Moving Beyond Expectations

February 1, 2007
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Moving Beyond Expectations

Dairy's got health and wellness on its side, but consumers want more.
Welcome to Dairy Field’s new Product Roundup, a Preview of the Latest and Greatest Offerings From Dairy Processors That Continue to Find new Ways to Satisfy Consumers’ Evolving Demands.
Brand managers and R&D teams were an active bunch in 2006, launching nearly 1,100 new dairy food products addressing virtually every need for taste, nutrition and convenience. This roundup is meant to provide a look at some of the newest items you might have missed, a peek at things to come and an outline of the trends that will be guiding the creation of even more new products in 2007.
It’s clear through discussions with processors during our many trips into the field that dairy is competing with nearly every other food product, not just other dairy companies, for share of stomach.
To that end, we thought it useful to present information gathered by one of our sister publications, Stagnito’s New Products Magazine, to show how the food industry as a whole is leaning in terms of following trends and consumers expectations in developing new products. We also present analysis from the folks at Mintel’s Global New Products Database of the dairy product scene. — Jim Dudlicek
Last Year’s Trends Are Now Expectations
In developing new products, please don’t confuse 2007’s latest trends with those of 2006. The “healthy” and “natural” trends of last year are now consumer expectations. “Portion control,” however, which was so hot 12 months ago, is apparently of much less interest to consumers at this time. That “convenience” trend of 2005 and prior is simply something consumers must have, say 78 percent of processors. This is the year for R&D to turn its attention to “organic” and “energy boosting” ingredients. In most cases, even yesteryear’s lows — fat, sugar, salt and calories — are simply expected.
The findings contained herein are based on survey data from 500 food and beverage processors where almost half the respondents’ firms have annual revenue of more than $100 million. Three percent report never having an unsuccessful new product launch.
This report discusses new product development planning, resources, trends, flavors and advertising across seven food and beverage categories: dairy; snack food and candy products; beverages; bakery; meat, poultry and seafood; and prepared foods.
Overall Trends
Let’s begin with failure as a way to emphasize the risk in new product development. Although much risk can be hedged through marketing, processors should consider research homework on how to avoid a flop. “I believe we used the ready-fire-aim concept more than the ready-aim-fire concept,” is the way one processor describes the perils of not doing homework.
The most frequently mentioned reason for an unsuccessful launch due to poor marketing is a lack of market research. “Our assumption that our tastes were consumer tastes,” explains how to fail. “We created a great product, but didn’t take the time to test the market to see if it would be wanted — and it wasn’t,” says another. A “lack of compelling consumer insight,” “no consumer-testing before launch,” and “not enough of consumer research/focus groups,” are other mentions.

Also, 22 percent of unsuccessful launches are attributed to product errors. “We reacted to a customer who specified flavors that were not acceptable to the end consumer,” is one non-flyer. Twenty-one percent fail due to poor planning. “No Stage Gate process, no forethought,” is acknowledgement of a missing plan. However, data show that all good things — more new products, more R&D funding, and new customers — come to processors with a plan. Those with a plan successfully launch 30 percent of the new products developed by R&D; those without a plan successfully launch 14 percent of the new products developed by R&D. The data show that processors without a plan develop many more new products than they release to market. This year, 56 percent of processors with a plan will release more new products to marketing. Those without a plan will be increasing the number of new products released 45 percent of the time. This year, 43 percent of processors with a plan are in a position to increase their R&D budget. For processors without a plan, 30 percent will have more R&D money.
What’s Hot
Most processors believe that new products containing one or more of the following characteristics are currently needed in the market place. These include, in descending order of need-frequency: organic, energy boosting (especially in snacks and beverages), natural ingredients, ethnic flavors and whole grain. Developing new products in 2007 that have one or more of these attributes will provide the least risk to processors.
In addition to new trends, this report finds that old trends have become consumer expectations. “Convenience” in new products is something four of five processors believe consumers must have. Other must have trends are less clear cut, but the data show consumers want “indulgent” new products that are also low in fat, sugar, salt and calories.
When processors are ambivalent about product characteristics, these should be considered ideas with the greatest risk. Here we find one-third of processors reporting a trend, while another third believe consumers are not interested. This risk-list includes gluten free, low glycemic, spicy/hot, high fiber, portion controlled and vitamin and/or mineral fortified. Focusing new product development in these areas will carry the highest risk to processors.
New Dairy Products
New dairy products include ice cream/frozen desserts, cheese, yogurt, cultured products, and milk. Hot selling flavors for ice cream and yogurt this year will be fruit, including acai, pomegranate, tropical, lychee, blueberry, black current, exotic, goji berries, key lime, noni and passion fruit. Top flavors for cheese will be spicy — chipotle being the favorite; milk will be about adding fruits, coffee or vanilla.
New dairy products are leveraged on advertising and trends. Dairies report advertising success with retail promotions, sampling, POP/in-store demos and coupons. Although too expensive for some, consumer magazines, direct mail and trade magazine are tried and true ways of helping a new dairy product fly.
The data show consumers expect dairy items to be “healthy,” “indulgent” and “portion controlled.” It is important to note that there is less expectation that new dairy products have lowfat, low calories or low sugar.

R&D and sales and marketing are the top team members followed by management, which is likely the chief executive officer who has a defined role as advisor. Suppliers are available to 80 percent of dairies where they are involved in new product development at the inception/idea stage all the way through to product completion.
Dairies devote 3 percent of their work force to new product development. Most do not outsource this type of work. This year, 43 percent will have more R&D dollars, 44 percent will operate at last year’s levels, and 13 percent will have less money. Those with extra money will invest in more new products, additional staff and growth.
Three of four dairies can develop new ice creams and yogurts in less than nine months. New cheese and milk products take a bit longer.
Two-thirds of dairies have a definitive new product development plan. Final product development, production and launch are the most important stages. Unlike any other category of food and beverage processors, the most frequently used research method at dairies is one-on-one interviews.
Study Methodology
Five hundred food and beverage processors completed questionnaires via a URL link for Stagnito’s New Products Magazine’s 7th Annual New Product Development Report. The number of responses means that the results are at the 95 percent confidence level ±4.3 confidence interval.
Thirty-one percent of processors in the sample create snack foods and candy products, 27 percent create new drinks, and 27 percent are bakeries. Twenty-seven percent develop prepared meat, poultry and seafood, 26 percent create new prepared foods, 18 percent are dairies, and 16 percent develop new prepared fruits, vegetables and condiments. These add up to more than 100 percent because many processors develop new products in multiple categories.

Overall, 43 percent of respondents are from research and development, 35 percent are from sales and marketing, and 30 percent are from upper management. Quality control accounts for 7 percent of respondents. Packaging, production and purchasing are also represented.
Find more trend information on other food industry segments at www.newproductsonline.com.

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