2012 New Product Development survey
A return to innovation forecasted — with a traditional focus
Answering consumer demand, creating new formulations and leveraging growth opportunities are among the reasons why beverage-makers plan to launch more new products in 2012 compared to 2011, according to the results of Beverage Industry’s annual New Product Development survey. A planned increase in launches was cited by 59 percent of respondents, which is a 14 percent rise from last year’s survey results. Among survey-takers who are expanding their new releases, 26 percent plan to introduce 11 to 20 percent more new products and 29 percent expect to grow the number of releases by 26 to 50 percent compared to 2011.
The forecasted rise was primarily attributed to more need for new releases, company growth and expanded opportunities, with one respondent citing the need “to keep competing in an ever-changing market.” Another respondent noted, “Because we are experiencing lower volumes, we are developing new products to compensate for those losses.”
Reflecting this growth in planned new products, 11 percent more respondents reported that they will have an increased research and development (R&D) budget in 2012 compared to 2011. In addition to the 41 percent who expect to have more money to dedicate to R&D, 52 percent of respondents noted that their budgets to develop new products will stay the same as last year. Among the 7 percent of survey-takers who said they expect a decrease in their R&D budgets in 2012, cost restraints and the “flailing economy” were explanations for the cut-back.
Although companies plan to introduce more new products, the survey shows that developers are focusing on traditional flavors in their debuting beverages. The Top 5 most anticipated best-selling flavors for 2012 are as follows: vanilla, chocolate, orange, strawberry and mango. The forecast is similar to 2011’s top-selling flavors, which included vanilla, strawberry, orange and mango along with apple, which took the No. 2 spot, according to survey-takers. This year, beverage-makers are drawing down their preference for lemon, which was the second-ranking top-selling flavor in 2010. The results also indicate a continued drop for pomegranate, which was the fourth best-selling flavor in 2009. The superfruit ranked 16th among best-selling flavors in 2011 and is predicted as the No. 15 anticipated top-selling flavor in 2012, survey-takers reported.
Non-alcohol beverages were a focus for most of the survey respondents with 58 percent indicating development in water or juice products, 39 percent planning sports or energy drinks and 19 percent focusing on carbonated soft drinks. An additional 29 percent are in the process of developing a new beer, wine or spirit product, according to the results. Water, juice and alcohol development stayed in step with 2011 survey results, but sports and energy drink development decreased from 52 percent of respondents planning new functional beverage launches last year.
The average cost to develop a new product from concept to consumer rose tremendously among this year’s respondents compared to last year’s survey. In 2010, New Product Development survey results showed that the average R&D investment was $46,000 for a new product. This year, the average was $140,878 with 17 percent of respondents reporting investments ranging from $100,001 to $250,000 and 22 percent allotting more than $251,000 for new product development. The 2011 New Product Development survey reported that 46 percent of respondents spent $1,000 to $25,000 on new product development, which decreased to 33 percent for this year’s survey. Also in contrast, last year’s survey results showed that 42 percent of respondents invested $25,001 to $100,000 in new product development, a figure that also decreased — to 28 percent — in 2011.
Resurgence of the familiar
In response to open-ended predictions about new flavors that will be used in 2012, survey-takers identified a list of familiar flavors, such as blueberry, cherry and watermelon, as well as more exotic options, including anise, bitter orange peel, fennel and tamarind. As intriguing as these emerging flavors might be, the majority of the most-used and best-selling flavors in 2011 were more traditional varieties, such as apple, raspberry and vanilla.
Beverage Industry’s survey showed a waning superfruit trend in 2010 and a return to traditional flavors, such as lemon, orange and lime. That momentum continued this year with survey-takers identifying fruit flavors as among their most-used varieties. The survey’s list of the Top 10 flavors used in 2011 was dominated by fruit with the exception of sixth place flavor vanilla. Apple, berry, orange, peach and raspberry make up the Top 5, with strawberry and lemon following the No. 6 flavor, vanilla, followed by tropical flavors mango and pineapple to round out the Top 10.
Six of the Top 10 most popular flavors in 2011 reported increases. Apple and vanilla were the strongest growers both reporting a 9 percent rise in use from 2010. Berry and pineapple were not far behind with a 7 percent increase in usage from 2010 to 2011, according to survey results. Although it did not make the Top 10 last year, coconut presented an 8 percent rise from 2010 with 34 percent of survey-takers reporting the ingredient’s use in 2011.
Last year, lemon ranked as the No. 1 most-used flavor as it was cited by 46 percent of respondents. The citrus fruit fell to No. 8 on last year’s list of most-used flavors with 39 percent of respondents citing lemon use. Also reporting a decrease is pomegranate, which ranked 10th as a most-used flavor in 2010, but fell to No. 18 in 2011. Lime ranked 11th on the list of most-used flavors in 2010, but fell to No. 21 on the 2011 list with a 9 percent decrease to 29 percent of respondents using the citrus fruit.
Not surprisingly, fruit flavors also made up the majority of the Top 10 best-selling flavors in 2011, although perennial favorite vanilla tops this year’s list with 22 percent of respondents identifying the traditional flavor as the best seller. The remainder of the list includes familiar fruits, such as apple, strawberry, orange, mango and peach, which make up the Top 6 best-selling flavors. Last year, acai returned to the
Top 10 after falling to 14th on the list in 2010. The superfruit ranked seventh with 11 percent of survey-takers identifying acai as a best-seller, which is down from the fruit’s No. 5 placement in 2009. Berry, cherry and lemon complete the Top 10 best-selling flavors list of 2011.
Similar to the most-used flavors list, lemon decreased on the list of best-selling flavors last year, dropping from second place in 2010 to 10th in 2011. Also mirroring the most-used flavors list, pomegranate dropped as a best-selling flavor. After pomegranate
fell out of the Top 10 in 2010, the flavor once again dropped to 16th in 2011. Last year also saw chocolate, a first place choice for best-selling flavor in 2010 and No. 2-ranking choice in 2009, fall 10 spots to 12th on the list of best-selling flavors in 2011.
Although it reported a drop in terms of a most-used and best-selling flavor, chocolate was chosen as the second most anticipated top-selling flavor for 2012, according to survey-takers. This year, vanilla captured the top spot with 20 percent of respondents predicting it will be a best-seller in 2012. Chocolate followed with 16 percent of the vote and tied with orange and strawberry, which both presented the same double-digit results. Fruit continues its reign with mango and tropical fruit garnering fifth- and sixth-place spots, respectively. Mango rose from its 7 percent predicted increase in 2011 to a 15 percent forecast that helped the flavor return to the Top 10 this year. Lemon and peach both received 13 percent of respondents forecasting their popularity, followed by apple, cherry and lime, which each reported 11 percent popularity.
Once again, superfruit flavors such as acai and pomegranate dropped on the list of anticipated best-sellers to below the Top 10 in predicted performance for 2012. Another dropping flavor was cola, which cracked the Top 10 of most anticipated best-sellers in 2011, but barely captured 1 percent of responses predicting continued cola success in 2012. In contrast, coffee, which ranked in the Top 10 in 2010, reported a slight increase to 9 percent predicted performance in 2012, which is up from 6 percent in 2011.
One respondent explained their motivation for introducing new products as a way to “increase the consumer’s choice of natural beverages,” which reflects the trend’s continued popularity. In Beverage Industry’s 2011 Product Development survey, 44 percent of respondents chose natural as the No. 1 latest consumer trend. On this year’s survey, natural ranks at 32 percent tying with convenience and energy-boosting as the three latest consumer trends. According to survey-takers, 49 percent of consumers have a high need for or interest in natural products, which is an increase from the 38 percent of participants who chose the same option in last year’s survey. A total of 48 percent of respondents indicated that organic is both of high need or interest and the latest trend to consumers.
Alongside the ongoing popularity of natural and organic, 55 percent of respondents chose healthy as a consumer must-have. Consumer demands also fueled survey-takers who indicated that they will continue their use of natural colors and flavors. Formulators’ predicted use of natural colors in 2012 remained in line with last year’s survey responses with 72 percent saying they do not plan to increase natural color usage in 2012, compared to 68 percent in 2011. The same
43 percent of survey-takers reported they will not use any artificial colors in 2012 as in 2011. Only 35 percent said they will use 100 percent natural colors, with the remainder choosing a varying blend of natural and other colorants: 18 percent plan to use 26 to 50 percent natural colors, 17 percent expect to use 51 to 75 percent natural colors, and 16 percent forecasted use of 76 to 99 percent natural colors in their products this year.
Thirty-six percent of respondents indicated that they will use 100 percent natural flavors in their products in 2012. Among the 35 percent who plan to increase use of natural flavors, many indicated consumer trends and demands for natural beverages as the reasons for doing so. In fact, no respondents indicated that they plan to formulate with 76 to 100 percent artificial flavors in 2012. Instead, in addition to the 36 percent who plan to use only natural colors, 18 percent of survey-takers predicted they will use 26 to 50 percent natural flavors, 19 percent plan to formulate with 51 to 75 percent, and 23 percent forecasted that they will use 76 to 99 percent natural flavors in their products in 2012.
Although natural and organic continued to rank in the Top 5 of consumer needs and interests, respondents indicated that convenience, energy-boosting and healthy attributes also were among consumer priorities. Convenience reported the same number — 53 percent — of survey-takers who chose the factor as a must-have for consumers last year, and 2 percent more people indicated convenience as the latest trend compared to 2011’s survey. Thirty-two percent of respondents also said energy-boosting was a latest trend with an additional 36 percent saying it’s a must-have for consumers. The latter figure is a 6 percent increase from last year’s survey, which had 30 percent of respondents say that energy-boosting claims are of high need or interest to consumers.
Filling out the Top 5 are products with healthy attributes, which was indicated as a consumer must-have by 55 percent of respondents and the latest trend by 31 percent. Fitting in with better-for-you values, low-calorie captured 47 percent of responses as a must-have with an additional 21 percent identifying it as a latest trend. In addition, low-sugar ranked eighth among product attributes with 40 percent saying it’s of moderate consumer need or interest, 33 percent ranking low-sugar as a must have and 19 percent choosing it as a latest trend.
The Top 10 also features the following functional attributes: beauty-enhancing and cognitive health. Although beauty-enhancing claims collected 36 percent of respondents who said it was of moderate consumer need or interest, it experienced a 28 percent decline as many survey-takers said the exterior-focused formulations were of low or no need or interest to consumers. Cognitive health fared better with 44 percent indicating it was a moderate consumer need or interest, 31 percent said it was a high consumer need or interest and 16 percent chose it as a latest trend.
Somewhat contradictory to the better-for-you and functional trends, indulgence ranked seventh among product attributes with 52 percent of respondents identifying it as a moderate need or interest to consumers. An additional 17 percent ranked indulgence as a must-have and another 19 percent chose it as a latest trend.
Product attributes that ranked below the Top 10 include heart health, which was chosen by 55 percent of respondents as a consumer must-have, but only 16 percent indicated it as the latest trend. High protein and high fiber also continued to report strong consumer interest. Low-fat experienced an increase with 53 percent of survey-takers identifying the trend as a consumer must-have compared to 39 percent in last year’s survey.
Several attributes reported declines during 2011, including low salt, low glycemic index, and vitamin- and mineral-fortified products, which continued their decreasing figures. In 2009, vitamin- and mineral-fortified ranked sixth as the latest trend, a figure that fell to 11th in 2010 and landed at No. 22 in 2011. Fair Trade experienced the largest decline with 33 percent of respondents identifying it as a trend in which consumers have low or no need or interest.
Providing trendy products to consumers continues to be a top driver of new product idea generation, which was ranked 1 percent below input from marketing and sales regarding new products. However, consumer trends captured 71 percent of survey-takers’ responses, which is a 10 percent increase compared to the 2011 New Product Development survey. Marketing and sales ideas also reported double-digit growth as it took first place among influencers of new product idea generation with 72 percent of respondents indicating the teams influenced releases. This represents a 16 percent increase from 2011’s 56 percent of respondents who indicated marketing and sales offer new product ideas.
Customers and customer demand ranked third with a similar 56 percent compared to last year’s 57 percent of respondents who develop products based on requests from their business partners. Showing a 6 percent decline, input from chief executive officers and upper management dropped from the top spot last year to fourth with 55 percent of respondents indicating that top executives play a role in new product ideas. Research and development departments, consumer research and testing, and in-house teams and meetings filled out the list with 51 percent, 49 percent and 44 percent, respectively.
Although fewer respondents said their chief executive officers provided ideas for new products, 78 percent still indicated that he or she is involved in the new product development process. Of those, 43 percent reported that the chief executive officer oversees, advises or guides the process, and 29 percent identified that he or she is a leader or decision maker. Those figures nearly mirror the results from 2010, but 7 percent more respondents identified their chief executive officer as a team member in 2011 compared to 2010. The same 10 percent of survey-takers in 2011 and 2010 reported that the chief executive officer provides final approval only. This year’s survey showed a 5 percent drop in the number of respondents who said their chief executive officer’s only role is to provide ideas — that figure dropped from 7 percent in 2010 to 2 percent in 2011.
An impressive 95 percent of respondents reported that their organization used a team approach to developing new products in 2011. Reflecting the rise in their influence on new product idea generation, respondents indicated that sales and marketing associates are part of 90 percent of new product development teams. This majority is up 7 percent from 2010’s figure of 83 percent of sales and marketing employees who were an integral part of the development team. Upper management were chosen by 79 percent of survey-takers as important members of the process along with another 69 percent who said R&D personnel also are on their development teams. Representing an increase from 2010, customers were included by 46 percent of respondents on their new product development teams.
Forty-two percent of survey-takers said they outsource part of their new product development process, which is an increase from the 28 percent of respondents who outsourced portions of the process in 2010 and the 25 percent who did so in 2009. Sixty percent of survey-takers said they outsource product development, which is not far from the 68 percent who involved an outside party in 2010. However, this year showed an increase in concept and product testing, which was outsourced by half of respondents, along with another 50 percent who chose an outside company to conduct market research. In 2010, 29 percent of respondents outsourced concept and product testing and 36 percent reached out for market research. This year, 37 percent of respondents also sought help with post-launch analysis or evaluation, and an additional 23 percent outsourced ideation.
One-third of respondents indicated that suppliers were part of their new product development teams. However, 59 percent of survey-takers said suppliers are involved in the new product development process, which is about even with the 60 percent who included their suppliers in 2010. For those who incorporate their suppliers in the process, 52 percent do so after product inception through to completion, 36 percent incorporate suppliers from inception through to product completion, 6 percent include suppliers after formulation is completed and through to completion, and an additional 6 percent said they only involve suppliers at the final stages of the launch.
Last year, 79 percent opted for suppliers to provide raw materials and/or ingredients, 67 percent called on suppliers for samples and 58 percent requested technical support and/or expertise from their suppliers. Additional reasons for supplier inclusion in the new product development process included formulation, consulting, consumer research and merchandising ideas.
The average timeline to develop a product from inception to final product launch in 2011 was nine months, which is a one-month decrease from 2010 but equal to 2009’s average. This year, 26 percent of respondents reported that their development process was faster than in previous years. The largest percentage of survey-takers — 35 percent — reported that they develop products on a six- to nine-month timeline, which is a decrease from 39 percent in 2010 and 40 percent in 2009 that developed in the same window. In 2010, 18 percent of respondents said they develop products in 10 to 12 months, which increased to 23 percent in 2011. Fourteen percent of respondents indicated that they develop products within 13 to 18 months and 3 percent take 19 or more months to create a new release.
On the opposite end of the spectrum, 9 percent of survey-takers develop a product in two months or less, and 15 percent allot three to five months for the development process, according to this year’s survey results. These figures are in line with the 62 percent of survey-takers who said their process timeline is about the same as in past years. Twelve percent of respondents reported that their process has been slower than in previous periods.
Companies continued to launch a similar level of new products in 2011 compared to 2010 as respondents reported the same average of 16 new products launched. In 2008, survey-takers indicated that they launched an average of 18 new products, which dropped to 12 new releases in 2009. In 2011, 26 percent of survey-takers said they launched three to four new products, and 22 percent added 10 to 24 more new products to their portfolio.
Both of these figures are 1 percent more than the percentages reported in 2010. The portion of respondents who did not launch any new products dropped from 12 percent in 2010 to 5 percent in 2011. In addition,15 percent of survey-takers indicated they debuted one to two new products and 17 percent introduced five to nine new products in 2011.
Although companies invested in developing an average of 16 new products in 2011, an average of seven made it into the market. Those average seven products are a decrease from the average of nine released in 2010 and 11 in 2009. Survey responses show a decline in the percentage of respondents who released five to nine new products, dropping from 20 percent in 2010 to 11 percent in 2011. However, 29 percent of respondents introduced one to two new products and an additional 28 percent launched three to four new releases last year. The percentage of respondents who did not introduce any new products declined from 12 percent in 2010 to 8 percent in 2011, according to survey results.
Of the seven products that were released to the market, an average of five products were considered successful, respondents said. Thirty-eight percent of survey-takers reported that the one to two new products their company introduced were successful, which is an increase from 26 percent who said their one or two new products were successful in 2010. Twenty-two percent of survey-takers considered three to four new products successful in 2011. Thirteen percent of companies that introduced five to nine releases as well as 10 to 24 new products each reported the launches were successful in 2011. Dropping from the 16 percent reported in 2010, 10 percent of respondents said none of the new products released in 2011 were successful.
For respondents who identified a new product failure, reasons included the product’s flavor, lack of marketing support and poor sales execution. In addition, one respondent noted the unsuccessful product was “too specific and targeted to one group.” Another provided the following explanation: “Did not listen to what consumers were saying and what market research suggested and went with product attributes that our internal team had a preference for, not the general population.”
This year’s survey shows that 59 percent of respondents have a definitive new product development plan, which is the same as 2009 levels, but a drop-off from the 64 percent of survey-takers who indicated a dedicated plan in 2010. Also akin to 2009 results, 75 percent of survey-takers said their company conducted post-launch assessments in 2011, which is close to the 73 percent who answered affirmatively in 2009. These figures represent an increase from the 64 percent of respondents who conducted post-launch assessments in 2010, according to survey results.
Sixty-three percent of survey-takers indicated market research was extremely important. Within market research, 74 percent of respondents reported that focus groups were most often used, followed by consumer panels, which were chosen by 54 percent of the sample, and in-store testing that was employed by 44 percent of respondents.
When it comes to marketing new products in 2012, online and electronic media marketing overtook sampling as the most popular choice compared to results from the 2011 New Product Development survey. While the rankings for online and electronic media were similar to last year’s levels, sampling decreased from the 44 percent that indicate plans to increase usage in 2011 to 38 percent of respondents who plan to expand the use of sampling in 2012. Both retail promotions and point-of-purchase or in-store displays recorded a drop in increased usage plans compared to last year.
One marketing category that has a predicted resurgence in 2012 is TV advertising, which ranked third in this year’s survey. Thirty-two percent of respondents plan to increase usage and 28 percent plan to keep usage levels the same in 2012. In contrast, one-quarter of respondents forecasted that the use of TV advertising would stay the same in 2011 with 11 percent planning to air more commercials. Continuing the double-digit drop reported in 2011’s survey, respondents once again indicated they plan to decrease usage of fliers and direct mailing in 2012. BI
Beverage Industry’s New Product Development survey was conducted by Clear Seas Research. The online survey was completed between Sept. 8 and Oct. 4, 2011, and included a systematic random sample of the domestic circulation of Beverage Industry and its sister publications, Dairy Foods and Prepared Foods.
Beverages were the focus of development for 93 percent of respondents with 45 percent that process juice and juice drinks, 26 percent dairy-based beverages, 24 percent energy drinks, 22 percent coffee and tea, 20 percent sports drinks, 19 percent water and 16 percent soft drinks. Alcohol makes up the remainder of the category total.
Thirty-five percent of respondents were from companies with less than $10 million in annual revenue. A total of 34 percent were in the mid-size company range — $10 million to $100 million. Reporting $100 million to less than $1 billion in revenue were a total of 13 percent of respondents. Eighteen percent of survey-takers were from companies reporting more than $1 billion in annual revenue.
On a regional basis, 22 percent of respondents have a business presence in the Northeast, 26 percent have representation in the South, another 24 percent said their companies can be found in the West and 28 percent have business in the Midwest.
Forty-four percent of respondents are in sales and marketing positions within their companies, followed by 22 percent in research and development capacities. Twenty percent of survey-takers represented upper management positions. Quality control and quality assurance, packaging, production and other titles made up the remainder of the sample.