Beverage R&D: 2010 New Product Development Survey
More than half of the respondents to Beverage Industry’s annual Product Development Survey are developing new sports drinks, energy drinks, bottled waters, juices and juice drinks in 2010. Another 30 percent expect to create new wine, beer and spirits products this year, followed by 14 percent of respondents formulating new carbonated soft drinks.
More than any other factors, the motivation to introduce new beverage products comes from consumer demand, survey-takers said. Other reasons include the desire to “increase sales,” “fill a unique need that we are not filling now,” “increase volume,” and give consumers “variety.”
Even in light of a recovering economy, nearly half of respondents expect their research and development budgets to remain in tow with 2009’s spending, and 38 percent forecast that their budgets will increase.
Of those who expect their companies to spend more on research and development this year, some said it will be driven by the development of new products and consumer demands, others indicate the increased costs of raw materials, labor and production, and a few said equipment upgrades will be factors. The 12 percent of respondents who believe their budgets will dip this year cite cost cutting measures because of the economy, current sales forecasts and fewer new products as reasons for their budgets’ decline.
Most survey-takers said their companies spend on average $40,000 developing a new beverage product from concept to consumer. The largest percentage of respondents, 44 percent, put their product development costs in the $1,500 to $25,000 range, followed by 39 percent of respondents stating their companies spend between $25,000 and $100,000.
Flavors and colors
New flavor introductions and color variety give many beverages the edge to stand out from competitors. This year, respondents demonstrated how important flavor and color choice can be.
Staying in tune with traditional flavors, vanilla, chocolate and strawberry were reported by respondents to be the best sellers in 2009. Pomegranate trailed closely as a top selling flavor, followed by acai and mango. Coffee, raspberry, green tea and lemon rounded out the top 10 sellers in 2009. In the 2008 survey, coffee, strawberry and vanilla tied for the best-selling flavors, followed by green tea and pomegranate.
Mango and orange were the most-used flavors by survey takers in 2009. Forty-seven percent of those surveyed said they used mango and orange in their products last year, pursued closely by strawberry and pomegranate, which were used by 45 percent and 44 percent, respectively. Tried and true flavors â€” lemon, vanilla, chocolate and apple â€” and superfruit flavors â€” acai and blueberry â€” filled in the top 10.
In 2010, beverage-makers expect chocolate and vanilla flavors to be their leading sellers, but also have high hopes for acai, pomegranate and strawberry. New tea flavors also are projected to be top sellers along with coffee, mango, raspberry, blueberry and cranberry this year.
Natural flavors again lead flavor use in beverage formulations. Forty-one percent of respondents use only natural flavors, while another 51 percent use at least 50 percent naturally derived flavors. This demonstrates the continuing move toward natural as 96 percent of survey-takers plan to use at least some natural colors in 2010. In addition, 38 percent of respondents plan to increase their use of natural flavors this year.
In regard to natural colors, 38 percent of survey-takers plan to use only natural colors in 2010. Three-quarters of respondents said their use of natural vs. artificial colors will remain the same this year, while a quarter plan to increase their use of natural colors.
Those who shared their reasons for using natural flavors and colors said that they do so because of consumers’ demands and preferences. “Consumers want healthy products, without preservatives, artificial colors and flavors, with functional ingredients that can provide them a better lifestyle,” one respondent said. “Better impression for the consumer,” “company direction,” “market analysis,” “we are going green,” and “to make our beverages healthier” were other reasons.
Drivers of development
The demand for convenience stands above all other consumer needs or interests, respondents said. Fifty-six percent of survey-takers said convenience is of “high need or interest” to consumers. Natural and healthy, though, reign as the latest consumer trends, and 52 percent felt that healthy and 47 percent believe that natural were also of “high need or interest.”
Other health and wellness trends also emerged as being of high importance to consumers. Forty-two percent of respondents said low calorie was of “high need or interest,” followed by 37 percent for both organic and low sugar and 34 percent for both low fat and high fiber claims. Fortifications also appeared as leading consumer needs. Thirty-two percent of survey-takers said that energy boosting is of “high need or interest” to consumers, and 30 percent said vitamin and mineral fortifications are important.
This year, low salt developed as a new attribute of importance with consumers. Fifty-three percent of survey-takers said low salt is at least of “moderate need or interest” to consumers. One trend on its way out appears to be low glycemic. Forty-two percent of respondents said low glycemic was of “low need or interest” to consumers.
Even though consumer demands rate high for new product idea generation, 67 percent of respondents said their companies’ chief executive officer or upper management are the primary influences on idea generation for new product development. Customer demands and marketing and sales tied as the No. 2 reasons for new product idea generation, with 62 percent of respondents stating that is where their ideas came from. Consumer trends, in-house teams and meetings, R&D departments, consumer research and testing, and trade magazines also contribute to new product ideas.
The chief executive officer’s role in new product development varies. Of the 87 percent of survey-takers who say their chief executive officer is involved in the new product development process, 34 percent say the company head oversees and provides guidance; 32 percent say the chief is the leader or decision maker; 17 percent said he or she is just a team member; 12 percent said the chief executive officer’s role is to only give final approval and 5 percent said the head only initiates ideas.
Even though upper management holds a lot of weight with new product development, the vast majority of new product developers’ organizations still use a team approach, respondents said. The sales and marketing department is the business segment most regularly included on a new product development team, 84 percent of respondents said. Upper management, research and development and production are the next most included departments on the team.
Only a quarter of respondents outsource any part of their new product development process. Of those that outsource any part of their new product development, 44 percent said they outsourced market research and prototype development, 22 percent said they outsourced concept and product testing, and 11 percent outsourced ideation.
Suppliers also are key members of the product development team. Sixty percent include suppliers in the new product development process. Those who make use of their supplier relationships say they provide ingredients and raw materials, technical support and expertise, samples, formulation advice, consulting, consumer research and merchandising ideas.
Of those who include their suppliers in new product development, 30 percent of beverage-makers said suppliers are engaged in the product development process from the idea stage all the way through to completion of the product. Another 61 percent of survey-takers said their suppliers are involved in product development after inception through to completion. Seven percent said their suppliers are involved after the formulation is finished through to product completion, and 2 percent said suppliers are only included in the final stages.
When purchasing ingredients in 2010, about 30 percent of beverage-makers said they will have greater concern about the country-of-origin of those ingredients. Sixty-four percent of respondents said they would have about the same concern, and 6 percent said they would have less concern.
New product launches
In 2009, the average time to develop a new beverage from inception to launch was nine months, survey-takers said. Forty percent take between six and nine months to prepare a new product for launch, while 25 percent can do it in three to five months. Only one percent take two months or less for the whole development process. On the opposite end, 6 percent of respondents take 19 months or more to ready a new product for launch. Comparing how quickly formulators were able to bring new products to market in 2009 vs. years past, 80 percent of respondents said their development efforts were about the same, while 14 percent said they were faster and 7 percent said they were slower.
While companies are hard at work developing new product ideas, not all of those ideas make it to market. Beverage companies participating in the survey said they developed on average 12 new products in 2009, which is down from an average of 18 new products developed in 2008. Of those products developed by survey-takers, on average 11 of those products made it to market, respondents said. Twenty-seven percent of the beverage companies surveyed released two or fewer new products in 2009, followed by 18 percent stating they released three to four, another 18 percent introduced five to nine, 16 percent launched 10 to 24, and 9 percent unveiled more than 25 new products. Twelve percent of respondents said they released no new products in 2009.
Respondents then said that on average, five of those new products released were considered successful by their companies’ standards. Nearly a quarter of respondents said that they had three to four successful new products in 2009, 17 percent said they had five to nine successes, 14 percent said they had 10 to 24 successful launches and only 1 percent said they had more than 25 new products that they considered a success. However, 29 percent of respondents said they had one or two successful new products last year, and 15 percent said they had none.
The economy does not appear to be significantly hampering new product launch plans for the coming year. Forty-five percent of survey-takers said they will introduce more new products in 2010 than last year. Forty-four percent of formulators plan to maintain the same number of rollouts, and 11 percent anticipate slowing down their product launches this year.
Several survey-takers said customer and consumer demands as well as driving their companies’ growth were motivators to create more new products this year. The economy also is playing a role in both the desire to develop new products and in the slowdown of new product development. One survey-taker said, “Consumer habits have changed as a result of the recession, and we need to change to capture a share of this reset marketplace.” “We need to expand and create new markets and products in a very tight and small marketplace,” another beverage-formulator said. Respondents cited refocusing on core brands and current lines in addition to budget constraints and again the economy as reasons they will slow down their new product development projects in 2010.
Marketing for success
Most beverage companies have a definite new product development plan, said 59 percent of respondents. In addition, 73 percent of survey-takers said their companies conduct a post-launch assessment.
Market research is important to many beverage companies’ new product development process. During new product development, 67 percent of respondents said they used focus groups, followed by 58 percent that conducted in-store testing and 50 percent that hosted consumer panels. Beverage-makers also used one-on-one conversations, consumer surveys, central location testing, home use tests and mall intercepts.
In 2010, marketing will be led by online promotion, with 45 percent of respondents citing they will increase online marketing this year and 26 percent saying they will maintain 2009 levels. Still a quarter of respondents said they do not plan to use online marketing in 2010.
Beverage companies also plan to rely heavily on sampling this year, with 38 percent of survey-takers saying they will increase sampling and 44 percent stating they will maintain their sampling levels from last year. In addition, sampling remains the most used form of marketing, with only 14 percent of survey-takers planning to conduct no sampling at all.
A third of respondents also said they planned to increase the use of point-of-sale displays, in-store demos and retail promotions this year. Slightly more respondents said they will hold on to last year’s numbers, with 37 percent investing the same amount in point-of-sale materials and 38 percent will stay consistent with their retail promotions. More than half of respondents also expect to increase their use of coupons or that their use of coupons will remain the same in 2010.
Beverage Industry’s New Product Development Survey was conducted by Clear Seas Research. The online survey was completed in November 2009, and included a systematic random sample of beverage companies based on Beverage Industry’s domestic circulation base.
Thirty-two percent of respondents were from larger beverage companies â€” those earning more than $100 million in annual sales revenue. Twenty-nine percent fell in the mid-size company range â€” $10 million to $100 million. Forty percent were from companies with less than $10 million in annual revenue.
On a regional basis, 66 percent of respondents have a product presence in the Northeast, 62 percent have representation in the South, another 62 percent said their products can be found in the West and 56 percent have business in the Midwest.
Thirty-four percent of survey-takers represented upper management positions within their companies. Twenty-six percent worked in research and development capacities, followed by 20 percent in sales and marketing and 6 percent in quality assurance/quality control. Production, packaging and purchasing each made up 3 percent or less of the respondent base. BI