Bringing a new functional food or beverage to market is not an easy task, and companies need to carefully weigh the pros and cons involved. Scott Backman offers pointers on successfully navigating the road to success
There is an exclusive club in which membership is coveted by industry colleagues but limited to only 20 per cent of those smart, and perhaps lucky, companies that seek it. This 'club' comprises companies that have new foods and beverages on the shelf for more than one year.
What is the secret to a successful launch? How can manufacturers add millions to their bottom line with better-tasting, healthier products? How can they avoid costly and time-consuming formulation pitfalls, and reduce their new product-development process along the way?
To help address these issues, last year, Cognis Nutrition & Health, a global supplier of natural health-enhancing ingredients, and WILD Flavors, a worldwide supplier of natural flavour and colour ingredients, announced an agreement to jointly develop innovative flavour systems with health benefits. In September 2006, the companies cosponsored a webcast to demonstrate how together they can offer turnkey solutions to new product launches.
During the webcast, about 165 out of the nearly 370 leaders in functional foods that had registered for the event participated in a live poll. While their responses were not that surprising, it was how they ranked key issues that merits attention.
Participants were fairly split when asked to identify 'the biggest hurdle in launching a new functional food or beverage.' Their feedback showed that the hurdles to successful launches are complex, intertwined and becoming increasingly more challenging.
Here are their responses:
- Creating a product that is differentiated vs the competition (20 per cent)
- Achieving a stable product (18 per cent)
- Keeping the cost per serving acceptable to consumers (16 per cent)
- Making a great-tasting product (13 per cent)
- Understanding the regulatory/patent legal requirements (11 per cent)
- The financial investment involved with product development and launch (10 per cent)
- Choosing the right product that resonates with consumers (10 per cent)
The list of challenges could be infinite, so it's no wonder so few companies formulating new products succeed. The need for help is apparent.
For example, the top hurdle cited in the poll related to product differentiation. Nutrition can be an extremely valuable tool in differentiating functional foods and beverages from the competition. Formulators can bridge the gap between the health benefits consumers desire and the good taste they demand by adding scientifically proven ingredients to virtually any food, beverage or supplement. Cognis recently coined the term 'Newtrition' to reflect how virtually any food, beverage or supplement can be transformed into a new product with marketable health claims. With 83 per cent of consumers reporting that they take active steps to improve their health through diet, there is an enormous demand for fortified products that deliver measurable health benefits. Cognis offers ingredients such as Vegapure plant sterols and sterol esters for heart health, among other ingredients, to accomplish this.
In the webcast poll, respondents were asked to rank 'next health platform our company is targeting with new products.'
'Weight management' was the leading response at 39 per cent followed by healthy ageing (21 per cent), heart health (14 per cent), immunity (13 per cent), cognitive function (eight per cent), eye health (one per cent), and skin (one per cent).
These health platforms can be achieved with science-supported ingredients, enabling packages to carry the health claims consumers want to hear. For example:
CLA: "reduces body fat, maintains lean body mass and prevents fat regain"
Plant sterols: "clinically proven to lower cholesterol and reduce heart disease"
Omega-3 fatty acids: "may reduce the risk of coronary heart disease," or "helps maintain healthy brain function," or "boosts the immune system"
Natural vitamin E: "maintains a healthy heart and blood vessels," or "maintains good health as we age"
Lutein esters: "helps maintain healthy vision"
In evaluating the potential new product, including which health platforms and ingredients best fit a new food or beverage launch, the following questions must be thoroughly addressed by the innovation team:
Does it fit with the company's mission? Consider the impact on the corporate culture, long- and short-term strategies, and return on investment.
Does the company have the in-house expertise required or should outside resources be considered? Conduct a staff audit looking at skills and time required with added responsibilities.
Can the desired nutritional ingredients be incorporated into the food or beverage without affecting the product's taste or texture? New ingredients can create formulating nightmares and specialized expertise is often required to adjust the recipe, processing, storage and distribution of the product.
Is there value in leveraging branded ingredients? Branded ingredients, if marketed successfully, can create a competitive advantage in the marketplace.
Is there a consumer demand? Market data analysis, focus groups and feedback from retailers are all fundamental to launching a new product.
Is the product sustainable, or is it a fad or a trend? Using input collected from the market analysis can help determine the product's projected lifespan.
Will consumers pay the cost per serving? Consumers tend to associate a need or desire for a certain product with a price they are willing to pay.
What is the competitive situation? Market intelligence should help avoid any surprises down the road and is getting easier with advances in technology beginning with Internet searches.
Making a game plan
The process breaks down when not all of these issues are addressed. Avoiding hurdles in the end requires starting with a solid team and a strategic game plan. These rules should be followed with few exceptions to help ensure success:
- Stay focused and stick with decisions.
- Tap select suppliers for their expertise.
- Require ongoing project thinking from the entire team.
- Keep things simple and clear.
- Demand constant communication.
- Share risk.
- Actively involve decision makers.
- Share timelines.
- Avoid people churn.
The innovation team must agree on whether to launch the product as a line extension or as an innovation. The key benefits of a line extension are that it allows a company to leverage an existing consumer base and it provides multiple purchase opportunities. There's also a shorter time to market, lower cost and lower risk, and it can replace a slow-moving SKU. The challenges with line extensions include product cannibalization and lack of consumer enthusiasm.
In comparison, an innovation offers the valuable position of being first to market. It creates excitement, expands the consumer franchise, and offers greater sales and profit potential. The challenges, however, can be costly in both time and money. Innovations require longer time to market, stand-alone marketing programmes, multiple SKUs, and they create higher risk.
Once the innovation team has a prototype product, the launch becomes a reality.
Market-research reports show 2006 was a record-breaking year with more better-for-you products than ever. This boom in the launch of health-enhancing foods and beverages will only escalate. Companies that avoid the pitfalls through smart planning will become members of the 20 per cent club — those that have products on the shelf for more than one year.Whether companies work independently or partner with industry experts in launching new products, sales success will depend on how well all the pieces are pulled together from idea creation and development to execution.
Scott Backman is market-development manager, functional food and food technology, for Cognis Nutrition & Health. —