R &D and its importance to food and beverage companies has been emphasized by many processed foods companies’ struggles to keep up with fast-changing consumer trends.
Within a week of each other, two major companies, Diamond Foods and Nestle, each opened a new R&D center to demonstrate their commitment to innovation. And those are just two of the more recent examples.
Innovation at Diamond Foods
In July, Diamond Foods officially opened its new innovation center in Salem, OR, which brings together all of the company’s R&D talent, including two specialists who have been with the company for more than 15 years, and other multi-disciplinary team members. The innovation center is responsible for everything from recipes and varieties to packaging and launch efforts. Though the center’s primary objective is to support Diamond Foods’ current brand portfolio, the company is open to expanding that portfolio if an opportunity warrants a new brand, according to Holly Mensch, vice president of innovation at Diamond Foods.
"Across the board our brands are growing, supported in part by current consumer trends, including the increasing popularity of snacking and consumer desire for clean-label foods, both core to the Diamond Foods business," said Mensch. "All brands in our portfolio have strong equities that could be further strengthened from innovation. There is an incredible amount of untapped potential that wasn’t leveraged over the years and now we are aggressively going after it."
Nestle re-envisioning frozen foods
About a week later, Nestle announced its own $50 million Nestle Research & Development Center in Solon, OH, which is "dedicated to transforming the way the world enjoys frozen and chilled foods," according to a news release.
Sean Westcott, head of the new Nestle R&D Center, outlined one part of the massive 144,000-square-foot facility, the Consumer Connect space, which has four mini-kitchens. Nestle invites consumers in, gives them a task, and then observes them as they perform it to gain a deeper behavioral understanding. That data then enables Nestle to determine innovations in cooking methods, packaging, portion size, ingredients, and other aspects of food production.
Westcott said the center is also focusing in part on what they call breakthrough innovations, or technology that could change the way a kitchen functions, which might present opportunities for new products in the frozen category.
"Part of our work is working with, for example, appliance manufacturers, looking at how they’re developing new ovens, microwaves, or new technology for cooking," said Westcott. "We’re working closely with them to figure out how they’re going to bring that technology to market, which could very well lead to new brands [for Nestle]."
R&D and innovation centers spread industry-wide
Nestle and Diamond Foods aren’t the only food and beverage companies to open up new R&D centers over the past few years.
WhiteWave Foods, a spinoff of Dean’s Foods which creates organic milks and plant-based products, is currently getting used to its new 66,000-square-foot Technical Innovation Center in Louisville, CO, which is more than three times the size of its previous test kitchen space in Broomfield, CO. The facility’s creation is well timed with WhiteWave’s expansion through acquisitions, including So Delicious, Earthbound Farm, Vega Foods, and most recently, Wallaby.
Earlier this month, Syngenta announced it had broken ground on a $20 million expansion of the Syngenta North America Seedcare Institute in Stanton, MN, a global leader in seed treatment research facilities. The expanded facility will enable Syngenta to more quickly develop and bring to market new seed treatment products and technology as well as meet increasing demand from farmers and seed companies.
A renewed focus on product development
With or without new R&D centers, many food and beverage companies are turning to product development as a way to generate growth for their brands, particularly processed foods and beverages that are being shunned by some health-conscious consumers.
PepsiCo has seen its R&D efforts increase under the leadership of CEO Indra Nooyi, who has doubled R&D in her tenure. This has led to such innovations as the 3D-printed Deep Ridged Chip and Gatorade pods. Like other companies, PepsiCo has taken strides toward health foods, as many consumers have asked for, having focused on protein bars and Quaker Oats products in recent years. But PepsiCo products deemed to be "junk food" are still very popular, so the company hasn’t stopped innovating in that segment either.
Hormel turned its R&D goals toward snack foods earlier this year, having released such products as Skippy P.B. Bites, Spam Snacks, which use proprietary technology, and Jennie-O All Natural Turkey Breast Sticks. With these product developments, Hormel is responding to two distinct consumer trends: portability and protein.
In March, Diageo pledged to boost its product innovation from accounting for 13% of its business to 20% of its business in the next five years. This will be an important part of Diageo’s strategy to boost sales in North America, its largest market, where the company saw volumes decline by 3% last quarter. The company will likely focus its efforts on growing its premium brands, such as Don Julio tequila, Buellit bourbon, and Ciroc vodka, as the premium category is a growing force in the spirits industry.
Kellogg and General Mills both had massive new product rollouts over the summer, many of which were developed around adapting to consumer preferences. These include Kellogg’s Origins line of cereal, granolas, and muesli, and General Mills’ Yoplait Plenti, which capitalizes on the fast-growing Greek yogurt movement seen in today’s yogurt industry.
As consumer preferences change, food and beverage companies learn to change with them, and that innovative fuel is in R&D.