Fill in the gaps. Start with a clean slate. Leverage existing brand and customer base. Add new sales opportunities rather than replace them. These are just a few of the back-and-forth issues that influence whether manufacturers should reformulate existing products or create a new one to combat declining sales.
Both options have their costs and benefits, but there's not always a clear-cut answer as to which consumers would prefer in each scenario. And not getting that decision right could cause more problems for the brand than it solves (Read: aspartame-free Diet Pepsi and its social media trouble).
Depending on the brand and its ingredients list, positioning, and customer base, the right decision will vary. Knowing the advantages and disadvantages of reformulating an existing product versus creating a new one from scratch helps manufacturers determine which effort is best suited for that particular product.
If the brand is already popular, manufacturers know they have a winning formula. The trick is to "fill in the gaps" and update that recipe to reflect current industry health trends and/or any other necessary adjustments, such as supply of ingredients, according to Logan Honeycutt, VP of business development at Label Insight.
This can mean reductions in costs needed to bring the new (reformulated) product to market.
"Finance-wise it can make sense to just reformulate an existing product since you don’t have to look at additional capital expenditures for a brand new product type or format," said Honeycutt. "This is where manufacturers will typically lean on their ingredient and supply chain partners to leverage their expertise for how to achieve a specific product attribute profile while leveraging existing capabilities."
By reformulating a product, a manufacturer can also leverage the brand's already established heritage and customer base. This can reduce the risk of wasting time and money trying to develop a new product and set of loyal customers, said Eric Penicka, research analyst at Euromonitor.
"In reformulating an existing product, some part of this trust and market presence already exists, so one is taking a step forward with some sort of foundation, albeit one which may be a bit shaky," said Penicka.
But reformulating isn’t always the easier choice. If it were as simple as finding a natural replacement for a problematic ingredient, ingredients lists across grocery store shelves might already look vastly different. However, due to the complex roles ingredients play in a product's flavor, texture, appearance, safety, and price, reformulations often take manufacturers years to bring out of R&D and into stores.
Instead, most major manufacturers, such as General Mills and Nestle, have selected certain brands or categories to update rather than make a particular change across their entire portfolio (Mars was an exception so far).
Depending on the manufacturer's goal, the task of adding or removing ingredients and finding replacements could "end up being more time-consuming than to create a product completely from scratch to target customer health needs," said Honeycutt.
"It’s like missing pieces of a puzzle, and then having to find the missing pieces by removing them from a completely different puzzle," he said.
Plugging in missing pieces can create its own challenges. In a report from The Sugar Association, the organization warns that even the best intentions for product reformulations can have unintended adverse consequences. For example, when manufacturers replaced butter with margarine, the trans fats contained in margarine’s hydrogenated oils ended up doing more harm than the saturated fats in the butter.
Even if a manufacturer can determine the best formula of ingredient replacements to maintain characteristics like taste, texture, and price, loyal customers may still feel alienated by the changes, said Penicka.
"A reformulation may fail in improving a product’s sales or even exacerbate them if they are not well received," said Penicka.
General Mills is one of many major manufacturers that has committed to widespread ingredient changes in different segments of its portfolio, including removing all artificial colors and flavors from its cereals by 2017.
"Changing recipes of iconic brands is a great challenge and responsibility," said Lauren Pradhan, senior marketing manager for wellness strategy in General Mills’ cereal division. "Sometimes the biggest challenge is the length of time it can take to make sure we get a new recipe right because each cereal may require different changes."
Reformulating: difficult, but doable
It may take extra work to reformulate a popular brand that is trying to adapt to industry health trends, but it’s not impossible. A study published in the Critical Reviews in Food Science and Nutrition earlier this year examined consumer acceptance of food products reformulated for salt reduction. In the study, meta-analyses showed that manufacturers could reduce salt by about 40% in breads and about 70% in processed meats without any significant impact in consumer acceptance.
Kraft Heinz’s marketing stunt this year also proved that reformulations are anything but impossible. Last April, the company announced a planned reformulation of Kraft Macaroni & Cheese to remove artificial colors and preservatives. The company then quietly released the reformulated product in December. It wasn’t until months later, in March, when Kraft Heinz publicly announced that the ingredients had been changed months before — without loyal customers noticing.
According to Penicka, creating a new product from scratch has "limitless" advantages for manufacturers, such as:
- Tapping a new consumer segment
- Adding new sales instead of offsetting declining sales
- Changing a company’s overall image from an increasingly irrelevant player to an innovative one
Starting off with a clean slate means that a new product doesn’t carry any of the assumptions or baggage leftover from existing products. If a snack brand is already considered unhealthy by the majority of consumers, a "healthy" reformulation may not go as far for the manufacturer as creating a completely new health-positioned snack.
However, that clean slate could also be the very undoing of a new product.
"The primary disadvantage with new products is that a manufacturer is starting from scratch — new marketing, possibly new consumer segment, zero existing sales," said Penicka. "There’s a lot of risk in investing in new products, as history tells us that most simply will not make it in the highly competitive U.S. market."
Creating a new product may also cost more than simply reformulating an existing one.
"I would say developing a new product is more costly, primarily since the product faces an incredibly challenging uphill battle in gaining the trust of both consumers and retailers" said Penicka.
There is no one-size-fits-all answer for any particular brand, product category, or manufacturer, but strategic ingredient and market analysis can yield insights into which decision might resonate better with today’s consumers.
"The longer a brand has been on the market and the more success it’s had in the past, the more I believe it makes sense to reformulate," said Penicka. "However, if a brand has a short product life and never really jived with consumers, it may make sense to scrap the idea all together and start from scratch."