some care must be given to what are and are not line extensions, for example: Adding a canned three-bean salad product to a line of canned bean products involves a change in processing and quality control tech- nology. Developers have gone from a high pH, low acid product to an acidified product. This is no longer a line extension; a different market niche is targeted. The product now has added value and is a new menu item. A potato chip manufacturer extends its product line to the manu- facture of corn chips or corn puffs or roasted peanuts or popcorn. These are not simple line extensions. The new products have in com- mon only the snack food element. These are distributed through the same channels and displayed in the same section of a retail store, but purchasing philosophies, storage facilities, and manufacturing technologies have changed extensively for the manufacturer. 4 New Food Product Development: From Concept to Marketplace Table 1.2 General Characteristics of Classes of New Food Products Types of New Product General Characteristics Line extensions Little time or research required for development. No major manufacturing changes in processing lines or major equipment purchases. Relatively little change in marketing strategy. No new purchasing skills (commodity trading) or raw material sources. No new storage or handling techniques for either the raw ingredients or the final product. This means that regular distribution systems can be used. Repositioned existing Research and development time is minimal. product Manufacturing is comparatively unaffected. Marketing must develop new strategies and promotional materials to interpret and penetrate the newly created marketing niche. Sales tactics require reevaluation to reach and make sales within the new marketplaces. New form or size of Highly variable impact on research and development. existing product Highly variable impact on physical plant and manufacturing capabilities. Major equipment purchases may be required if manufacturing to be done in-house. Marketing and sales resources will require extensive reprogramming. Reformulation of Moderate research and development required consistent with existing product reformulation goal. Generally little impact on physical facilities. Generally little impact on marketing and sales resources unless reformulation leads to repositioning of product. Repackaging of The novelty of the repackaging will dictate the amount and degree of existing product research and development required. Slight impact on physical facilities. New packaging equipment will be required. Little impact on marketing, sales, and distribution resources. Innovative products Amount of research and development dependent on the nature of the innovation. Highly variable impact on manufacturing capabilities. Possible heavy impact on marketing and sales resources. Creative products Generally heavy need for extensive research and development, therefore a costly venture. Extensive development time may be required. May require entirely new plant and equipment. Degree of creativity may require development de novo of unique equipment. Basically will require total revision of marketing and sales forces. Creation of a new company or brand may be required. Risk of failure high. What Is New Food Product Development? 5 Table 1.3 Examples of the Different Types of New Products Type of New Product Examples of Category Line extensions A new flavor for a line of wine coolers or for a line of flavored bottled waters New varieties of a family of canned ready-to-serve soups New flavors for a snack product such as potato chips New flavored bread-crumb coating A coarser or more natural peanut butter Repositioned existing product Oatmeal-containing products positioned as dietary factors in reducing cholesterol Soy-containing products repositioned as dietary factors combating cancer Soft drinks positioned as main meal accompaniments New form of existing product Margarine or butter spreadable at refrigerator temperatures Prepeeled fruit or sectioned grapefruit or oranges Fast-cooking products such as rice or oats Instant coffees, teas, and flavored coffees Dehydrated spice blends for sauces Reformulation of existing products Low calorie (reduced sugar, fat) products Hotter, spicier, zestier, crunchier (e.g., peanut butter), smoother products All-natural (“greener”) products, organic products Lactose-free milk products High-fiber products New packaging of existing product Single-serving sizes of, for example, yogurt Branded fruits and vegetables Pillow packs for snack food items Institutional sizes for warehouse stores Squeeze bottles for condiment sauces Pull-top containers of snack dips Use of thin profile containers Innovative products Dinner kits Canned snack food dips (see above) Frozen dinners Simulated seafood products Creative products Reformed meat cuts Extruded products Surimi and kamaboko-based products and soy bean curd (tofu) and limed corn if these were discovered recently Short-chain fatty acid containing products 6 New Food Product Development: From Concept to Marketplace Line extensions are not to be confused with brand extensions. A brand can be likened to an umbrella that embraces products that represent reliability, confidence, quality, and “motherhood.” A brand might best be described as a concept embodying values and reliability (of a company). Customers rec- ognize a brand as providing safety, reliability, and quality at a price they are willing to pay. Many brands have this cachet: no matter what they make, if it has their brand, it’s got to be good! Brands have been described as having an essence; Barnham (2009) argues that this is wrong—brands need to be thought of as being the essence, a concept bringing greater value. Barnham presents an interesting discussion of the philosophy of brands and branding. Brand extensions, particularly brand overextensions, can be a death-knell for the products under its protective umbrella. One need only think of one’s favorite brand of food and picture that brand name being extended to carry a line of women’s lingerie or men’s underwear or hygiene products. It can have disastrous results. Yet Marks and Spencer™, a U.K. brand better known as Marks and Sparks, had the cachet of top quality whether it was food prod- ucts, clothing, or furniture. President’s Choice™ has also succeeded with this in some aspects. One sees another aspect of brand as essence. Marketing programs are usually not greatly affected by line extensions, but there can be some surprises. When a confectionery company with an established line of children’s confections attempts to introduce a line of adult-flavored confections, some marketing difficulties can arise, for exam- ple, a company with jujubes and jelly beans introducing flip-top dispensed mints or humbugs. Conflict has been introduced: children do not like the new flavors; adults do not accept a child’s brand of candy not knowing that it is flavored for them. Different promotions, advertisements, and store placements for the adult products are necessary. Conversely, Pez Candy® started out as a mint-flavored candy directed to adults as an aid in stopping smoking. Packed unimaginatively in a tin, they were introduced into North America in the 1950s in a cigarette-lighter-like dispenser. Poor sales led to the dramatic change to children’s candy flavors, and the dispensers are now collectors’ items. Promotion, repositioning, and repackaging brought new life to a losing product. 1.2.1.2 Repositioned Products A company can be surprized to find through their consumer intercepts and letters that consumers use their product in ways that the company has never anticipated. A new market niche has been created that gives new life to an existing product. An example is ARM & HAMMER® Baking Soda finding a new niche as a body deodorant, a dentifrice, and a deodorant against food odors in refrigerators. Repositioning an established product takes a company into new and unknown markets. Each repositioning must be considered individually. Rebranding and extensive marketing promotion may be necessary. What Is New Food Product Development? 7 1.2.1.3 New Form of Existing Products A paste product converted to a tablet (or vice versa) a sauce transformed to a sprinkle-on powder or to a spray-on product represents new forms of exist- ing products, but they may be forms too radical a departure from the known product for consumers to accept. Such changes in form are costly processing changes for the manufacturer. The modified product must be seen as a valued improvement over the tradi- tional form to be successful. Profound departures in form require reeducation to new usage habits. A new form of a product, for example, prepeeled, precut french-fry style potatoes have not become successful in the retail, chilled food counter but have become remarkably successful in the food service market. Here, they offer convenience, i.e., added value. Sampson (2010) described how the Nestlé Company found that changing the shape of the traditional squares found in most chocolate bars such as their Nestlé Noir™ bars caused better taste sensations. It was found that the chocolate in the form of waves melted better and was more “comfortable in the mouth,” and the flavor lasted longer. 1.2.1.4 Reformulation of Existing Products The “new, improved” product is typical of this category. Reformulation may be necessary for any number of reasons: Some improvement, such as better color, better flavor, more fiber, less fat, greater stability, fewer calories, is required in a product to meet competitive products or to fit with perceived trends. Raw materials or unique ingredients become unavailable or too costly. Substitutes must be found to remain price competitive. Ingredients with superior characteristics become available, or improved processes allow the manufacture of products of higher quality at a lower cost. Reformulation is needed to lower the costs of a product to meet the challenge of cheaper imitations from competitors. This is often the reason for reformulation. The safety of ingredients, additives, or even raw materials may be challenged. Their use is no longer permitted, or their level of usage may be restricted. Colorants, artificial sweeteners, and some nutra- ceuticals (for example, kavakava and St. John’s Wort) have all either had their safety questioned, been restricted in their use, or been banned outright. Reformulation may also be necessary to create a new market niche for existing products, for example, one with fewer calories, more fiber, or lower sodium content. 8 New Food Product Development: From Concept to Marketplace Reformulation efforts vary from being inexpensive and accomplished in a short developmental time, for example, reducing salt in a product, to being very costly in research and development time such as the replacement of sugar or fat to make reduced calorie products. A new, improved product presents a marketing dilemma for a company. Customers and consumers wonder that if this new version is an improve- ment, why was it not offered in the first instance? 1.2.1.5 New Packaging of Existing Products This product sector reflects an interesting mix of simple to complex technol- ogy and change of form (see Figure 1.1). At its simplest, it is the packaging of bulk produce into smaller packages that are more convenient for consumers (1) Field potatoes (2) Bulk potatoes Cleaning, culling, size grading (3) Retail packaging 5 and 10 lb units Branded potatoes Varietal potatoes Wrapped units of 4 (4) Institutional market Precooked, foil wrapped Prepeeled, precooked, diced French fry—cut Mashed Hash browns Potato skins (5) Added-value marketing Frozen french fries Dehydrated potatoes Canned potatoes Snack foods a. Chips b. Reformulated chips Industrial products a. Modified starches Figure 1.1 b. Starch derivatives c. Alcohol Adding value to the humble potato. What Is New Food Product Development? 9 and can enter a new market niche, for example, yoghurt or fruit pieces packed into sizes convenient for school lunches. Manufacturing involves only purchasing, inspection, grading, cleaning with an increased empha- sis on sanitation, trimming, storage, weighing, packaging, and distribution. Development costs vary from minimal to extensive. How it becomes more complex is seen more clearly in Figure 1.1: field pota- toes complete with dirt and culls were available at one time on the retail market in large 100-lb sacks. Next came the cleaning, culling, and size Â grading of potatoes (box 2). These were repackaged into smaller package sizes to suit smaller families and apartment dwellers with no desire or storage space for 100-lb sacks of produce (box 3). In boxes 4 and 5, greater transformations occur involving both new packaging and new forms of established products with more convenience features and serving different markets. Each step requires more sophisticated processing, quality control, sanitation, packag- ing and storage, and handling. Field carrots, oversized, misshapen, and unsuitable for the produce coun- ter, have followed a somewhat similar path but not as elaborate as that for potatoes in Figure 1.1. They, through washing, cutting, and trimming and abrasion, are now “cocktail”-sized carrots and so-called baby carrots, all attractively packed in branded packages. A product, unsaleable on the retail produce counter, has been given added value and entered into a new upscale market niche as crudités. The abraded pulp waste also is used and goes into feed or fertilizer. A new merchandising concept arose: the brand labeling of packaged pre- pared produce and organically produced vegetables, meats, specially bred (e.g., heritage breeds), or free-range-raised animals gave traditional products a new life as new products of higher quality or convenience on which a com- pany is proud to put its name (Gitelman, 1986). Packages of “speed scratch products,” i.e., mixed, washed salad greens, prepeeled fruits and vegetables, and sliced mushrooms, fit into this niche. Previously nameless or brand-less produce and meat cuts now bear display stickers of well-known brands of food companies or naming-the-farm raised breeds. Raising heritage breeds or growing heritage crops introduces another level of complexity to this sector. Success rests with marketing a brand, the quality of which is known and respected by customers and consumers. For suppliers to food service out- lets and the outlets themselves, particularly upscale restaurants, the use of heritage breeds, organically raised animals, or local produce in their menus provides added value features for those valuing such features. Modified atmosphere packaging (MAP) and controlled atmosphere pack- aging (CAP) have permitted the creation of a number of new fresh products with an extended shelf life allowing the opening up of new markets in a larger distribution area. Both technologies require extensive research for safety and shelf life stability of the products (see later). Biobased materi- als, another packaging development, offer a marketing ploy as environmen- tally sound features (Petersen et al., 1999; Shahidi et al., 1999; Rojas-Graü 10 New Food Product Development: From Concept to Marketplace et al., 2009). They are new and as yet experimental, and care must be taken over the safety of these packaging films. In their review, Rojas-Graü et al. describe the incorporation of functional ingredients in edible coatings for fresh-cut fruits. Changing from glass containers to metal ones, or vice versa, or the change- over from steel cans to aluminum cans or to plastic containers is an expen- sive makeover of a packaging line: it requires new machinery or the use of a co-packer. Changeover from cylindrical, conventional cans to thin profile containers (retortable pouches and semirigid trays) for thermally processed foods requires both reformulation and a new filling and packaging line. Such a change improves quality and provides added value for which cus- tomers pay more, but it does require costly plant modifications. Equipment is presently such that line speeds are slow. Another cost associated with packaging is the cost that may be involved in the need for a returns system whereby the used containers of a product must be picked up as customers return these. What can be used for packaging restricts, in many areas, it to be recyclable, reusable, or able to be composted. 1.2.1.6 Innovative Products Innovative products are difficult to categorize. “Innovate” is defined in both Webster’s Ninth Collegiate Dictionary as “make changes” and The Concise Oxford Dictionary as “make changes in.” An example of an innovative product is the Sony Walkman®, whose inventor, Akio Morita, chair of Sony, claimed the Walkman involved no new invention and no costly research and develop- ment. In his opinion, companies place too much emphasis on basic research to their own detriment. Reliance, he claimed, on basic research prevents companies from being competitive. Morita saw opportunities in various new developments and put these together with the perception of a consumer need. The Walkman was simply the putting-together expertly of established inventions into a superbly marketed product—its secret was in new packag- ing (i.e., putting together of ideas) and marketing. This is innovation (Geake and Coghlan, 1992). An innovative product, then, is one resulting from making changes to an existing product or products. Are any of the foregoing product sectors inno- vations? Most would say “No.” Generally, the more innovation (change) in a product, the riskier it is to introduce and the more costly the marketing strategies of that novelty. The Walkman was a radical, innovative, and con- ceptual change in communication whose customers had to be educated to its added value. Little research or development and few production line changes are required for a frozen food processor to put a stew, some frozen vegetables, and a frozen pastry on a tray and call it a frozen dinner. Likewise, putting a can of tomato sauce, a package of dry spaghetti sauce spices, and a pack- age of dry pasta together with a package of grated cheese to make a dinner What Is New Food Product Development? 11 kit requires little research and development effort. All items in these two remarkably successful innovative products are readily sourced, and their ease of combination has engendered many imitators. New ingredients often form the basis for innovative products. Simulated crab legs, lobster chunks, shrimp, and scallops, all based on surimi technol- ogy, have allowed the development of many faux seafood dishes (Johnston, 1989; Mans, 1992). The changing demographics of cities caused by immigration offer unique marketing opportunities for the putting together of ethnic dishes. Processors of chick peas, navy beans, and other lentils might satisfy ethnic tastes with such added value products as hot bean dips or hummus and hummus tahini and many variants of these. However, any venture into innovative products should only be undertaken with a brand able to carry such products. A new brand may be required. 1.2.1.7 Creative Products A creative product is one brought into existence according to most dictionary sources: the rare, never-before-seen product. The development of surimi, a fish gel, several hundred years ago and its development into kamaboko-based products would be considered a creative product, as would tofu and limed corn meal. Today, one might consider reformed meat products as a creative development, and certainly, extrusion to produce new puffed products is creative. The great problem for companies who have introduced successful innova- tive or creative products is that imitators rapidly flood the market with me-too products. Imitators telescope the time and effort (often measured in years) that was required of the developer of the creative product. Development time may be only as long as it takes the imitator to get new labels printed; marketing know-how has already been developed to educate the public by the originator. Market entry costs will be minimal. 1.2.1.8 Genetically Modified Products Genetically modified products fit rather poorly into the above creative prod- ucts category. These could be products modified from their traditional shape, taste, or color by conventional means—and there are arguments about what are conventional means—or by gene splicing technology. Gardeners are del- uged with catalogues picturing red, blue, or black potatoes; yellow or green cauliflower; carrots with pink, yellow, or purple cores or with round shapes; beets with purple or white alternating interior rings or beets that are globes or elongated; tomatoes that are yellow, pink, or deep red; and red or yellow raspberries. Only their imagination limits the variations plant geneticists can develop for hobby gardeners. Seed producers and gardeners accept these ini- tially as novelties that they can amaze their friends with, and eventually, these 12 New Food Product Development: From Concept to Marketplace gradually get accepted universally. Commercial growers hint at increased phytochemical content or a vague healthy benefit from increased antioxidants. The development of commercial crops with increased levels of beneficial phytochemicals in crops that are staples in some diets has been the target of plant geneticists; one example is a new rice variety with enhanced caro- tene content to combat eye disease. Other categories of genetically modified products are those modified to have a better shape—e.g., straighter bananas for easier shipping, square (or nearly so) melons for better packing, or firmer tomatoes for less damage in transit. Arguments from the anti-GMO groups are that these developments do not benefit the buying public but benefit only the food industry and are not wanted or appreciated by the public especially if there are flavor or usage changes. What still appears to have a strong taboo is the eating of cloned animals. At present, the technology is extremely expensive, and many people have a strong aversion to the use of cloned meat. There is a wealth of literature in the public domain (see Voosen, 2009) and in trade and scientific journals arguing for and against the safety, public acceptance, or ecological advisability of genetically modified crops. Many countries have banned the use of genetically modified foods or ingredients. Product developers are forewarned to research what the cur- rent regulations are. 1.2.2 Customers and Consumers Customer and consumer describe two different entities: the two words should not be interchanged unless the intended meaning is clear. A customer is one who buys in a marketplace. The customer is attracted by point of sales mate- rial, promotions, or tastings in the marketplace or at food trade exhibitions. Customers make choices (i.e., purchases) according to their consumers’ likes and dislikes, allergies, disposable or budgeted income, or commercial or industrial requirements. The customer is also looking for reliability (cf. brand loyalty) of delivery, quality, and price. Dr. Kurt Lewin (reported in Gibson, 1981) described the customer as a “gatekeeper.” As such, gatekeepers are A family member who decides what is purchased for the household The purchasing agent of a company, a retail chain, a central com- missary for a restaurant chain, an institution, a hospital, and the like, who buy or send out tenders to suppliers with specifications required by others within their organizations Chefs who plan menus and decide what raw produce, ingredients, or semifinished goods are purchased for the diners in a restaurant Pet owners who determine what pet foods are purchased for their animals What Is New Food Product Development? 13 The consumer uses (consumes) what was purchased by the customer. The consumer can also be the customer. For example, the diner in a restaurant or the eater of finger food walking down city streets is both customer and consumer. Consumers influence customers on what is purchased or served, but as noted by Fuller (2001), “There is the conflict between the consumer’s hedo- nistic demand of ‘I want’ and the customer’s practical barrier of ‘I need’ or ‘I can afford.’â ›” This conflict is apparent by uneaten food returned to a cafeteria’s waste; prisoners rioting over the quality and variety of food they are served; ingredient suppliers losing contracts when their clients’ specifica- tions are not met; or children refusing to eat their meals. Marketing and sales personnel must distinguish clearly between the func- tions of customer and consumer in the marketing, promotion, and selling of new products. Sales personnel are concerned with retailing and retailers, the purveyors. Retailers are mostly interested in the customer since the cus- tomer buys. Marketing programs must attract both customer and consumer. 1.2.3 Added Value Added value is a characteristic many new products are purported to have. The late Mae West had a memorable line in the old film She Done Him Wrong: “Beulah, peel me a grape!” Beulah provided added value for a con- sumer: peeled, ready-to-eat fruit possesses this characteristic. Added value describes a change in a product that makes that product more desirable. Meltzer (1991) rather unhelpfully defined “value added” processing (“added value” and “value added” are synonymous terms) as “…any technique that effects a physical or chemical change in a food or any activity that adds value to a product,” which is another way of saying added value is added value. Whatever the value is, consumers want it. De Chernatony et al. (2000) did not do much better in trying to define added value. They interviewed 20 brand managers and as might be expected got as many different descrip- tions: added value meant many things to many people and served diverse roles in branding—they found the concept was “multidimensional.” Figure 1.1 pictures the concept of added value more concretely. Convenience was created by breaking 100-lb sacks of field potatoes by cleaning, culling, size grading (box 2 in Figure 1.1), and packing into more suitably sized packaging in five and ten pound units (box 3, Figure 1.1). The 100-lb sacks of potatoes were not convenient for small family units and were far in excess of the needs of the increasing number of apartment dwellers who had nei- ther cellars nor space nor desire for such quantity. Smaller, more convenient unit packaging (foil- or glassine-packaged potatoes) introduced new mar- ket niches by targeting “live-alones” such as seniors and occasional potato users. Added value was introduced by more convenient packaging. Adding value continued to be added with prepeeling, dicing, or slicing the potatoes. I worked closely with a potato processing operation that produced 14 New Food Product Development: From Concept to Marketplace prepeeled, french fry-cut potatoes (box 4). Preparation time for institutional users such as the quick-serve eateries was minimized—waste was concen- trated in a central location where it might be more profitably used. A new market niche was created providing value. Today, potatoes and several other vegetables and fruits are offered not only by their brand or varietal name but also with suggestions for the best culinary uses of that particular variety. The customer knows what variety to buy for the purpose in mind, or the customer can buy the variety, know- how to best prepare it, and have the assurance of quality that the brand name confers. Adding value requires skilled labor, more sophisticated technologies, and more complex (and costly) processing equipment to safely manage the more fragile products produced. For example, peeled, precut potatoes or peeled and abraded cocktail carrots or segmented oranges are more sensitive to con- tamination and spoilage. The developer needs not only to prevent spoilage but, more importantly, to prevent hazards of public health significance (see Pyke’s statement opening this chapter). Other needs associated with added value are new market research, the production of new marketing material, and more complex handling and distribution techniques. Adding value equals added cost that is only justified by old and new customers and con- sumers alike accepting that more value comes with this cost. Meat, poultry, and fish are also sold with more descriptive names, by brand names, and with preparation instructions or recipes describing how to cook the particular cut of meat or species of fish. Added value for both the consumer and the customer has been introduced. 1.2.4 Markets and Marketplaces Market and marketplace are often used synonymously. This is inaccurate. Each has a unique meaning. A market is conceptual: it depicts a need discovered in customers and consumers that marketing personnel hope to develop into a potential to sell to customers who want to buy. That is, one can say that there is a market for organically grown vegetables or for locally grown crops or for marinated (preinfused with salt and spices) pork meats or self-basting turkeys or that there is a market for low calorie foods. This means that there are customers in the many different marketplaces who preferentially pur- chase organically grown products or low calorie foods or premarinated pork chops. These undiscovered needs (the Walkman was a fulfillment of an undiscovered need) must be developed with skilful marketing research into wants and then satisfied with products. Products are sold in marketplaces not in markets (despite the use in com- mon parlance of farmers’ markets). Marketplaces are real: they are not conceptual. They range from farmers’ roadside stands to giant food stores, from beverage and snack bars in movie houses to coin-operated food vend- ing machines, from mobile canteens visiting work sites to stand-alone What Is New Food Product Development? 15 restaurants. Even electronic food marketplaces operating from Web sites are real marketplaces; they are places where products are sold. 1.3â ‡ Marketing Characteristics of New Products Figure 1.2 depicts three dimensionally the difficulties accompanying the marketing and selling of established products or new products in familiar and unfamiliar marketplaces and with the movement of these products into new market niches. The y-axis is a measure of increasing marketplace complexity; the farther from the origin, the more complex the marketplace. Marketplace complexity arises with any of the following or any combination of them: A product is moved into marketplaces with increased activity by competitors. The product needs more sophisticated warehousing, distribution, and retailing treatment (e.g., a stale product return program or bottle refund program). New food legislation, changed local regulations, or cultural norms of a more complex marketplace (e.g., in foreign countries) need to be adhered to. The general economy of the country or economic developments unique to the targeted marketing area have soured. z Elusivity 5 1 3 x Technical complexity 6 2 Figure 1.2 Product complexity, market- 4 place complexity, and consumer y elusivity interactions character- Marketplace istic of new products and their complexity marketing. 16 New Food Product Development: From Concept to Marketplace The marketing skills within the company or available to the com- pany cannot meet the challenges of the new marketplaces. Geography of the market area is such that control over the product is diminished with possible loss of quality or safety. The difficulties of selling novelty or educating consumers to the value of the product present major problems. The x-axis is an index of increasing technical complexity required for a product with innovation or creativity and added value. The farther from the origin, the more creativity, innovation, or technical complexity there is in the product. More research, development time, and costs are involved. The product is more fragile and sensitive to abuse; it requires care in handling and distribution channels to maintain its high quality throughout retailing and in the hands of the end user. Therefore, more creative marketing effort is needed to educate the customer and consumer to recognize the added value features. The z-axis (into the page) is a measure of the recalcitrance, volatility, com- plexity, even fickleness or incredulity of the targeted public, a characteristic I have coined as elusivity. Is it the recalcitrance of customers that explains the growth in “healthy” and “health” food categories when there has been “a dra- matic increase in the per capita consumption of high calorie desserts, salted snack foods, and high calorie confections” noted as far back as 1986 (Gitelman, 1986) and continuing to this day? Obesity has been branded as having an effect on the immune system leading to the susceptibility to infections (Falagas and Kompoti, 2006), and excess fat as measured by body-mass index is an impor- tant cause of most cancers (Larsson and Wolk, 2008; Renehan et al., 2008), yet the average caloric intake by consumers is up over what it was 20 years ago, and obesity has quadrupled (IFT e-Newsletter, October, 2005). Yet there is the apparently contradictory belief stated by many marketers that consumers are on a wellness kick—this is perversity of consumers, my elusivity. Today, obesity is considered to be of epidemic proportions. The z-axis rep- resents the elusivity of the recalcitrant, hard-to-find and hard-to-understand, volatile, and changeable customer who is targeted in the marketplace. Elusivity can be likened to market segmentation, the creation of a new mar- ket niche. If a product designed for the general public (a rare event—no product fits or satisfies all needs) is redesigned for the teenage market, that consumer has become more elusive and the market is being segmented. If this hypothetical product is redesigned again for teenagers of single parents, more elusivity is created. Marketing purists might cavil at this, claiming that this elusiveness is really a variant of the y-axis or marketplace complexity. It is not: it is not the volatility of the marketplace that is repre- sented, but the volatility, fickleness, stubbornness, and disbelief of consum- ers and customers within these marketplaces. What Is New Food Product Development? 17 Six numbered solids situated in Figure 1.2 represent typical problems faced by developers as they attempt to bring new products to market. Cube 1, at the origin, depicts the situation of an established, hypothetical product in a market regarded as home to a company. The company moves the product into a more complex (according to any of the factors described for the y-axis) marketplace (cube 2). The targeted customers and consumers have not changed. There are no new development costs getting into a new marketplace. Only costs associated with marketing (labels, promotional materials, and advertising), sales (brokers), and distri- bution increase. Cube 3 is the product but with added value (increased product complexity), but the product has stayed in the same (local) marketplace and targeted its regular (known) customers. Costs for the added value feature as well as for marketplace introduction of the new product (new by definition) and for pro- motional material to educate the old customers (and consumers) now escalate. In the situation represented by cube 4, the new product (with its added value) is introduced in a more complex marketplace. The company has simply expanded into a new marketplace with its new product. The targeted customers remain the same but in a new playing field. Researching the new market area brings increased costs because the old marketing and promo- tional strategies may not be suitable. Distribution costs increase. The company has found a new use (that is, a new market niche) for the origi- nal product: it is targeted now for an elusive consumer but in its local (familiar) marketplace (cube 5). This repositions our product for a new market. Some examples are as follows: a popular antacid is repositioned as a calcium supple- ment for elderly women; a hand cream proves to be an excellent insect repel- lent for campers; a well-known baking soda has a purpose as a refrigerator deodorant. Costs can again increase significantly to reach these new targets, which are more elusive. Such repositioning can be risky. A cosmetics company may not want their mystique to be associated with the sporting life and insect pests: a manufacturer of a habanero pepper hot sauces with a high content of phytochemicals of the capscaicinoid family may not want to enter the quasi- medicinal arena based on their product’s content of this nutraceutical. Now the company decides to move its product with its added value and reposition it for elusive customers in a market foreign to the company (cube 6). This represents the worst of all possible worlds as the following depicts; a manufacturer of Monterey Jack cheese reformulates it to contain medium chain length fatty acids (added value) for people with digestive disorders. Here, an established product has been repositioned into a healthcare market niche. Risks and development costs are high; promotion can be difficult. Figures 1.1 and 1.2 have been compared using potatoes but one could just as easily use cocktail carrots or in-store sushi products or even pre- pare roasted chickens. Prepared potato products (reformulated chips, hash browns, stuffed potato skins, etc.) drive technical complexity far to the right 18 New Food Product Development: From Concept to Marketplace (cube 3) and at the same time push market complexity into new market areas such as the leisure food category, food ingredient and food service markets (cube 4), and also a more elusive consumer (cube 6). 1.3.1 Product Life Cycles Every product has a life cycle as depicted in Figure 1.3a. The horizontal axis is a measure of time. The vertical axis is an index of a product’s acceptance measured as either volume of cases sold or sales dollars. Five distinct phases of the life cycle can be discerned: 1. The introductory period is heavily supported by promotions, in-store demonstrations, advertising, and slotting fees to gain introduction. Sales volume is initially low as customers and consumers are edu- cated about the product. 2. A strong growth period ensues when first-time customers begin repeat buying and more new consumers are attracted. There is (4) (3) (5) (2) (1) (a) +$ Case volume sales –$ (b) +$ Figure 1.3 Characteristics of products, their life cycles, and profit- ability: (a) Typical product life –$ cycle, (b) the profit picture, and (c) the contribution of Time new products to profitability. (c) What Is New Food Product Development? 19 positive acceleration of sales growth. Growth continues as new markets open, but continued promotion and expansion at the intro- ductory pace are costly. 3. A decline in sales begins. Growth accelerates negatively. 4. Next comes a no-growth period. Sales are constant, a sign of a stag- nating market. 5. The decline accelerates. Newly introduced competitive products adversely affect sales; customers and consumers become indifferent to the old product. Promotions cannot profitably maintain sales. There are life cycle curves for product categories as well as specific products within a category. Instant coffee, as a product category, could be described as being still in the growth phase as manufacturers introduce flavored instant coffees, and instant coffees are used as ingredients—an activity referred to as product maintenance. Nevertheless, the leading brands of instant coffee have changed places as their manufacturers go through different stages of the cycle at any given time. The sale of flour had for years been in a no-growth phase that was only slightly ruffled by the advent of cake mixes; now, it is enjoying a modest growth as many households are returning to the art of home baking, and cook book sales have become hot items as has the popularity of TV cooking shows and cooking classes. During the 1970s, meat prices soared because of a scarcity of beef, the sale of meat substitutes and extenders grew dramatically and then plummeted drastically when meat became plentiful and prices fell. Meat extenders never reached a no-growth phase (phase 4); their life cycle is best described as a spike. Meat substitutes or retextured meats survive in the dried soup category and the soup-in-a- cup products. Life cycle curves are as varied as the products they represent. 1.3.2 Profit Picture More revealing of the success of a product than sales is the profit brought in by those sales. The introductory phases have minimal net profit (see Figure 1.3b, phases 1 and 2). These bear the costs of past research and development, the heavy costs for promotion to get market penetration, and the retailers’ demands for slotting fees to obtain shelf space. Net profits outpace expenses during the latter part of the growth phase (phase 2, Figure 1.3b). The improvement continues in phase 3 but toward the end of this phase profits begin to drop off as customer and consumer demand drops due to inroads by the competition and costs for both market expansion and for support of the product against the competition. During the no-growth phase (phase 4), the company eventually sees the product as unprofitable—it costs too much to maintain. Manufacture ceases. To keep profits flowing and maintain viability of the company, replacement products must be ready for a launching. A sequential launch of two new 20 New Food Product Development: From Concept to Marketplace products (Figure 1.3c) maintains the company’s net profit picture. This tactic forces a company to have new products in various stages of development with some ready to launch; this requires an on-going research and development program. Bogaty (1974) suggests that for every one product on the national market, two should be in test marketing. For each of these, he sees four in the last stages of consumer testing and ultimately, working backward, 32 product ideas should be in screening stages. The cumulative profitability of success- ful new products promises a good return on investment. For these reasons, a company needs to be constantly investigating markets and marketplaces, customers, and consumers for new product ideas worthy of development. 1.4â ‡ Why Undertake New Food Product Development? The previous section highlighted two reasons to develop new products. First, very few products last forever—they die and must be replaced, or they are rebranded into something completely new. Second, successful new products contribute enormously to a company’s continuing profit picture. Each year, new products flood the marketplaces. Figure 1.4 shows new food product introductions for the period 1964 to 2008. During this period, the data roughly approximate to a sigmoid growth curve going from approx- imately 1000 introductions a year to over 20,000 a year. There is an initial nascent period from 1964 until the late 1970s and into the early 1980s. This is 2.5 Number of new food products (×104) 2 1.5 1 0.5 0 1964 1968 1972 1976 1980 1984 1988 1992 1996 2000 2004 2008 Year Figure 1.4 New food product introductions over a 45-year period. (Data courtesy of Mintel Global New Products Database [GNPD].) What Is New Food Product Development? 21 followed by a rapid growth period continuing for approximately 10–15 years. Then by the mid-1990s, there is a very mixed period of decline and growth until data become unavailable. During this 1964 to 2008 period, there are several periods of economic downturn. The criteria for estimating recessions, depressions, or simple eco- nomic downturns are varied according to which economic statistic is used: the 1960s started with an economic downturn and closed with one in 1969 with the in-between years rather difficult. There was another in the early mid-1970s; a more extensive one in the early 1980s; another in the early 1990s; a small decline in 2001; and the current economic decline we are now experi- encing that began in late 2007. These economic declines are marked by gray areas in Figure 1.4. The start and finish of these periods of economic decline and recovery are difficult to mark with precision: beginnings and endings vary with the particular criteria economists chose to mark economic declines and recoveries. (Usually declines and recoveries are preceded and succeeded by periods of economic turmoil before and after the economists’ signposts claim, for example, today [2009 and early 2010] economic indicators suggest a recovery, yet unemployment figures are high, retail sales disappointing, bankruptcies high, and personal debt at an all-time high.) Economic declines appear to have very little effect on new product introductions especially if one takes into consideration that any introduction may have been preceded by anywhere up to 18 months of developmental work. Generally accepted observations of “hard times” are fewer purchases of pre- pared meals, that is, a return to home preparation of meals; less eating out as expense accounts are cut, and upscale restaurants start to fold; and greater coop- eration among competitors occurs. Conflicting with these observations is the equally anecdotal observation that when the going gets to

New Food Product Development: From Concept to Marketplace

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