retired Senior Vice President and Chief Research Officer for General Foods Corp., Greenwich, Conn.
Robert G. Eilerman,
Senior Vice President, Science & Technology, Givaudan Flavors Corp., Cincinnati, Ohio
Associate Director, Food & Beverage R&D–Asia, Procter & Gamble Far East, Inc., Kobe, Japan
Vice President, Research & Development, McCormick & Co., Hunt Valley, Md.
David R. Lineback,
Director, Joint Institute for Food Safety and Applied Nutrition, University of Maryland, College Park
David C. Macnair,
Vice President, Global R&D and Quality Assurance, Campbell Soup Co., Camden, N.J.
D. Ramkishan Rao,
National Program Leader, Food Science & Technology, Cooperative State Research, Education, and Extension Service, USDA, Washington, D.C.
David S. Reid,
Professor of Food Chemistry, Dept. of Food Science and Technology, University of California, Davis
President and Chief Operating Officer, David Michael & Co., Inc., Philadelphia, Pa.
Connie M. Weaver,
Distinguished Professor and Head, Dept. of Foods and Nutrition, Purdue University, West Lafayette, Ind.
1. How does food R&D differ today from the way it was conducted, say, 20 years ago?
Clausi: I see a paucity of basic research in the food industry today. I don’t think universities have changed that much in their approach—they are more focused on application technology. In the past, we did blue-sky “basic” research but always had some application in mind. I don’t see that happening in the food industry today. It’s most obvious in the United States, somewhat less obvious in Europe (Nestlé and Unilever are still doing basic research). The new innovation, true leading-edge change, is going to take place in small entrepreneurial companies willing to stick their necks out, use pioneering research, or develop pioneering research. The big companies say that when those companies are successful, we’ll buy them. Basic pioneering research in food is not completely dead at the university level, but universities are being pressed more and more toward applications. Government is so tied to various constituencies that they’re not reaching out the way they should be. The U.S. Dept. of Agriculture should focus on establishing goals and get out of the laboratory-running business. They should address pioneering food research goals that solve long-term problems concerning food for the public, and have the work done where it can best be done—in industry and universities, where the talent is. This type of R&D cannot and should not be done by individual sectors because the cost is too exorbitant.
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Eilerman: R&D efforts today tend to be much more focused and directed toward developing solutions which address key business opportunities. In the past, the major food companies generally supported large in-house R&D organizations that conducted much of their own basic research as well as applied research directed at their major product lines. This is no longer the case. There is much more emphasis on trimming the in-house organizations, with a concentration on identified core competencies. Other R&D activity which is deemed necessary is carried out through alliances and partnerships forged with institutes, universities, and sometimes even with competitors. In the past five years, statistics show that more than 90% of the organizations which conduct in-house R&D also support significant outsourcing programs.
El-Khoury: R&D evolved over the past few years in putting more emphasis on the total experience vs a focus on the technical and functional aspects of the development. This provided a new dimension to technical developments and pushed everybody to think more holistically. This is not unique to the food industry, and was certainly promoted by thought leaders who emphasized the concept of the experience economy. McDonald’s has existed for decades and we mostly thought about it in terms of the convenience it provides. Today we think about McDonald’s and Starbucks in the context of the experience they provide, whether it is in the form of Happy Meals for kids or innovative coffee drinks that probably would not have made it if the setup was different.
Faridi: Today we are a lot more effective in applying the technical talents toward the business needs of the employers for new product development, quality maintenance, and cost optimization than we were 20 or even 10 years ago. This higher level of effectiveness is due to the information age and increased communication with our business partners, suppliers, and customers. Today we live in a networked society, which helps break down the walls and functional silos. Also, today we are fortunate to have “knowledge-workers” rather than employees. Twenty years ago, the management route was the main route to glory and financial rewards. Today most major corporations offer technical ladders that are very attractive, so we see more and more staff choosing technical vs management as a way to move up the corporate ladder.
Lineback: It seems that the development is predominant today, with research playing a much less visible role than 20 years ago. There are two caveats to this: it may be a perception rather than a reality, and it is dependent on how research and development are each defined. Two decades ago, there were a number of food companies with strong research efforts in addition to the traditional development efforts for new products for the organization. Today, there appear to be many fewer food companies with major research programs. Consolidation within the industry has resulted in fewer, but larger, organizations. Whether this reduction in number of companies parallels the apparent reduction in company research programs is not clear. Some R&D functions appear to have been transferred to other organizations, such as suppliers.
Macnair: Food companies are placing much more reliance on external vendors as sources of R&D, partly driven by the specialization in technology that has occurred in the past 20 years. Like department stores and specialist stores, they play different roles. Modern communications and a more global approach have led food companies to reorient how R&D is conducted. In today’s food company, much more R&D expertise is in application rather than as primary developers of technology, so that internal competence is as coordinators and appliers of technology rather than primary producers. Twenty years ago, food companies such as General Foods had a very broad-based R&D function, with a significant amount of basic research and applications. Today, food companies have to get their R&D from an array of outside organizations such as universities and increasingly from their vendors. European companies such as Unilever and Nestlé probably have not gone as far down that road as U.S. companies.
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Rao: Food R&D is much more sophisticated and driven by global competition, environmental concerns, legal issues, and consumer demands today than it was two decades ago. Today’s R&D also requires more highly trained personnel. We have a greater understanding of the science of food, and while this is a boon it also demands more knowledgeable employees to fully exploit the new and emerging knowledge. Consumer expectations have increased dramatically. Their demands have extended from the traditional variety, availability, and affordability to healthful, convenient, and safe food (even if they have to pay more). These variables now demand that today’s R&D units be staffed with highly knowledgeable individuals.
Reid: Over the past 20 years, there has been a trend toward increasing development and reducing research. There is less in-house research. Most of the research is conducted by third parties under contract/direction or by suppliers as a survival necessity. Overall support for research in the food industry has been very flat, compared to the biomedical and biotechnology fields. Certain sectors have become “hot,” but many critical areas for the future are neglected because of limited resources. Today, instead of R&D, it may be more accurate to think of a three-tiered system consisting of “Research,” “Targeted Research and Initial Development,” and “Development.” Whereas 20 years ago there was substantial investment in food research, now the investment in food research is better described as a focus on “Targeted Research and Initial Development.”
Rosskam: Food companies are having to develop products faster and with less internal resources. They are doing more following than leading, since they do not have the development budgets that they once did. It is easier and less costly to allow a smaller company to innovate and then just buy it. For example, look at Coke’s recent purchase of Mad River, the New England beverage manufacturer.
Weaver: I did a sabbatical with Kraft in 1988. They had 22 nutrition scientists in the department I worked in. They had technicians, wet chemistry laboratories, animal feeding facilities, and many specialized research departments one could work with to have samples analyzed chemically, physically, microbiologically, etc. It was a very active, cohesive group which presented their findings at national meetings and had regular meetings about what was on the horizon. They were already exploring functional foods at that time. They wrote comprehensive reviews on diet and health relationships and looked for ways to be at the cutting edge. Today, the chemistry labs are pretty much gone. The animal facility is gone. They have a fraction of the personnel in nutrition science, and they are scattered across various departments. They contract small projects with university scientists. The recent merger with Nabisco is creating strategic planning activities across long distances. I think the scientists remain thought leaders but are no longer doing their own R&D.
2. What are some examples of successful R&D in the food industry, and why are they successful?
Clausi: Here I may show some bias, since most of my examples of successful food R&D are from General Foods: creation of instant desserts; powdered beverages that have the quality of natural juices, such as Tang and Country Time; soft moist pet foods pioneered by Gainesburgers; Cool Whip, which harnessed emulsion technology in the food industry; and aspartame, which, although it was an accidental discovery, was a very successful example of R&D for the food industry. In each of these cases, a totally new category that didn’t exist before was created, and most of these were not line extensions, variations on a theme, or packaging novelties, but something that created new markets, categories, totally new concepts.
Eilerman: We have seen major contributions in the food area from biotechnology. Examples include enzymes (rennet for cheese) from recombinant DNA technology, a variety of plants (soybean, wheat, etc.) with improved yield and other properties, and diagnostic testing which has enhanced food safety. Packaging advances have also led to improvements in delivery, shelf stability, and the ability to supply unique products. Microwave technology has clearly contributed in many ways to demands for different products which address today’s lifestyle (convenience, speed, etc.). Although there are still many challenges that remain, many products have found a place in the marketplace.
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El-Khoury: I continue to be fascinated by the beverage market in Japan. The pace of innovation in this market is impressive. It is very hard to stay on the shelf if you do not have the power to out-innovate and outperform. Based on those who know the Japanese market well, this success revolves around three factors: a consumer who demands excellence; a culture of “innovate or die,” probably influenced by the electronics industry; and an attention to details from product to package to the design of the overall execution. Needless to say, R&D should not be conducted in a vacuum. When the objective is clear—to meet the needs and wants of consumers—demanding consumers will help drive great innovations.
Faridi: Successes in the food industry are too many to mention. We introduce more than 10,000 new products every year, and our food supply is the best, least expensive (as percent of income), and the safest in the world. Another area of major success is new developments in the ingredient business. U.S. product developers enjoy access to the best and most abundant supply chain of ingredients for developing new products.
Lineback: There are many examples of successful R&D in the food industry. They are successful because they meet real or perceived needs of consumers that result in large-volume product sales.
Macnair: Some of the more successful examples are not stunning examples of technology but rather the effective meeting of identified consumer needs by coordination between marketing and R&D. Bringing all those elements together is very compelling. An example of this is Lunchables, a very successful brand for Kraft. Campbell’s V-8 Splash is another example of successful R&D. Good R&D really translates into a successful product when there is very clear alignment between different aspects of the business—R&D, marketing, and supply chain—focused on delivering a product to meet a well-defined consumer need. There have been occasions where innovative products failed in the marketplace. Olestra has struggled as a consumer product, although untold amounts of money were put into the technology. One of the things to be mindful of is that technology alone is rarely a guarantee of success. Often, consumers can be very wary of new technologies regarding food. Irradiation is one example, biotechnology is another. This suggests that technology alone will not win over consumers.
Rao: Value-added processing and convenience can be singled out, among others. Examples of successful products that met a consumer need include Lunchables, Snack- Well’s, calcium-fortified juices, calcium “chews” (such as Viactive), and cholesterol-lowering foods. Some of these successful new introductions are variations on existing foods that are delivered in new/exciting ways; most represent “value-added” products. There are numerous successes in the marketplace, and many casualties that never succeeded! The successful products meet a definite consumer need/desire. Many are real, and many are “fads” that are nonetheless perceived as worthy and therefore create a demand. Another area that is likely to make a debut is designer foods, once biotech foods are accepted by the consumer.
The order of introduction of new technology would be a factor in whether a technology is successful. For example, introduction of biotech foods (such as yellow rice with beta-carotene) that are “consumer friendly” followed by the introduction of biotech foods that are “corporate friendly” probably would not have led to the kind of consumer opposition to this technology that we see today.
Reid: The development of nonthermal methods of preservation is an on-going success. A consumer need for improved safety and improved quality meshed with an evolving fundamental research base that allowed for targeted development of the critical technologies allowed for product development to move forward. Reduced-fat and fat-free products have greatly improved in consumer acceptability. Much of the improvement stems from application development built on critical fundamental research findings describing the physical and rheological properties of gels and similar systems. The fundamental research was not necessarily performed with the object of enabling reduced-fat products; rather the objective may have been the understanding of gelation and the relationships between structure and rheology.
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Weaver: Tropicana is this year’s nutrition success with its line of citrus juices which have different fortification strategies, from calcium to folate. They are also testing a new product blending attributes of citrus juices and milk (smoothies). Two years ago, the best-selling new product for Walmart was Mead Johnson Nutritionals’ Viactiv. In both cases, they targeted women’s health, conducted the relevant research to make health claims, and had a marketing plan that reached the media appropriate for their product. They used credible scientific spokespersons and worked with the media. Their products met a true nutrient need in a palatable form that was creative.
3. What effect do food company mergers have on R&D?
Clausi: When two basically dissimilar entities (such as tobacco and food) merge, the impact is minimal. Each unit goes along on its individual way, and R&D is minimally affected. However, when two similar food processing companies merge, there is a very profound impact—if not immediately, then over time. There is a lot of rationalization of activities, minimization of duplication, and consolidation of workforce and laboratories. I would like to think that the result is a stronger R&D department, but that’s a measure of the quality of the management. Whatever is long range, is put on hold by the acquiring company. One of the team always becomes dominant and puts a hold on what the other one is doing until it understands what the other is doing. There is less impact if the two merging companies are less similar, such as a meat packer merging with a food processor. Chances are the meat packer didn’t have much R&D to begin with. However, with two canners or two meat companies, where they have similar activities or similar markets, there is a profound impact.
Eilerman: Generally, mergers lead to a reevaluation of the R&D conducted in the different parts of an organization. There is usually a strong push to reduce internal R&D during the blending period, and long-range efforts may be dramatically affected or reduced. There is also a loss of focus, which can lead to a loss of momentum if the process is not handled carefully. One clear advantage is the increase in technological capabilities which can result from blending several different organizations together. The end result for R&D can be very positive if appropriate emphasis is placed on decisions related to how, how much, and which R&D is strategically correct.
El-Khoury: I think that the effect will be small, at least in the short term, because most of the mergers are not driven by R&D capabilities. They tend to target brand names, brand equities, and an increase in marketing capability, like securing more share of stomach or more shelf space. This obviously can change. More interestingly, however, there is a substantial increase in joint ventures and licensing activities which are more focused on exploiting technologies that have been underutilized. This increased commercialization capability is going to have a positive impact on R&D capabilities and innovation.
Faridi: It usually improves our abilities to learn from one another through transfer of best practices and sharing of experiences. It also helps the R&D organizations of the merging companies to become more robust by putting the best of the two together. Undoubtedly, there will be some downsizing involved. However, the benefits usually exceed the risks.
Lineback: Mergers definitely increase the emphasis on development as the companies compete to place new products into the marketplace. With the high cost of development for a new product, some decrease in product introductions appears to be occurring. However, there is intense competition and concentration on development of products that have an increased opportunity for market success. It is not clear what the effect is on research—it is not readily apparent that it is increased as a result of mergers.
Macnair: There is no question that the wave of mergers is certainly driven by a belief that there are significant synergies that could be realized by such mergers. Yet we are all dealing with the reality of relatively slow market growth in the U.S. There may be some spare R&D capacity as these companies merge. Then we shall see how the new companies choose to invest in R&D. I believe that we are beginning to see a return to increased investment in R&D that will more effectively stimulate real innovation and quality enhancement.
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Rao: Mergers reflect the trend which has occurred in many industries—it is driven by the need for enhanced profitability. Mergers might achieve cost reductions and enhanced efficiency. R&D is often a casualty of mergers. A few of the more forward-thinking organizations realize that R&D is the “life blood” of a successful organization and do not decimate R&D after a merger. Rather, they fashion the merged organization in a way that builds on the strengths of the merging companies. So mergers need not be bad for R&D. But it is the short-term goals of the merged companies that have hurt R&D.
Reid: Mergers have tended to reduce the number of individuals involved in R&D. The reduction in personnel is proportionately greater on the research side. Mergers have also driven to some extent the development of new R&D management systems and management tools, in part to assist with the integration of merging cultures. The ability to manage effectively the initial stages of development and the selection of projects to move forward has improved, driven by the fiscal realities of mergers.
Rosskam: Mergers reduce the total number of R&D people and often require the selling-off of non-core brands which then get the opportunity to be re-energized by the new owners. They also create the opportunity to leverage the brands of the merged companies intro new food applications. For example, maybe Keebler wants to market a savory/vegetarian cracker that they could use the Worthington brand equity to leverage.
Weaver: Sometimes mergers can lead to creative strategies to blend diverse expertise, and sometimes they lead to inactivity as they wait to see how the structure falls into place.
4. How will globalization of the food industry affect R&D?
Clausi: Where true globalization is taking place, we are beginning to see a proliferation of what we call branch labs around the world, servicing that particular market or company in that area. They may all be linked with the central organization or not, depending on how the company is run. At General Foods, we were more or less international, with a dual reporting structure, reporting to the local organization for business direction (what product we should be selling, unique aspects of the product to be mindful of, what flavor or taste the product should have, etc.) and reporting to the central research organization for functional direction and leadership. Companies that are truly global buy ingredients over a wider area of the world. The result is that suppliers are going global to be closer to their customers—a relatively new thing. Even smaller suppliers have to have branches around the world to satisfy their customers. So true globalization, where major businesses are in major markets around the world, of necessity brings about true globalization of talent, people, laboratories, and suppliers.
Eilerman: Globalization has forced food companies to consider the pros and cons of centralized vs decentralized R&D organizations. Both approaches have advantages and disadvantages. In centralized organizations, there is usually a critical mass to carry out cross-functional programs. On the other hand, strategically placed smaller units in a global marketplace can create the possibility to quickly tap into new technologies wherever they arise.
El-Khoury: Over the years, companies evolved from being international to multinational to global. Each phase had its advantages and disadvantages. It is, however, a fact that today we are in a global economy, and leveraging scale is an important contributor to success. While food, culture, and taste preferences tend to be local, geographical boundaries are becoming less distinct. A few years ago, Japanese teenagers wanted to imitate American teens, including moving away from eating noodles to consuming more hamburgers and pizza. Today, Asian youth is trying to imitate Japanese youth. The challenge is to find a sweet spot that balances globalization and localization and to structure R&D accordingly.
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Faridi: Globalization of food companies has had a marginal impact on R&D organizations, particularly in the U.S. Transfer of best practices and technologies and people has been the main area of progress. For most food companies, having a truly “one global lab” is still a work in progress. Part of the problem is that regulatory laws and legislation, as well as consumer desires and economic standards, are vastly different around the globe. This makes having a true “one global lab” and developing products around the clock very difficult.
Macnair: Globalization is good for R&D because it broadens the opportunity to draw from different ideas, from different marketplaces. With today’s communications capability, it’s very much easier to conduct R&D on a more global basis. So we’re seeing more products moved across markets, and we are certainly conducting more projects with multiple groups within the company interfacing on the same projects, which we could not have done a few years ago. I see globalization as a positive because good ideas and good technology are not restricted to any one market.
Rao: Globalization has already had considerable impact on food R&D. The trend has been to expand the horizons of R&D organizations and has generally led to enhanced innovation, with a resulting array of new product ideas. This trend will clearly only continue to accelerate. Standards of safety, identity, and quality differ from country to country. International trade will put pressure on U.S. R&D to come up with measures to maintain the standards of the imported and exported food.
Reid: The effects of globalization are in many ways similar to the effects of mergers. Cooperative groups have extended their boundaries. Knowledge has to move freely over extensive networks. Local solutions are no longer adequate. Development has a significant local component, whereas research has a more universal relevance. This is another driver of the changing balance between research and development.
Rosskam: Globalization has some real positives in being able to access products and trends more quickly and commercialize them in another part of the world.
5. Are there any new technologies that have the potential to improve food R&D?
Clausi: Biotechnology and genomics are really the wave of the future. Real answers are not going to come until we get in there and find out how the body really deals with various food components at a medical, molecular, genomic level. Till then we will have a lot of fits and starts. Biotechnology is where I’d put my marbles. Another area is nutritional science—not traditional metabolism, etc., but learning how various substances are utilized by the body and affect the body in positive ways. It’s an area that’s going to grow, but we have to get answers first, and they’re going to come from medical science, biotechnology, and genomics.
Eilerman: The most dramatic improvement is the ability to manage and distribute information. Informatics processing tools, when properly deployed and effectively utilized, greatly increase the access to R&D knowledge. This puts the right data in the hands of the appropriate scientists (or other scientific knowledge users) with high efficiency and thereby increases the effectiveness of the process. Molecular biology offers the promise of discoveries which dramatically change the food R&D universe in a way similar to that which has occurred in the pharmaceutical field.
El-Khoury: In the context of improving R&D, a powerful approach is learning cheap and failing cheap through rapid experimentation. This is where early prototyping can be very effective. You can learn a lot even from imperfect prototypes. Any technology that will help meet this objective should be seriously considered. Quick prototyping, mathematical modeling, and Internet testing are only a few tools.
Faridi: The most important technology for improving R&D effectiveness is information technology. New software for raw material and formula management, ecommerce with suppliers and customers, and Web-enabled interactions are just a few examples.
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Lineback: There are new technologies being developed that certainly have this capability, particularly from the development standpoint. These include nonthermal preservation technologies such as high-pressure processing, pulsed electric fields, pulsed-light treatment, and oscillating magnetic fields. The emphasis for these is on the “potential,” although high-pressure processing already is being used commercially. The continuing development of time–temperature indicators has implications for commercial development to improve food safety.
Macnair: Many of the technologies are still in their formative stages. Biotechnology, for example, is a major opportunity for the future. Its potential will really only be realized in the consumer’s mind when we are able to deliver products from that technology that have clearly recognizable consumer benefits. New technologies in the area of ensuring food safety will continue to grow in importance. I see continued expansion of aseptic processing in the U.S. It is quite an accepted and well-developed technology in Europe but relatively underdeveloped in the U.S. I think that R&D will inevitably benefit from significant improvements in communication and data management, such as software that allows you to effectively run multiple sites working on a single project. And ultimately, technologies or techniques that allow us to get a better insight into consumer behavior will be critical, will allow us to speed up and make more accurate development of more targeted products to consumers.
Rao: The food industry has many new technologies that can be adapted. The issue is not so much identifying new technologies as it is implementing them. There are a host of new preservation technologies emerging, such as ohmic heating and high pressure, and new processing technologies, such as supercritical fluid extraction for sensitive food components and supercritical extrusion for the production of novel products. We will likely see a host of novel technologies emerge around the nutraceutical area, which will yield many new approaches for extraction, fractionation, and development of delivery forms. Adapting irradiation of food would be beneficial in improving shelf life and food safety. Other upcoming technologies include microarray technologies and sensor technologies.
Reid: There are always new research techniques, new instruments, new concepts coming along. These are difficult to forecast, and may evolve from unlikely sources. For example, NMR is a powerful research tool and a powerful control tool in the modern food industry. This could not have been foreseen in the early developmental stage of NMR. New communication technologies, and the continued rapid evolution of the Web may have the greatest impact on research and development, as the quality of interaction continues to increase and the ability to search for and retrieve information continues to grow.
Weaver: There are emerging food processing technologies. Barriers are more regulatory than imagination for new product ideas.
6. What are the benefits and drawbacks of conducting R&D in-house and through outsourcing?
Clausi: The clear benefit is in having a core skill or core technical basis for your business. By doing in-house R&D, you build an invaluable cadre of talent. I would never envision running a company that had a need for a core technology without having a core talent as good as any in world. Benefits and drawbacks depend on what the need is and where the talent lies. There is no problem whatever with outsourcing—nobody knows everything, especially in a world where more and more talent exists. You should have a strong cadre of talent in house, charge them to know who else anywhere else in world has talent in that area of importance to you, and, if necessary, outsource to that talent. However, other people may also be aware of it, so it’s better to be there first. Also, if you become totally dependent on outsourcing, you’re at risk. That would be a fool’s path.
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Eilerman: Perpetual innovation is a key success factor for technology leadership. No internal R&D group can possibly hope to excel in all the areas necessary to maintain a competitive advantage. Therefore, to be successful, having the right blend of internal and external (outsourced) R&D activity is critical. Outsourcing also allows a company to manage its risk more effectively while not avoiding new advances due to lack of resources. Also, a balanced approach allows a company to concentrate on core technologies where internal talent is available while still taking advantage of new discoveries in non-core areas where the company may not have the talent necessary to exploit specific technologies. It also allows for more parallel processes to occur, thus compressing the development cycle.
El-Khoury: This depends on the nature of the development, the commercialization prospect, and the size of the prize. Outsourcing R&D is gaining popularity. It puts less pressure on one’s own resources and leverages outside capabilities that may not exist in-house. I believe, however, that it is still confined to projects with moderate complexity, such as flavor development. Fortunately, there are a lot of these projects in the food industry, and leveraging outside capabilities is certainly beneficial. Also, historically the food industry has been more “open” than other industries, with fewer drawbacks behind joint work. This makes outsourcing not unusual. Overall, I see more benefits than drawbacks.
Faridi: It all depends on the size of the organization and the nature of the outsourcing. Many of the challenges we are facing today are simply too big for one company, regardless of the size of the company. Therefore outsourcing to specialized organizations as well as collaborating with universities and research institutions becomes critical. There are numerous agencies providing outsourcing possibilities, from routine analytical services to sophisticated product and package development and consumer testing. My guess is that we will see an increase in demand for such activities over time.
Macnair: The benefits are probably fairly straightforward: specialization is simply a reality in today’s world, and a broad-based food company cannot possibly be competent in all facets of food technology. So we need and must tap into areas of expertise outside our business. I see a major benefit in making an organization more outward looking and more receptive of ideas. The difficulty is that it’s hard to manage well. Confidentiality issues, in a business where formal intellectual property protection is rare, are always going to be challenging. In an industry where most of what we have falls under the heading of industrial secrets (e.g., recipes and processes that are considered proprietary), allowing a third party to do its job properly requires very careful management. Also, there has to be a very clear understanding of expectations, goals, and objectives, and ultimately both parties must benefit financially from these relationships for them to continue.
Rao: Simplistically, in-house provides greater control and usually involves higher costs, whereas outsourcing may provide the advantage of not having permanent employees nor carrying the associated overhead but is very targeted. Generally, a company will likely benefit from a combination approach in which specialized research areas are outsourced but the ongoing R&D needs are met by an in-house group. This is essential to maintain the long-term “institutional memory” that is so essential. Patent issues and scientific piracy are more important in outsourcing compared to in-house R&D.
Reid: From an academic’s point of view, shared, accessible information is most valuable, as it opens new avenues of thought. “In-house” and “outsource” suggest different levels of control, and different levels of access to information. The extent of the accessible data differs. This automatically has consequences. The greater the level of sharing, and the larger the group with access to the knowledge base, the more likely solutions are to arise. This clearly ignores the economic factors that are also critical to success and failure in the development of new products.
Rosskam: The benefits of conducting R&D in-house are speed to market and added protection of intellectual capital. The negatives are added cost, speed to market (because of not using additional outside resources), and loss of some new “eyes on the ball.”
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Weaver: There are benefits to contracting with academia. Academics are highly motivated to do good research, they are less expensive, they are experts, they are a source of creativity. However, they have publication and training expectations related to student preparation, promotion, and tenure, and there are proprietary and conflict-of-interest issues.
7. How do industry-university, industry-government, and industry-supplier alliances figure into the R&D picture?
Clausi: We need more of such alliances, particularly in the U.S. I travel a lot around the world, and it’s not at all uncommon to see these groups working hand in glove in major countries. The U.S. keeps them at arm’s length, a kind of legacy of riches and singular wealth that is no longer necessarily true. When the U.S. was alone doing research in the processed food industry, we could be wasteful, but we can’t anymore. We won’t make advances in food science if we don’t work together in alliances. If government played the role of matchmaker, setting goals, and bringing together industry, academia, and even government labs, there could be basic breakthroughs in food R&D. We do it in the military and space and to some degree in medicine. We don’t do it in food. That’s stupid. Nevertheless, there are some fledgling steps in that direction. We need more of them.
Eilerman: To take advantage of new knowledge and technologies rapidly being developed, it is essential for food R&D organizations to develop networks of alliances. This helps to manage risk, create the necessary balance in a portfolio, and compress the development cycle for new introductions. The trend with food companies is also to push the burden of the research and early development to their suppliers to manage costs and also allow them to focus more narrowly on their own key activities.
El-Khoury: One key driver for joint R&D work is in leveraging outside capabilities because sometimes it is not very efficient to try to do everything yourself. One potential outcome is to come up with inventions and discoveries that do not exactly fit in the original scope of the development, such as accidental discoveries, but which can be used or commercialized by other parties. These two factors can be good material for a solid and healthy relationship between the R&D capabilities of universities, government, and suppliers.
Faridi: Alliances fit into the R&D picture very well. Either most of the alliances that companies establish with other companies as well as with universities and government are related to R&D or R&D is a major component of that partnership. It is most helpful in long-range R&D.
Lineback: Industry–university alliances, partnerships, and cooperation have a rather long history in the area of research. While the food industry invests a relatively low percentage of sales income in research, a portion of this has been invested in research with selected universities and individual university faculty. Normally, this has been for more basic or fundamental type research in which the industry has identified the generation of information that would be useful for them in their product line. Industry has also used university faculty as consultants on R&D projects. I am not familiar with very many industry–government alliances. Industry–supplier alliances are an important aspect of the R&D picture and seem to be increasing in both importance and frequency. This often involves selected suppliers doing some aspects of R&D for the company, for which they gain favored supplier status. Comments are frequently heard that food companies have shifted more of their R&D to suppliers, but I do not know how valid that perception is.
Macnair: These alliances have been and will continue to be important. Industry–supplier alliances have continued to grow in significance. There are some very good models of industry–university alliances which continue to evolve, but industry–government alliances are the least well developed, and it is an area where there is considerable opportunity yet to be realized. The challenge is that government, quite appropriately, has a different agenda. Industry has to conduct itself in a way that returns value to shareholders, whereas government is interested in far broader-based areas such as food safety, nutrition, and, obviously, the science base for regulation. We all have a great vested interest in basing regulations on the best available science.
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Rao: Industry must depend on university and government research as the reservoir of information, knowledge, and ideas that drive corporate R&D. There is a need to develop better mechanisms to maintain interactive links between these sectors. This has been recognized but not yet “solved.” The supplier–industry linkage is a good one that is sustained by the interdependency of the two sectors. The value of this relationship is more short term than is the relationship of industry to government/academia. More than bipartite alliances will be necessary to move the industry forward. The alliances will be successful if there is something for all the parties involved in the alliance. For example, in an industry–university alliance, there should provision for protecting the confidential nature of the industrial needs and an incentive for the university to publish. This can be accomplished by identifying additional money for long-term but peripheral research related to the confidential issue (e.g., money for a graduate student, postdoc, etc).
Reid: Alliances are positive drivers of discovery. The best evidence of this is the success of cooperative approaches in Europe such as FAIR, the agriculture and fisheries research and technological development program.
Rosskam: Alliances can be an effective way of bringing “best of class” practices together at a minimum of cost.
Weaver: All three types of alliances are important. The university is a good source of original research for technology transfer to industry. Industry and government provide a balance for regulatory, efficacy, and safety issues. Government can help fund large-scale trials by academia that enhance commercialization. Suppliers can do stability, purity, and pharmacokinetics testing for industry.
8. What effect, if any, do food safety problems, such as mad cow disease, foot-and-mouth disease, and E. coli and other foodborne disease outbreaks, have on food R&D?
Clausi: Good news and bad news. The bad news is that the media focus on the negative aspects of the food supply and like to blow it up way out of proportion sometimes. The good news is that the focus on microbial issues and environmental issues today makes much more sense than in my day when we focused on food additives as a priority when we should have been focusing on microbial and environmental contaminants. I’m concerned that consumers get so gun-shy that they don’t trust the food supply. The reality is that we have the safest food supply by far that has ever existed. It’s not perfect—there are bacterial and environmental issues to deal with, but we have to put them in context.
Eilerman: Food safety issues tend to heighten the consumer’s sensitivity to food products in general. For R&D, this sometimes means having to discontinue one approach and realign the resources. For example, the BSE concerns have led to a sensitivity around products containing gelatin. This has caused researchers to change direction and rapidly develop alternatives for many food products. Likewise, GMO issues have caused serious problems with many existing products. Food R&D groups have again had to change direction and develop new products which address the consumer’s concern.
El-Khoury: There is no question that such outbreaks must be avoided at any cost. Food safety and quality are not negotiable. Proper legislation and systems must be in place to protect the consumer, and R&D can help in developing the tools and measures to control such issues. R&D can also come up with alternatives that give the consumers a choice. Functional foods are gaining popularity and should be able to bridge some of the gaps.
Faridi: The issue of food safety affects everyone who is in the food business and should be taken very seriously. Foodborne outbreaks shake consumer confidence in the food supply and allow special-interest groups to use the issue as a political tool. We have to do everything possible to strengthen the Food and Drug Administration and other relevant government agencies (both federal and state), invest in developing detection techniques, and support organizations such as the Institute of Food Technologists, the National Food Processors Association, and the International Life Sciences Institute.
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Lineback: Food safety problems and foodborne disease outbreaks appear to focus issues among the consumer community, but I am not at all certain that they have a significant impact on food R&D. The food industry continually seeks improvement in processing technologies that will result in increased food safety. The problems cited in the question increase emphasis on processing and production of certain food products on which the company is already working. They serve as a signal that continued diligence is needed in the development of food processes and products with improved food safety characteristics.
Macnair: They have a considerable effect because they have a major impact on the consumer’s confidence in our industry. So they present a tremendous challenge to the R&D community to continue to work to find ways of ensuring safety and wholesomeness of our products. The campaign against microbiological contamination is never ending, but new concerns such as BSE present very different and unique problems. And currently they’re ones that we don’t necessarily know the answers to. But it clearly shows that the issue of food safety will and should remain an extremely high priority in the R&D community. It requires a constant search for new techniques, new technologies, new procedures to combat changing food safety challenges. Issues are not stagnant but continue to change. Food R&D has to continually improve its game to keep ahead of these types of food safety issues, as they frequently impact budget allocations, resource allocations, and where the research dollars are invested. As food safety issues continue to increase, R&D dollars will be taken from other areas and reallocated to food safety–related activities.
Rao: Clearly, food safety is a major driver of food R&D. Currently, the industry does a pretty good job of managing known pathogens and potential toxins. In some, cases the industry has taken the lead in educating the consumer. New or more virulent organisms and new safety issues such as BSE drive an acute change in R&D focus. These safety areas are examples of situations where the industry/academic/government interaction has been at its best—in resolving a common problem that provides no unique economic advantage to any company.
Reid: Consumer perceptions and public attitudes are important drivers. Given a limited resource, the allocation of assets necessary to address food safety issues at a level the public expects necessarily reduces the resources available for allocation elsewhere.
Rosskam: They will challenge us to have effective, low-cost, and enforceable testing procedures for raw materials and finished products. They can give way to new products such as more meatless food applications.
9. What are the major challenges to improving R&D in the food industry?
Clausi: As long as acquisitions of innovative companies and mergers are commonplace and as the world offers opportunities to further market existing products, we’re going to see a lack of emphasis on futuristic R&D. That’s the number-one challenge.
Eilerman: Challenges include attracting talented scientists to the field; effective utilization of the new informatics tools to compress the learning cycle; proper orchestration of internal and outsourced R&D activities to maximize the impact; and understanding how to efficiently exploit new technology globally.
El-Khoury: The food industry has, probably more than any other industry, the wonderful challenge to improve the lives of consumers so that they can enjoy a healthier and more productive life. There are several ways to deliver that. Funding significant research and major innovations is obviously important. Of equal importance is the personal passion and entrepreneurship of food researchers, similar to what characterized the dot.coms. We need to build more of it in classic industries like food. This is when innovation, speed, and consumer delight will go ahead hand in hand.
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Faridi: The challenges facing us in the coming years are many. Here are a few: There is a huge gap between organizations’ need to innovate and our ability to do so—people, work process, and culture all have a role in making R&D more innovative. We need to further enhance our alignment with our business partners and view R&D as the owner of the business rather than a support group. And with the arrival of generations X and Y in the labor market, we need to retool our human resource techniques and practices to make the work environment more appealing to them.
Lineback: The major challenge facing the food industry in improving R&D is funding. When attention is on the bottom line, as is emphasized today, and cost reductions are emphasized, R&D is often the target for reduced funding. Productive use of alliances is also a challenge in developing them and making them effective.
Macnair: Fundamentally, there is not enough investment. We have to continue to work to convince our companies’ leadership that investment in R&D is worthwhile, productive, and for the ultimate benefit of the company and its shareholders. If we fail to do that, we will not see greater emphasis placed on R&D and innovation. I’m optimistic that we can do that. We are seeing signs of increased R&D spending. Also, it is very important that we continue to find ways of encouraging students to enroll in food science and related disciplines so that we will continue to have the talent that we require within both academic and industrial research. We have to ensure that students see the food industry—and therefore R&D within it—as an exciting and productive career opportunity.
Rao: Investment in long-term research by both public and private institutions is a major challenge. Current investments appear to be aimed at short-term returns. With a few minor exceptions, the food industry, unlike other industries, does not have any R&D directly funded by the federal government. The challenge is to increase direct federal support to R&D in the food industry. This will enable companies to derive greater productivity from R&D and achieve greater profitability from their research investments. This in turn translates into R&D organizations being able to identify emerging scientific breakthroughs earlier and faster and to be able to translate scientific discoveries into new product opportunities. The other more pragmatic issue that R&D must cope with is continuing to assure the safety of products and the compliance with an increasingly complex regulatory environment, particularly in light of the globalization of the food supply.
Reid: I cannot speak to development, but there is a critical need for more support for research in food science and technology. In addition to developing the knowledge on which a new generation of technologies and products can be based, research can attract the innovative thinkers and developers into the study and understanding of food, and provide the new generation of food R&D professionals that are critical to our future.
Rosskam: The challenges are cost and too much conventional thinking.
Weaver: A major challenge is to think longer term than the typical philosophy. Short-term goals cut out the maturing of a great idea or technology so that only small gains are realized. Long-term relationships with an expert rather than a one-time, short-term project with a limited goal creates an ability to have continuous consulting and development of an idea.
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10. What role does (or should) a company’s marketing department play in the direction that R&D takes?
Clausi: I have a direct and perhaps surprising answer. It is what I told my R&D people during the “glory days” of General Foods R&D. It is simply that as members of a consumer products company, we are all in “marketing.” To that extent, marketing’s goals are our goals, but it is not their job to tell us how to get there technically. That’s R&D’s job.
Eilerman: I can answer this question with respect to my company and also indicate in which direction it seems to be going for all industries. With respect to my company, all major fundamental and applied science R&D project activity must be justified after proof of concept by a business contract/commitment that indicates expected income stream from the research effort. Marketing decides what products are required to grow the business, and these decisions then lead to a determination of what projects need to be funded in R&D. We also carry out strategic R&D, which enables us to maintain a leadership position in our core competencies or in some cases explore totally new areas. The funding for this type of R&D is established (usually as a percentage of the total R&D budget) by our division executive management team. With respect to the industry in general, there has been a decided shift toward R&D that is more customer focused, and it is clear that marketing has a major influence on that process. Also, there are more attempts to identify customers at an early stage in the process, and this certainly speaks to a greater input from marketing to identify opportunities and line up key customers to participate in the technology development process.
El-Khoury: R&D and Marketing must work together from day 1 of any development project. They bring different skills that help provide a broader perspective and a deeper analysis of new opportunities. This should eventually lead to better returns on R&D investments. This does not necessarily mean that both R&D and marketing should play, initially, equal roles in defining the new opportunities. Either function can drive that, but both functions should get on the same page as soon as possible after that to secure alignment behind common business and development objectives. The key is to make sure that such a close relationship does not define projects that are too narrow in scope. This could limit the capacity and desire to innovate. R&D must maintain the freedom to experiment and learn within certain boundaries. At least, this is how it works most of the time in the business world. I understand that things work differently in academia.
Faridi: R&D organizations need to have a group of “stakeholders” or “owners” that includes marketing, sales, operations, purchasing, and general management. This group should provide overall direction for the R&D organization and assure that the technical strategies are congruent with the business strategies. On a day-today basis, we need to be engaged with all the stakeholders and make decisions based on what is good for the company rather than for any single component of the company.
Macnair: Marketing and R&D are both critical elements in the business process. They inevitably have different roles to play in meeting the overall business objectives of the company, so it is imperative that they be highly interactive at both the concept and executional phases of any project. It is R&D’s responsibility to work out how to deliver against the consumer need and to provide marketing with potential options that could optimize the product offering. It is marketing’s role to make sure that the development stays focused against the consumer needs that have been identified and also to craft a way in which the product benefits and positioning are communicated to the consumer. Both groups must do their jobs well and interactively if there is to be a successful outcome. So I do not see R&D as a servant to a marketing agenda. Rather, both groups should be totally focused on identifying and delivering against real consumer needs in the market-place.
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Rao: The marketing department is one of the influencing factors in shaping the direction of R&D. Most of the focus of this department currently appears to be on short-term returns often contributing to a major failure (about 99%) of profitable marketing of the final food product. This is not surprising, because there is a highly contracted time line for R&D to be an effective partner. An equitable focus on both long-term and short-term marketing strategies may be more desirable. A good example is the sequence of R&D strategy and introduction of genetically modified organism (GMO) products in agriculture. Introduction of philanthropic GMOs (e.g., yellow rice with beta-carotene) followed by the introduction of “profit-oriented” GMOs could have had a better impact on the acceptance of GMOs by the consumer. Thus, a marketing analysis with long-term benefit as a variable would influence R&D strategy.
Reid: Marketing’s role in R&D is an interfacial role with development. Marketing and development together map out directions, with marketing identifying niches, consumer needs, etc., and development identifying feasibility. Development also brings in awareness of the state of research in the necessary support areas and can then interface with research to identify whether the necessary science or technology is in place, can be researched, or is not possible. In a sense, development is an interface between research and marketing. All three are necessary to the defining of future directions.
Rosskam: Marketing plays a critical role for R&D. Typically, marketing provides the approved (budgeted) projects for line extensions, new products, and product improvements. It also provides the priorities for the projects. However, R&D and marketing are too often “oil and water” when marketing tries to clearly define flavor and taste targets or to give meaningful feedback. There is a classic disconnect because we have professionally trained food scientists and sensory scientists trying to accommodate a marketing group that speaks a different sensory language.
Weaver: Marketing should neither be left out of the process nor have the sole or dominant role in R&D. I think marketing should be part of the team (along with the scientists and technologists), beginning with identifying worthy areas of pursuit that make sense for the company’s mission as well as a marketing niche. Marketing should have input on packaging, messages on labels, and all aspects of consumer interest. Its ability to introduce the product and achieve purchase is critical to the overall success.
Lineback: Traditionally, when universities and faculty want research funding, they turn to industry; when industry wants consultants, it turns to academic faculty or professional consultants. Current issues in food safety and in R&D transcend the boundaries of any one discipline and are not conveniently packaged in conceptual frameworks unique to industry, government, or academia. The issues are larger, yet the focus is still disciplinary and organizational to a great extent. A new paradigm is needed. This approach will be multi-disciplinary and multi-institutional and will be based on building partnerships (alliances) involving government, industry, academia, consumers, commodity organizations, and trade groups carefully selected to address specific issues. This will be difficult, for there are many complex issues to be addressed; yet it is not impossible, even for R&D, if we are to meet the challenges of the future. This will start with building small partnerships for specific issues and building on those successes. It will take time, great effort, and a mutual commitment to making it happen.
Reid: The foods of the future will be functional foods, i.e., foods tailored to deliver particular functions. The functions can be health related, nutrition related, culture related, property related, safety related, stability related, process related, product related, component related, etc. Through research, potential new functions will be discovered. Then targeted research and development will identify methods to deliver these new functions. And then development will incorporate these new functions into foods available in the global marketplace.
DEVELOPING FOODS is a quarterly section covering the interaction of Research & Development and Marketing in the development of food products.
by Neil H. Mermelstein,