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THE MYSTIQUE AND MYTHOLOGY OF NEW PRODUCT DEVELOPMENT

ToAPO Training Course on Value Addition

to Agricultural ProductsJuly 22 – 24, 2009

From

Dr. Navam HettiarachchyUniversity Professor

Department of Food ScienceUniversity of Arkansas Fayetteville, AR, USA

Email: nhettiar@uark.edu

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OVERVIEW What you will learn

Characteristics of classes of new products

Innovative and creative new products

Product line extension and reformulation

Development process as an integrated system

Summary

References

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LIFE BLOOD OF FOOD COMPANIES

REWARDS OF NEW PRODUCTS

FAILURES – SEVERE FINANCIAL

LOSSES, ENDURE LOSS OF FACE

WHAT YOU WILL LEARN

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HOW WILL YOU DEFINE A NEW PRODUCT?

“A PRODUCT NOT PREVIOUSLY MANUFACTURED BY A COMPANY AND INTRODUCED BY THAT COMPANY INTO ITS MARKETPLACE OR THE PRESENTATION BY A COMPANY OF AN ESTABLISHED PRODUCT PERHAPS IN A NEW FORM OR INTO A NEW MARKET PREVIOUSLY EXPLORED BY THAT COMPANY” Fuller, 2005

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CHARACTERISTICS OF CLASSES OF NEW PRODUCTS

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WHAT ARE THE CHARACTERISTICS OF A NEW FOOD PRODUCT AS INTRODUCED BY A

SPECIFIC COMPANY?

NEVER BEEN MANUFACTURED, AND DISTRIBUTED BY THAT

COMPANY BEFORE

AN OLD ESTABLISHED PRODUCT: IS INTRODUCED INTO A

GEOGRAPHICALLY NEW AREA

INTRODUCED EITHER IN A NEW PACKAGE OR A NEW SIZE

OR FORM

INTRODUCED INTO A NEW MARKET NICHE WITH A NEW

FUNCTION

Fuller, 2005

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General Characteristics of Classes of New Food Products

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Types of New Product

General Characteristics

Line Extensions Little time or research is required for development.No major manufacturing changes in production lines or

major equipment purchases are required.Relatively little change in marketing strategy is

required.No new purchasing skills (commodity trading) or raw

material sources are required.No new storage or handling techniques for either the

raw ingredients or the final product are needed. This means regular distribution systems can be used.

Repositioned existing product

Research and development time is minimal.Manufacturing is completely unaffected.Marketing must develop new strategies and

promotional material to interpret and penetrate the newly developed market niche.

Sales tactics require re-evaluation to reach and make sales within the new market places. Cont’…

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General Characteristics of Classes of New Food Products cont…

Types of New Product General Characteristics

New form or size of existing product

Highly variable impact on research and development.

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 require extensive programming.

Reformulation of existing product

Moderate research and development required with reformulation goal.

Generally little impact on physical facilities.Generally little impact on marketing and sales

resources unless reformulation leads to repositioning of product.

Cont’…

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General Characteristics of Classes of New Food Products cont…

Types of New Product General Characteristics

Repackaging of existing product

The novelty of repackaging will dictate the amount and degree of research and development required.

Slight impact on physical facilities. New repackaging equipment will be required.

Little impact on marketing, sales and distribution resources.

Innovative products Amount of research and development dependant on the nature on innovation.

Highly variable impact on manufacturing capabilities.

Possible heavy impact on marketing and sales resources.

9Cont’…

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General Characteristics of Classes of New Food Products cont…

Types of New Product General Characteristics

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 or unique equipment.

Will require total revision of marketing and sales force. Creation of a new company or brand may be required.

Risk of failure is high.

10Fuller 2005

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INNOVATIVE AND CREATIVE NEW PRODUCTS

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INNOVATIVE PRODUCTS WHAT IS AN INNOVATIVE PRODUCT?

“one resulting from making changes to an existing product”

Can be costlier and riskier

New ingredients can be the basis for innovative products

E.g. Simulated crab legs, shrimp – based on Surimi technology – sea food dishes

http://www.handsofhopedisasterreliefservices.org/b2b/pics/Surimi__Pure_Meat_Fish_.jpghttp://img1.tradeget.com/lynnhaha/1D5JQV6B1imitationsurimicrabflakes1.jpg

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CREATIVE PRODUCTS THE ONE NEWLY BROUGHT INTO EXISTENCE: THE

RARE NEVER-BEFORE-SEEN PRODUCT

EXAMPLES: TOFU, BEAN CURD, REFORMED MEAT PRODUCTS, EXTRUSION FOR PUFFED PRODUCTS

TRULY CREATIVE PRODUCTS HAVE GREATER COSTS AND DEVELOPMENT TIMES THAT MAY BE MEASURED IN YEARS RATHER THAN WEEKS OR MONTHS

http://utopiankitchen.files.wordpress.com/2007/02/pesto-stuffed-tofu.jpghttp://www.vegansoapbox.com/wordpress/wp-content/uploads/2009/01/tofu1.jpg

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ADDED VALUE DEGREE OF INNOVATION OR CHANGE THAT MAKE A PRODUCT

MORE DESIRABLE TO CONSUMERS

BETTER COLOR, TEXTURE, CONVENIENCE

IMPROVED STABILITY, FUNCTIONALITY, ETC. EXAMPLE: PRE-PEELED FRENCH FRY-CUT POTATOES

WHAT ARE THE PROBLEMS?

SPOILAGE, MARKETING AND SALES TECHNIQUES

PREPARED HASHBROWN, BAKED POTATOES, PARTIALLY COOKED FRENCH-FRY STYLE CHIPS, STUFFED POTATOES ETC.

BRAND NAME

http://www.lutosa.be/files/produits/catalogue/consommateurs/large/hash-brown.jpg http://caseman.files.wordpress.com/2008/08/mccain-fries1.jpg

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CUSTOMERS AND CONSUMERS

WHO IS A CUSTOMER? ONE WHO BUYS IN A MARKET PLACE

WHO ARE THE GATEKEEPERS? FAMILY MEMEBRS, PURCHASING DEPARTMENT OF COMPANIES, CHEF’S, OWNERS – PET FOODS

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WHO IS A CONSUMER? ONE THAT USES THAT WAS PURCHASD BY

THE CUSTOMER

MARKETING AND SALES PERSONNEL MUST UNDERSTAND THE DISTINCTION BETWEEN A CUSTOMER AND A CONSUMER

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MARKETS AND MARKET PLACES WHAT IS A MARKET? A NEED DISCOVERED IN

CUSTOMERS AND CONSUMERS THAT MARKETING PERSONNEL HOPE TO DEVELOP INTO A WANT, A POTENTIAL TO SELL PRODUCT – ORGANICALLY GROWN PRODUCE, LOW-CALORIE FOODS ETC.

WHAT IS A MARKET PLACE? REAL PHYSICAL ENTITIES – FARMERS MARKET TO GIANT FOOD STORES

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WHAT ARE THE MARKETING CHARACTERISTICS OF NEW PRODUCTS? Cont…

NEW FOOD LEGISLATION AND REGULATIONS OR MARKETING CUSTOMS NEED TO BE FOLLOWED

THE GENERAL ECONOMY OF THE COUNTRY AND SPECIFIC ECONOMIC FACTORS IN THE AREA BEING SERVICED ARE ALTERED DRASTICALLY

THE LEVEL, AVAILABILITY, OR LACK OF MARKETING SKILLS WITHIN THE COMPANY TO MEET THE ABOVE CHALLENGES

THE GEOGRAPHY OF THE MARKET AREA AS WELL AS THE DIFFICULTY OF SELLING NOVELTY, OR EDUCATING THE CONSUMER PRESENT PROBLEMS

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PRODUCT LIFE CYCLE

Fuller, 2005

Characteristics of products, and their life cycles. (a) typical product life cycle; (b) the profit picture

Time

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INTRODUCTORY PERIOD – SUPPORTED BY PROMOTIONS, IN-STORE DEMONSTRATIONS, AND ADVERTISING

STRONG GROWTH PERIOD – FIRST TIME CUSTOMERS BEGIN REPEAT BUYING AND NEW CONSUMERS ARE ATTRACTED

DECLINE IN SALES VOLUME. GROWTH ACCELERATES NEGATIVELY

NO-GROWTH PERIOD. SALES ARE CONSTANT – SIGN OF STAGNATING MARKET

PRODUCT LIFE CYCLE

Fuller, 2005

http://www.tabpi.org/2005/fcp24.jpg

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WHY UNDERTAKE NEW FOOD PRODUCT DEVELOPMENT?

BETTER MARKET AND CONSUMER RESERCH – HELPED COMPANIES REMOVE POTENTIAL PRODUCT FAILURES MUCH EARLIER IN THE DEVELOPMENTAL PROCESS

RETAILERS ARE GIVING MORE ATTENTION AND SPACE TO THEIR OWN PROVATE LABEL PRODUCTS

PRODUCT SATURATION IN SOME PRODUCT CATEGORIES

Fuller, 2005

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WHY UNDERTAKE NEW PRODUCT DEVELOPMENT? ALL HAVE LIFE CYCLES. EVENTUALLY THEY DIE AND MUST BE

REPLACED OR REVIGORED BY HEAVY MARKETING, CONSUMER ACCEPTANCE

OFFER THE OPPORTUNITY FOR AGGRESSIVE GROWTH FOR LONG RANGE GOALS

NEW MARKETS MAY BE CREATED. EG. ORGANIC OR FUNCTIONAL FOODS

NEW KNOWLEDGE AND ADVANCING TECHNOLOGIES – NEW PRODUCTS FOR HEALTHY LIFE STYLE

CHANGES IN GOVERNMENT LEGISLATION, HEALTH PROGRAM, AGRICULTURAL POLICY, OR AGRICULTURAL SUPPORT PROGRAMS - DEVELOPMENT OF NEW PRODUCTS.

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TECHNOLOGICAL REASONS FOR NEW PRODUCT DEVELOPMENT

MARKET PLACE REASONS FOR NEW PRODUCT DEVELOPMENT

TECHNOLOGICAL PRESSURES FORCING NEW PRODUCT DEVELOPMENT

GOVERNMENTAL INFLUENCES PUSHING NEW PRODUCT DEVELOPMENT

WHY UNDERTAKE NEW PRODUCT DEVELOPMENT? Cont’…

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Various Food Business Activities over Which Goverments in Different Forms and at Different Levels

Exert Influence

Activity InfluenceFiscal policy Interest rates for development loans

Grants–in-aid; research fundingTaxation policy

Patents and Copies Copy right protection and licensingResearch funding if guarantee of patent protection

Trade barriers Tariff and protectionismStandards of food product identityAvailability and cost of ingredients

Environment protection Waste disposalRecycling or reuse requirements of

packaging materialsEnergy utilization and disposal

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Cont’…

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Various Food Business Activities over Which Goverments in Different Forms and at Different Levels

Exert Influence Cont’…

Activity Influence

Marketing and trade practices

Product or advertizing claimsBillboard and advertising placementsStore hoursContainer sizes

Employment practices OSHA and worker safetyUnemployment benefitsMinimum wage levels

Health policy Nutritional guidelinesNutritional labeling

Agricultural policy Support programs for commoditiesAvailability of commodities

Consumer protection Product safety; safety of agricultural chemicalsLabeling; product names; comparative advertisingInspection services

25Fuller, 2001

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PHASES IN NEW FOOD PRODUCT DEVELOPMENT

DEVELOPMENT OF A BUSINESS STRATEGY THAT DESCRIBES THE PROJECT

RESEARCH AND DEVELOPMENT PHASE – MANUFACTURING DESIGN

DEVELOPMENT OF PROGRAMS FOR MARKETING, PRODUCTION, AND QUALITY ASSURANCE

ORGANIZATION OF THE PRODUCTION AND DISTRIBUTION FOR THE LAUNCH AND THE ANALYSIS OF LAUNCH SALES DATA

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http://www.capewinelands.gov.za/Portals/30/MuncipalHealthServices/FoodControl.jpg http://www.lib.ncsu.edu/exhibits/

sodfather/images/timeline66.jpg

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PRODUCT LINE EXTENSION AND REFORMULATION

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WHAT ARE LINE EXTENSION PRODUCTS?

EXTENSION OF A FAMILY OF SIMILARLY POSITIONED PRODUCTS

A FAMILY OF CONFECTIONERY PRODUCTS – CHILDREN TO ADULTS

FLAVORS. DIFFERENT PROMOTIONS, ADVERTISEMENTS, AND STORE PLACEMENTS FOR THE ADULT PRODUCTS CONSIDERATIONFuller, 2005

http://www.tredegars.com/userimages/Confectionary.jpg

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REPOSITIONING EXISTING PRODUCTS

CONSUMERS IDEA FOR A NEW USE

ARM & HAMMER BAKING SODA – NEW USE –BODY DEODORANT AND DEODORANT FOR FOOD ORDORS-REFRIGERATORS

WHAT DO THESE REQUIRE?

EXTENSIVE MARKETING DEVELOPMENT – NEW MARKETS –BRAND EXTENSION MAY NOT BE SUITABLE Fuller, 2005

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NEW FORM OR SIZE OF EXISTING PRODUCTS

EXISTING PRODUCT INTO A NEW FORM: A PASTE PRODUCT INTO A POWDER – MUST BE CONSIDERED AS AN ADVANTAGE BY CUSTOMERS AND CONSUMERS Fuller, 2005

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REFORMULATION OF EXISTING PRODUCTS

“NEW IMPROVED” PRODUCTS

WHAT ARE THEY?

BETTER COLOR, BETTER FLAVOR, MORE FIBER, LESS FAT, GREATER STABILITY, FEWER CALORIES, TO MATCH THE COMPETITOR OR FIT IN WITH TRENDS

UNAVAILABLITY OF A RAW MATERIAL – REFORMULATION TO OVERCOME SCARCITY

NEW TECHNOLOGIES AND CHEAPER INGREDIENTS – IMPROVED CHARACTERISTICS AND PROPERTIES

TO LOWER THE COST OF THE PRODUCT TO COMPETE WITH CHEAPER PRODUCTS

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http://www.schrempp.us/ww/food/Icecream.JPG

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REFORMULATION OF EXISTING PRODUCTS Cont…

REGULATORY AGENCIES HAVE ALTERED THE LEGAL STATUS OF AN INGREDIENT OR ADDITIVE – COLOR ADDITIVES, AND ARTIFICIAL SWEETENERS. SAFETY OF NUTRACEUTICALS – KAVA KAVA, St JOHN’S WORT

CREATE NEW MARKET NICHE FOR EXISTING PRODUCTS – FEWER CALORIES Fuller, 2005

http://images.iherb.com/NOW-04717-l.jpghttp://www.thesuperfoodco.co.uk/images/st-johns-wort-capsules.jpg

http://static.howstuffworks.com/gif/artificial-sweeteners-1.jpg

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NEW PACKAGING OF EXISTING PRODUCTS NEW TECHNOLOGIES: CONTROLLED AND MODIFIED

ATMOSPHERE –CREATION OF NEW PRODUCTS- SHELF LIFE EXTENSION

BIOBASED MATERIALS – SAFETY OF PACKAGING FILMS

METAL TO GLASS CONTAINERS – A NEW PACKAGING LINE

GLASS CONTAINERS TO PLASTIC SQUEEZE BOTTLES WITH SNAP-CAP LIDS FOR DISPENSING MUSTARD, KETCHUP

CYLINDRICAL CONVENTIONAL CAN TO THE POUCH - THERMALLY PROCESSED FOOD REQUIRE REFORMULATION - FASTER HEAT PENETRATION – RECALCULATION OF THERMAL PROCESS-EXTENSIVE CHANGES TO THE PACKAGING LINE REQUIRED

Fuller, 2005

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DEVELOPMENT PROCESS AS AN INTEGRATED SYSTEM

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DEVELOPMENT PROCESS AS AN INTEGRATED SYSTEM

ANALYZE SOCIO-ECONOMIC DEVELOPMENTS IN A PARTICULAR MARKET

TRANSFER PREFERENCES AND PERCEPTIONS OF CONSUMERS INTO CONSUMER CATEGORIES

CHANGE CONSUMER CATEGORIES INTO “PRODUCT ASSORTMENTS”

GROUP “PRODUCT ASSORTMENTS IN PRODUCT GROUPS INTO DIFFERENT STAGES OF THE FOOD SUPPLY CHAIN”

IDENTIFY PROCESSING TECHNOLOGIES REQUIRED FOR PARTICULAR PRODUCT GROUPS

ANALYZE THE STATE OF THE ART IN REQUIRED PROCESSING TECHNOLOGIES

COMPARE THE STATE OF THE ART OF REQUIRED PROCESSING TECHNOLOGIES WITH FUTURE NEEDS

Fuller, 2005

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PHASE IN NEW FOOD PRODUCT DEVELOPMENT

Company Objective

Ideas

Perceived Needs of Market

Development- Bench-top- Pilot plant

Consumer Trials

Screening

Consumer Research

Financial Review

Feasibility Studies

Production

Test Market

Product ProgressionData Flow

Fuller, 2005

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SCREENING CRITERIA USED

IS THE IDEA FEASIBLE WITHIN THE TIME FRAMEWORK REQUIRED BY THE MARKETING DEPARTMENT – ANSWERS FROM MARKETING, MANUFACTURING, ENGINEERING, AND RESEARCH AND DEVELOPMENT DEPARTMENTS

DOES THE IDEA MEET PERCEIVED CONSUMER AND CUSTOMER NEEDS? DOES IT RESOLVE THE CONFLICT OF “I WANT” VS. THE CUSTOMER’S “I NEED”?

WILL A FINANACIALLY SOUND BUSINESS PLAN BASED ON THESE NEW PRODUCTS STAND UP TO CRITICAL ANALYSIS AND MEET OBJECTIVES SET BY MANAGEMENT?

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Idealized representation of activities flow in product development

CONCEPTObjective Testing

Consumer Preference

Testing

Process Design

Product Design

Pilot Plant Production

Bench-top Product

Subjective Testing

Commercial Plant

Production

Market Test &

Evaluation

Pilot Process

Plant Production

Fuller, 2005

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SUMMARY

PURPOSE OF DEVELOPING A PROCESS: MOVE A DESIRABLE PRODUCT TO THE

MARKET

WITH SUCCESS IN THE SEGMENT OF THE MARKETPLACE WHERE IT IS GOING TO COMPETE

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References Fuller, G.W. 2001. Food, consumers, and the food industry: Catastrophe or

opportunity? Boca Raton: CRC Press LLC. Fuller, G.W. 2005. New food product development: From concept to

marketplace, 2nd edition. Boca Raton: CRC Press LLC. Friedman, M. 1990. Twenty-five years and 98,900 new products later …. Prep

Foods 159:23- Harris, J.M. 2002. New food product introductions continue to decline.

FoodReview, Economic Research Service, USDA. 25:24-27. Kantor, D. 1991. New product proliferation: are the benefits worth the cost?

Prep Foods 160:28

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