1 FST 253 Research and Development of Food Products.

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FST 253FST 253Research and Development of Food Products

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Why do you need a development process ?

Control cost and time An investment not a risk

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New Food Product Development Phases

Several distinct phases

Phases are not sequential

They overlap, are concurrent and interactive

May even return to conceptual phase

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Phases… (cont.)Company Objectives Perceived Need of Consumer

IDEAS

Feasibility Studies Consumer Research Financial Review

SCREENING

DEVELOPMENT Gold standard to Pilot

Production

Consumer Trials

Test Market

DataFlow

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The Phases:

1. Market Research Phase

2. Ideation Phase

3. Feasibility Assessment Phase

4. Development Phase

5. Testing Phase

6. Rollout Phase

7. Evaluation Phase

8. Maintenance Phase

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The Development Team

Cross-functional

Different departments

STAGE-GATE approach to product development

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Stage 0: Idea/ Planning and Situation Analysis Gate 1: Decision to do a preliminary investigation

Stage 1: Preliminary investigation/ Consumer Needs and Idea Generation Gate 2: Decision to build a business case

Stage 2: Detailed investigation and business case/ Concept Development Gate 3: Decision to go into development

Stage 3: Development/ Feasibility Confirmation Gate 4: Decision to go into testing and validation

Stage 4: Testing and validation/ Scale up Confirmation Gate 5: Decision to go into full production and market launch

Stage 5: Full launch and final report/Product Launch Gate 6: Project Termination

Stage 6: Post Launch Audit/ Key Learnings

Key Decisions throughout the Process

1 2 2 3 3 4 4 5 5 610 6

Idea ConceptBusiness Case

DevelopScale UpTest/ Validation

LaunchPost Launch Audit

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Market Research Phase

Identify market

Identify the market needs

Conduct focus groups

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Ideation Phase

Generate new product ideas

Reduce to management number

Define the concept

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Feasibility Assessment Phase

Make sure the ideas are feasible meet needs withstands critical analysis

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Development Phase

Develop the concept

This is the phase where the Culinologist is most involved

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Steps of the Development Phase

Research

Develop “Gold Standard” or benchmark

Develop prototype

Convert to plant friendly formulation

Document!

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Steps of the Development Phase..

Specs and procedures for plantSmall manufacturing run / PilotIn-house and consumer testingPackagingHACPP planNutritional infoFinal Spec SheetLegal issues

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During development process…

Data obtained during Development steps can be used to: Refine marketing costs Source out ingredients and packaging materials Draft marketing plans, labels, promotional

literature, etc. Determine production facilities Determine warehouse and distribution needs

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Each stage requires interaction with different departments

Product statement may change

Changes in the direction of product development

Can return to the “drawing board” numerous times

During development process…

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After consumer trials, company can decide whether or not to go into a test market Selection of test market Mini-market tests Regional launch

After development process…

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Evaluation

Evaluation of the test market correct weaknesses recognize strong points

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Maintenance

Make improvements

Pep up sales New use, new niche, added value

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Reasons for Success/Failure

Management strategic goals, commitment

Marketing Product appropriateness Sales strategy

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New Product Failures

Why? Poor planning Poor management Poor concept Poor execution

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Poor Planning Product does not fit company’s strategies,

competencies, or distribution strength Failure to properly analyze market in order

to understand opportunities present or specific unsolved consumer needs

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Poor Planning (cont.) Failure to understand cost to enter and

sustain position in product category Failure to perform due diligence in

discovering patent and copyright issues


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Poor Management Organizational culture Support and resources for new product

process Management’s expectations and focus Process used to develop products and

determine budget


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Poor management behaviors: No entrepreneur behavior Discourage or penalize risks Inadequate investment capital No cross-functional teams Demand immediate returns

Firms that do not invest in innovation won’t experience any innovation


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Poor Product Concept Lacks a compelling benefit A me-too item with no real and relevant

difference with existing products Does not have a defined market target with

adequate sales potential Introduced at the wrong time


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Poor Product Concept Incorrectly positioned product, such as

Benefits of a product that are irrelevant to the consumer

Consumer is unable to perceive a meaningful difference between brands

Thus, consumer sees no need to buy the product


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Poor Product Concept Can add to shelf clutter and consumer

confusion Fragmented product line, which increases

costs in production, distribution, and inventory control


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Poor Execution Products that do not deliver as promise

Lack taste and texture Packages that are difficult to open Deteriorates before expiry date

Extends to all areas of marketing plan Insufficient advertising, poorly scheduled

launch, fails to reach targeted consumer, fails to communicate product’s name, benefit, and availability


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Poor Execution Introduced too late Introduced too early

Campbell’s Intelligent Cuisine


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New Product Success

4 Basic Consumer Truths Product needs to deliver on the concept

promised Advertising quantity and quality matters Distribution drives sales Long-term support for new brands are

needed

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Other “truths” New items adds incremental dollars and

profit to both category and brand Enhances manufacturer’s and retailer’s

position Launches are carried out with minimum

disruption

New Product Success

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Other “truths” cont. Accompanied by product service plan and

consumer target plan Identification of activity-level costs

These are the back-end of the development process

New Product Success

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5 most important factors in distinguishing between a product winner and a loser:

1. Understanding of user’s needs

2. Attention to marketing and launch publicity

3. Efficiency of development

4. Effectiveness use of outside technology and external scientific communication

5. Seniority and authority of responsible managers

New Product Success

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The development of a new product is the development of every aspect of the business that the product needs to be successful

Consistently successful new products need every aspect of the business working in harmony

New Product Success

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New Product Success 12 Requirements that are needed for aproduct to be successful:1. Appropriate organizational environment and

top management support2. A disciplined new product development

process3. Dedicated development teams plus the

willingness and ability to partner and outsource

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New Product Success (12 reqs.)4. Product development activities that start

with and flow from business unit strategy

5. Understanding the external environment and identifying market opportunities that fit core competencies

6. Identification and specification of what is driving the consumer and what the consumer wants

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New Product Success (12 reqs.)

7. Processes and techniques for keeping the pipeline filled with a wide variety of product ideas

8. Clear and focused product definition early in the process before development work begins

9. A superior and differentiated product and package

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New Product Success (12 reqs.)10.Use of research to measure reaction to

the product and all elements of the program throughout the development process

11.A well-executed launch

12.Ability to adapt, grow, and improve as market and competitive condition evolve

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1. An appropriate organizational environment and top management support

Nurturing of innovative thinking

Support risk taking

Ability to sustain losses from first to third year

Committed to putting right team together with adequate resources

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Need for completeness, consistency, and proficiency

Realistic but disciplined timetables

Proper up-front planning is critical

2. Use of a disciplined new product development process

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3. Dedicated development teams plus the willingness and ability to partner and

outsource

Use of cross-functional teams Enhances speed to market Facilitates implementation of projects

Food processors are using suppliers expertise and resources

Manufactures are partnering with each other and with suppliers

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4. Product development activities that start with and flow from business unit strategy

Product development must be a part of overall business unit strategy, stemming from clearly articulated objectives for business growth

Financial and human resources must be available

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5. Understanding the external environment and identifying market opportunities that fit core competencies

Identifying “gaps” that are created by changing consumer tastes that are driven by changes in the marketing environment Demographic, socioeconomic, and lifestyle

changes Advances in technology

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6. Identification and specification of what is driving the consumer and what the consumer wants

Unsatisfied consumer needs represents potential new product opportunities Understanding customers needs, wants,

and preferences E.g. Pre-cut salads

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7. Processes and techniques for keeping the pipeline filled with a wide variety of product ideas

Consistently identify and screen a large multitude of new ideas through a systematic process and set of techniques E.g. Kraft Foods

Ideation requires encouragement and reward for creativity and excellent market intelligence

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8. Clear and focused product definition early in the process before development work begins

Need to identify target market, product concept and positioning, and consumer benefit to be delivered first

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9. A superior and differentiated product and package

A superior product must be: innovative, possessing unique features,

meeting customer’s needs better, delivering higher relative product quality and solving the customer costs.

E.g. Frito-Lay’s Baked Lays

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10. Use of research to measure reaction to the product and all elements of the program throughout the development process

Continuous market studies

Continuous refinement and evaluation of product

Thorough testing of product

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11. A well executed launch

Defined as: setting specific goals and targets for

market performance running initial production, distribution and

selling it to the trade implementing the advertising and

promotional programs tracking all of these activities relative to

goals and targets

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11. A well executed launch (cont.)

Success measured in 4 key areas:1. Production and distribution

2. Sell-in

3. Consumer reaction

4. Overall performance

Launch must be tracked to determine success

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12. Ability to adapt, grow, and improve as market and competitive condition evolve

Firms plan to ensure market success via contingency planning and to continuously improve the product bundle Establishing scenarios of market and

competitive reaction Monitor reaction Having alternative strategies available

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Product Policies and Goals

Needed for new project success Consistent approach to new products Charter to guide new product development

efforts Management of a portfolio of development

process Specific projects selection criteria

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Product Development and New Business Strategy

Strategic Plan will identify business objectives, time frames, and direction for achieving growthMarketing decisions made at: Organization level Business unit level Product line level Brand level

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Organization Level

Determine what business the organization wishes to compete in E.g. Kraft E.g. Proctor & Gamble

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Business Unit Level

Choose:1. The market/s to serve

2. Product line that will serve these markets

Decide how to allocate resources to serve across those product lines and customers

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Product Line Level

Which items to carry

How broad or narrow and how deep or shallow should the line be

Tactical decisions such as positioning, advertising, pricing, and packaging

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Brand Level

Monitors product/line performance position and advertisement promotion and pricing packaging and distribution

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Strategic Business Plan

Specifies the financial objectives

Specifies the avenue for growth

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Role of Top Management in Setting New Product Strategy

Identified as:

Direction setter

Product line architect

Project portfolio manager

Process owner/creator

Team launcher

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Strategic Approaches in the Food Industry

Example: Nabisco changed it’s vision in order to meet it’s

stated goal Reviewed its own basic competencies Renewed emphasis in and growing core

brands

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New Product Opportunity Analysis

Involves ongoing environmental scanning

Systematic procedure for evaluating whether opportunities fits objectives

Flows from the business plan

Must be disciplined and directed

Ideally started in existing product lines

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Need to expand beyond current categories in order to locate emerging needs May result in potentially higher investment

and greater risk

Must focus on categories that fit organizational competencies


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Factors to consider in evaluating market opportunities: Increasing interest in a new product benefits Category size, as measured in sales Category growth rate, as measured by the rate of

increase in sales Category margins Number and rate of new buyers in the category Degree of brand switching (a measure of customer

loyalty and product appeal)


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Factors to consider (cont.) Stage of the category life cycle, indicated by rate

of growth in sales, and nature and extent of competition

Amount of product/band differentiation Recent innovation in the category Innovations in related fields that have potential

applications in the category Number of competitors

Market shares of competitors

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Factors to consider (cont.) Technology position of competitors Barriers to entry and barriers to exit: access to

raw materials, capital requirements, proprietary technology, economies of scales, customer-switching costs

Advertising and promotional expenses to sales ratios in the category

Seasonality of sales

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Understand the consumer and what they are seekingOpportunity high in: Products in early stage if life cycle Products with high margin and growth Products with few recent innovations Products without entrenched and dominant

competition

Avoid categories with high barriers to entry/exit


1 FST 253 Research and Development of Food Products.

Documents

development stage

product development

development process

development phase research

conceptual phase slide

maintenance phase slide

development steps

market research phase