While today's consumers may say they are less interested in Big Food's products, those manufacturers are not going to let them go quietly.
Kraft Heinz, with its stable of more than 200 brands known to consumers worldwide, has relied on its R&D arm to try to keep its brands from being passed over by today's shopper — as well as to create new products that are likely to land in more carts.
The food giant has fallen on rocky financial times, reporting a $12.6 billion net loss in February. In the fallout, turnaround expert Miguel Patricio was hired as the company's new CEO. Months after he took the helm, Patricio explained in an earnings call how vital R&D will be to the company's turnaround, both in developing new items and expanding beloved brands into new product lines.
Amanda Young is one of the people leading this charge. Promoted last month to vice president of R&D in the United States — from her previous job as vice president of R&D for the refrigerated segment, which she held at the time of this interview — Young has had a long career with the CPG giant. She sees herself as being in charge of evolving, expanding and innovating the company's portfolio.
Young spoke to Food Dive last month about her experiences, outlook and what the future holds for Kraft Heinz products. This transcript has been edited for brevity and continuity.
Food Dive: What are the biggest priorities for R&D right now?
YOUNG: When I think about our R&D organization and what we focus on, ... three pillars is how I would break it out. So number one, we're gonna look at how do we continue to evolve our iconic brands. You know, we have a lot of longstanding brands. They've been able to stand the test of time, but we need to make sure that those brands continue to stay relevant with today's consumers.
... You may be familiar with what we did a few years ago on Kraft Macaroni & Cheese, where we cleaned up that ingredient line, went to our "no unknowns" claims. And we've done similar things within my business unit as well. A couple of years ago we renovated our entire portfolio of hot dogs. So we took all of our Oscar Mayer hot dogs to no added nitrates or nitrites, to no artificial preservatives, and to no fillers. ... We didn't make that change to just our sub-line or a few of our SKUs. We made that change to the entire portfolio.
Similarly, on Philadelphia Cream Cheese, which is another product that I have responsibility for, we took our Philadelphia brick cream cheese into a simpler ingredient line — five simple ingredients — and we are continuing to do the same on our soft cream cheese as well. Really continuing to invest in those brands and renovate those brands to make sure they're evolving with today's consumer.
...The second pillar here would be continuing to optimize our portfolio and making sure we're capturing new consumers, new occasions and new needs. So really kind of an innovation piece here, and focusing on some innovation.
...Lunchables is a brand, and actually a category, that we invented about 30 years ago. But you know, the Lunchable consumers are constantly evolving. The sweet spot for Lunchables are kids that are 6 to 12. So we are, every single year, recruiting those new users into the Lunchables brand. So making sure we're able to capture those new consumers. So thinking about, in this case, some Lunchables innovations. We've recently launched Lunchables Brunchables, and that was something that [is] trying to get those new users into the brand and providing them with the product that we think appeals to today's moms.
"We have a lot of longstanding brands. They've been able to stand the test of time, but we need to make sure that those brands continue to stay relevant with today's consumers."
VP of R&D - U.S., Kraft Heinz
Another example could be taking a very strong brand that we have, like Philadelphia Cream Cheese. How do we expand that into new occasions? So in Philadelphia, several years ago we launched Cheesecake Cups. So this was snacking — basically an easy way to be able to have cheesecake that's ready to snack on, single serving, you know, with a fruit dip. ... How do we continue to expand that snacking occasion? We have a savory occasion, which was a bagel chip and cream cheese dip. And then most recently, in the past year, we've launched Philadelphia multi-serve dip that can be served hot or cold, and also that same concept in a single serve version.
...The last piece, which is another pillar, ... is launching into new white space areas. So how do we continue to evolve into places we don't play today? ...Within refrigerated, [there are] a couple of examples. ...Just Crack an Egg is a great example where we've launched into a space that we currently didn't play. So that product is actually shelved with the eggs, ...so really getting into the white space area, and really kind of a completely new kind of type of product. This is something that allows the consumer, by adding a fresh egg, to make a hot egg scramble in under a couple of minutes.
And it really delivers on that whole fresher, less processed consumer need, while providing them something that really kind of takes breakfast back. Often times, people are reserving that hot breakfast occasion for the weekend, and this allows them to do it conveniently during the week, and allowed us to expand in a new part of the grocery store.
Last, we have another product that just launched this year called Fruitlove. ...It's a spoonable smoothie. So again, leveraging on young consumer trends. It's got a blend of fruit and vegetables as well as Greek yogurt to provide some protein in the mix. But it's, again, allowing us to shift into different sections of the grocery store or different areas within the refrigerated shelf where we don't play today.
How do you decide which new white space areas to try to get into? Where do those ideas come from, and how are they developed?
YOUNG: It's one of those things that we will look at working in partnership with our marketing team to really understand where is there an opportunity and where do we have the right to win or the right to play in those spaces. For example, on the Fruitlove category, it does contain dairy. We have expertise in dairy on my team and we do play in other categories within that shelf set. So we have kind of the right to play there, but also had an idea and a concept that we felt had the right to win.
So it's a balance of looking at those two things. And we work really in close collaboration with our marketing and our brand build teams as we think through our strategic plan every year to really understand what are some of those white space opportunities.
Similarly, you think about some of the recent expansion of Philadelphia. We look to our brands that are what we consider a powerhouse brand, and how do we continue to leverage that powerhouse brand where we know people recognize it. They know that brand stands for quality. We have almost a 70% market share in cream cheese. How do we leverage that brand and allow us to use that to expand in other spaces?
But then, something like Fruitlove, we made a decision: That really needs to be a new brand or its own brand because it's so different from something like Philadelphia, and consumers may not understand the connection between a current brand name and a new area that we go into.
What do you see as the biggest challenges in your job?
YOUNG: Right now, I think the speed and the pace of change. We want to make sure that we can keep up with what today's consumers want. And everything that we do starts with a focus on consumer, first and foremost. But our brands that are in our product that we developed, also are known for quality and consistency, and we need to ensure that. So, it's how do we ensure that we can continue to deliver what the consumer wants in a ... consistent, high-quality way, and do that quickly.
... I think the ability of competition to enter into our spaces is easier now than it used to be. There are strong manufacturing networks that new companies can leverage. There's e-commerce channels for distribution that companies can leverage. And so that, I think, for us puts a lot of pressure on how do we continue to do both at the same speed and the same pace. Making sure that we do that in a way that isn't compromising our core values.
What do you see as some of the biggest opportunities?
YOUNG: We have such a portfolio of iconic brands. When I think about why I came to work at Kraft Heinz, it was because I wanted to work on products I grew up with. I love the idea of working in CPG, being able to see the things that I would making on shelves. I'm a user. My family, we are all users of Kraft Heinz products.
... I think that's still one of our biggest opportunities. We have products that are so familiar to everybody. They're recognizable, they're nostalgic. ... How do we leverage that? How do we, as I mentioned, our pillars of innovation. How do we leverage that fact and take that as an opportunity to leverage the recognition, leverage what people may know and love about our products that deliver on quality — that we know taste great — and continue for those brands to evolve so that we are providing consumers with what they're looking for today in a product?
And that may be a cleaner ingredient line versus what we developed 20 years ago. It may be a more convenient package that you find in a c-store or versus traditional grocery shopping or things that are easily distributed through e-commerce channels. So how do we take what people know and love about our brands and leverage that and attract those consumers today?
A lot of big food companies are having slower sales than in years past because consumers are looking for cleaner, less processed products. You're working hard to get cleaner labels on products, but how do you get consumer perception to change?
YOUNG: I think it's a challenge. I think it can be difficult sometimes when when consumers may look at Kraft and Heinz and, and really kind of equate us with the definition of processed food. I think where we have themes of success and being able to shift away from that is where we have continued to invest in our products, ... make those changes that get us to the cleaner ingredient lines, that get us to the kind of things that consumers are wanting and expecting today, and that we're consistent with that.
And I mentioned, Philadelphia Cream Cheese as an example where we've been investing in this brand for years, so we've had a strategy to continue to move to a cleaner ingredient line, kind of a fresher, less processed product. I mentioned we're at a 68% market share and even actually grown the share since 2014.
"I think that's still one of our biggest opportunities. We have products that are so familiar to everybody. They're recognizable, they're nostalgic. ...How do we leverage that?"
VP of R&D - U.S., Kraft Heinz
Similarly, Heinz Ketchup — it's not in my business unit necessarily — but ... we have our core brand, but we also have provided offerings for other consumers. We have organic. We've got Simply Heinz. We're launching now Heinz vegetable ketchup, with other vegetables in it besides tomatoes. And we've got a 70% market share with the Heinz brand. So for me, it's about just continuing to invest in those brands and continue to deliver on consumers' needs.
...We may not have the ability to always do that. There are some products where those technologies that people consider processed are going to be required to give it the type of qualities and characteristics that we're looking for.
And we're always continuing to try to push and to challenge that. But that's where we also have a strategy of not just renovating, but then optimizing the portfolio and looking at where else should we go: new brands, new categories. Where else should we play to continue to make ourselves relevant? ... I'll be honest, my family is a lover of Kraft Heinz products, and I make sure every time I go home, I share that love with them. ... Sometimes they're surprised and they don't actually know that products that they use and love, and don't consider processed — or maybe they even don't consider coming from Big Food — are actually products that we make.
When Kraft Heinz reformulated its iconic Macaroni & Cheese, it was famously a secret that consumers didn't know about until they'd been buying it for months. Is that how all reformulations are done at Kraft Heinz now?
YOUNG: I think it depends on the product and it depends on the change. Because what we do find is sometimes when you tell someone you changed it, or you tell them you've changed it, ... or any time you're making a change, there is always fear that consumers are going to notice a change, even if you don't believe that it is noticeable. And I think that was in part what drove the Mac & Cheese decision. [We decided] we're going to do it. We want to really see. And we actually monitored consumer complaints, and we did not get consumer complaints when we made the change. We got a spike when we told people we made the change. But we knew that the product really was performing just as well and the products really weren't different. So some of that really is more of a marketing strategy.
In the case of hot dogs, for example, we actually wanted to talk about it because that change that we made, it was trying to demystify our approach, and that renovation was really about demystifying what's in your hot dog. We're proud that we sell hot dogs. We're proud of how they're made and the quality that goes into those. But when people see a hot dog, they think of it as being highly processed, right? Even if you compare it versus a sausage — which may be made the exact same way, and the only difference is how finally you're grinding the meat that you use — but people see a hot dog, and it looks so uniform and consistent, therefore it must be highly processed.
In your years in the food business, how has research and development changed?
YOUNG: I think in a lot of ways it's the same. In a lot of ways, it's continuing to focus on the consumer first, and we've got to be delivering products that the consumers want and that the consumers need. So that's the same. ... How R&D has changed is, I think, number one: speed. So we talked a little bit before about speed and how quickly that we need to innovate to keep up, not just with our consumers, but to keep up with the competition.
I think it's changed because I think consumers now are more informed and have more opinions about what they want in their food and don't want in their food. ... I am going to be more mindful today about what my ingredient line may look like, versus maybe what I was thinking about 20 years ago when I was starting up as a product developer. ... I think there's more of a focus on what goes into ingredients.
"Sometimes [my family members are] surprised and they don't actually know that products that they use and love, and don't consider processed — or maybe they even don't consider coming from Big Food — are actually products that we make."
VP of R&D - U.S., Kraft Heinz
I think that's also challenged us in terms of the technology that's needed to make sure that we have products that can withstand a reasonable shelf life through our distribution and supply chain. Especially for me working in a refrigerated business, we start to remove preservatives and take things out of a product, it does become more challenging to make sure that we have other ways to protect those products through our shelf life.
And then, I think, designing products for the various channels. Products in the past were designed to be put in a case, put on a pallet, and that pallet was shipped to our distribution center and then to a retailer. Today, our products can be shipped through an e-commerce channel. They could go through a distribution channel to a convenience store, which is very different from a distribution channel that might go to a grocery store. So how are we designing our products for all those different kinds of conditions? Whereas in the past it wasn't as much of a consideration. So I think those things have all added some additional challenges and things that we have to consider as we go through the development process.
Miguel Patricio, the new CEO of Kraft Heinz, really seems to be interested in a lot of the things you've talked about. Does his new focus for the company make a big change in what you do? Are there things now that you'll be doing differently?
YOUNG: I think with Miguel coming in, for me it's a very exciting time to be part of the R&D organization. He talked about building a culture of creativity, and even though we may have a lot of scientists in the organization, we have a lot of very creative scientists and a lot of people that can bring a lot of new ideas to the table.
I'm excited about his renewed focus on R&D and focus on growth. ... We've recently put a new chief growth officer in place across the organization. ... I'm excited to see as we go forward and outline our plans for the future, what is that going to look like as we want to reinvigorate our innovation pipeline, reinvigorate our product lines. I think it means we'll do more.