Once Upon a Time, An Army of White Coats Ruled the New Product Kingdom. Now, the Word Is Out: R&D Has Just Left the Building.
By Dan Murphy, Contributing Editor
Gone out for lunch lately? Sure you have. And you've probably dined at least on occasion at one of those clean-cut, we'll-greet-you-at-the-door-with-a-smile, casual-theme restaurants that seem to anchor every mall and strip center in the United States. While you were waiting for the food to arrive, did you examine the menu? Not just what you ordered, but the entire menu. Try it at your next opportunity.
Chances are you'll find several new and unusual entrees. Perhaps not all appetizing, depending on your tastes, but different, creative and interesting.
Now, take a look around the restaurant. Do you really believe there's a four-star chef in the back, carefully attending to that lemon-broiled whitefish or that honey-grilled chicken you ordered? More likely, the entree you're enjoying probably arrived earlier that week-frozen, sauced, seasoned and already grill-marked and ready to "prepare."
The "outsourcing" evident in these restaurants only mirrors what is taking place in the food processing industry. Caught between the twin pincers of rising production costs and relentless competition, most major processors have opted to slash their R&D staffs and funnel their new product development work toward outside suppliers.
For the meat industry, the transition has been particularly severe. A bit of perspective puts the situation into sharp focus.
"When I first joined Armour back in the 1970s, it had more than 200 people working in its R&D division," says James Marsden, professor of meat science at Kansas State University. "Swift & Co. was right up the street, and it had close to 200 people in R&D, too. Eckrich was based in nearby Indiana, and it had about 100 people. Now, they're all combined and together they have about 25 people-total."
Changing times
Not only have the resources devoted to product development been dramatically reduced, but the corporate mentality has also changed.
"Twenty years ago, R&D was a well-guarded secret," points out Warren Kenniston, vice president of Sturbridge, Mass.-based Gemini Industries, a leading food product development firm. "Companies kept it to themselves. Now they need the input and support from the outside to cope with a more competitive marketplace."
Since its founding in 1975, Gemini has been in on the development of many new products across the meat, poultry and seafood categories. The company's focus has been in the foodservice arena, where market trends are sharpened to a white-hot intensity.
"There's a 'throw-away' mentality out there," Kenniston says. "The lifeblood of the restaurant business has always been new products, but now there is even greater pressure to make [menus] constantly new, fresh and different. In most cases, operators are down to a 16-week life cycle for new products."
Kenniston laughs when he traces the evolution in attitude among food industry executives as competition in the marketplace has intensified.
"In the early '80s, it was: 'Don't call us; we'll do it ourselves.' In the late '80s, it became: 'Hey, we could use a little help here.' Now it's: 'Bring us some new products. We want to be your partners.' In the last 10 years, I have seen a complete shift," he notes.
The theory behind that shift is simple: Outsourcing R&D, if done effectively, permits a processor to concentrate on its core operations, saving on capital and labor costs.
R&D is farmed out to suppliers or contractors-who then become the company's "specialists." The processor is then free to focus on production efficiency and marketing strategies.
To some observers, that argument has a bottom-line basis that can't be ignored. Others contend that the push toward outsourcing has been fueled more by necessity than economics.
"Unfortunately, the meat industry historically has had the mentality of saying, 'We can make this-so let's sell it,' " says Barry Feig, founder of the Sandia Mountains, N.M.-based Barry Feig's Center for Product Success, a new product think tank. "What they need to do is ask, 'What does the consumer want?' That's a whole different ballgame, and that's why this industry is relying more on outside consultants to help it get new products off the ground," he adds.
Feig certainly supplies a different mentality to the R&D game. With his background of more than 20 years in advertising and marketing, he argues that success is dependent on more than just new product quality and performance. The products that succeed are the ones that make an emotional connection to the consumer.
"You can take any product out of the commodity arena with a strong brand name and an emotional hook," he says. "But you have to wrap the product up into something exciting."
Unfortunately, excitement in the meat industry has traditionally revolved around raw material margins, not new product introductions. But it's impossible to escape the bottom-line basis of food marketing in the 1990s, as consumers grow ever more demanding and even less loyal to established brands and traditional products. New product sales may no longer be just the frosting; they're beginning to represent the cake.
Marketing innovative concepts
"More than one-third of all food industry sales are coming from products that aren't even on the shelf right now," points out Alan Turover, a principal of the Evanston, Ill.-based Turover-Straus Group, which specializes in new product development. "More importantly, food companies have figured out that there's twice the profit in marketing innovative concepts, as compared with 'me-too' ideas."
Turover suggests that building innovation into-as well as onto-new products is only part of the battle. New products have to be targeted against old products.
"People aren't going to suddenly start eating more food," he points out. "You can only replace whatever they're currently eating with something else."
Turover's "replacement strategy" focuses both on what "role" the food product must play-center of the plate, side dish or ingredient-as well as the eating occasion.
"Too often, [new] meat products don't address eating occasions," he says. "Companies worry what a new product will do, but when it's going to be consumed isn't always clear."
Bacon provides a good example of Turover's tactics. Most bacon processors concentrate on production efficiency, he says. A few have developed value-added packaging. Fewer still seem committed to a broad-based strategy that positions bacon in various eating occasions.
"If you're going to target bacon as a snack item, you're really competing against chicken wings, fried cheese and other hot hors d'oeuvres," Turover contends. "Is it going to be a finger food? An appetizer? A snack ingredient? These are the questions that need to be answered."
Questions that aren't always easy to pose, much less answer-especially by the highly trained but narrowly focused food technologists who populate most test kitchens.
Breaking down barriers
"The typical R&D person is afflicted with a bad case of tunnel vision. The person is trained to worry only about the company's immediate needs," says Gene Gagliardi, president of Atglen, Pa.-based Visionary Design and a long-time "meat man" best known for inventing the celebrated Steak-umm thin-sliced sandwich product back in the 1960s.
"I have an advantage because I don't work for a specific company. I can think 'out of the box,' " he adds.
Gagliardi's expertise is being tapped by the National Live Stock and Meat Board, which has enlisted his help to develop innovative and value-added beef products. Gagliardi's vision may offer what could be a key to the meat industry's long-term R&D success: value-added utilization of low-cost materials.
He says tomorrow's winners will likely emerge from today's undesirables.
Simply put, he says meat processors need to find ways to create new products from the raw materials they're currently under-utilizing.
So far, Gagliardi has a rather impressive track record of doing just that. Among his recent creations are:
-- Pork Bites-marinated, bite-sized, oven-roasted, whole-muscle appetizers.
-- Pork Frizzlers-whole-muscle pork strips, marinated and seasoned with barbecue sauce.
Both Bites and Frizzlers are being tested by Bojangles, a Charlotte, N.C.-based fast-food chain.
-- Popcorn fish-a spin-off of the wildly successful breaded, bite-sized popcorn chicken concept introduced in 1992 by Pepsico's KFC unit.
Popcorn fish, like Gagliardi's other inventions, was created from a "waste" product, in this case improperly sectioned whitefish fillets whose dimensions don't fit the specifications. Considered to be scrap in most operations, they were pressed into a low-cost block to be cut into cheap fish stick-type products.
Now, they are seasoned, breaded, deep-fried and frozen to be re-heated on site at KFC stores.
It's the thinking behind these new products that's the important ingredient, Gagliardi stresses.
"When most people in the industry look at a pork butt, they see a pork butt," he says. "I see it differently. I visualize it being totally utilized, with every piece given added value."
It's a process that Gagliardi-as well as many of his equally far-sighted contemporaries in the world of free-lance R&D-believes works best when it is unshackled from corporate goals and objectives.
New products emerge most successfully when the concepts can be nurtured in the fertile minds of people who "see" more in a pork butt than just a piece of meat.
"I really believe that if you're creative, you're creative in everything you do," he says. "With new product development, the industry is finally starting to realize that we have to think differently if we're going to be successful."
ASSOCIATED ARTICLE:
Philly Phenom
How a steak sandwich found fame and fortune in a most unlikely location
by Dan Murphy, contributing editor
In football, Philadelphia's team exceeded expectations this season, as the Eagles reached the NFC playoffs and won a first-round game. In foodservice, a Philadelphia firm is enjoying an equally exciting run with a classic product few expected to find marketed in a convenience store: The Philly steak sandwich.
The Philly steak sandwich is created by heaping piping hot, thin-sliced steak meat onto a hard roll, then layering on the cheese and letting it melt. The onions are optional-the piping-hot part is not.
See, the Philly steak sandwich requires the meat to be sufficiently hot to melt the cheese. Not a problem for most delis and take-out eateries, but it was a big problem for operators of WaWa, a chain of convenience stores in the Northeast. WaWa stores are not equipped with grills.
Enter the Vincent Giordano Corp.
A processor of several lines of oven-roasted, natural deli meats, including corned beef and pastrami, Giordano's supplied various deli meats to WaWa. Then, in conjunction with Gene Gagliardi, president of Visionary Design, Guy Giordano came up with a product that allowed WaWa to offer its patrons an authentic version of Philly's favorite sandwich.
"The stores were serving hot sandwiches from a microwave," says President Guy Giordano. "We came up with the idea to pre-cook the meat so the individual stores could re-heat in a 'thermalizer,' a type of water-bath cooker. So far, it has been great."
The beef is prepared from top round trim. "We go through four or five loads a week," Giordano says. "Then it is marinated, fully cooked, and vacuum packaged for delivery to WaWa stores. Store operators heat the meat in the thermalizer, then hold it in a warming tray until [it] is served.
Currently, the product is in more than 500 WaWa stores, with plans to expand its promotion this year.
The work is apparently paying off. When WaWa did a head-to-head comparison with a competitive product vs. Giordano's product, its sales more than doubled.
Now, if only the Philadelphia Eagles can duplicate that feat on the football field.