New product development (NPD) is the lifeblood of global food manufacturing.    

Through the successful development of innovation, food and drink businesses can build brand awareness, reach new customer demographics and adjust core ranges to reflect evolving trends in format, flavour and functionality.  

But the investment required can also be substantial, with no guaranteed returns.  

NPD is essential to success, but it doesn’t come cheap 

 

From initial testing through to a full roll-out, it can cost between $10,000 to $100,000 to get a product off the ground. And after all that, an estimated 75-80% of food industry product launches fail in their first year. 

That investment looks even more daunting in the current financial climate. Though there are some signs of stabilisation, nearly all food and drink businesses continue to face higher costs across their supply chain, including commodities, transport and labour. This all has a direct impact on their profitability.  

Against that backdrop, many food manufacturers and suppliers have opted to scale back NPD in the last 12 months, focusing resources instead on tried-and-tested core portfolios rather than experimental innovation.   

There is another option – agile product development 


This NPD strategy enables companies to balance innovation with the need to cut costs by adopting a shorter, more incremental timeline.  

So, instead of months spent in the lab, followed by a national roll-out and multimillion-pound marketing campaign, the process is broken down into smaller chunks. This in turn minimises risk by targeting customers at a far earlier stage in the development.  

So how does agile product development work? 


An initial product or prototype is developed over a matter of weeks – rather the more usual months – in response to an emerging market trend or need. It is then immediately tested and refined in the market, through quick cycles, gathering customer feedback and adjusting accordingly, to come up with an improved product at the end of each cycle.  

This strategy of short development phases and frequent testing through market research helps food and drink businesses drastically reduce their risk. It also allows them to protect investments at a time when rising costs are placing increasing pressures on budgets.  

Are there any other benefits to adopting agile product development? 


By relying on a constant loop of market research, the new products tap into the latest consumer sentiment rather than outdated trends. There is also the option to outsource elements of the process – such as the gathering of initial customer feedback – to third parties, further reducing the internal resources required.  

This means that companies that deploy machine learning, predictive analytics and artificial intelligence can provide food manufacturers and suppliers with insight on potential customer responses to an early concept or idea before any significant investment has been made.  

Key takeaway

It is an understandable response to scale back the scope and frequency of NPD in the current climate. But food and drink businesses that do choose to commit to innovation can give themselves an edge over their competitors.  

By instead adopting an agile product development strategy, these companies can continue to respond to market needs, the latest trends and build brand excitement and awareness, while minimising the risks to their bottom line.  

Read part 6 in our Cost of Goods series: Using analytics to mitigate cost rises: the role of data-driven procurement in the global food industry here.

And more about how rising costs are impacting the food industry in our blog series, including why sustainability should be a priority and how proactive procurement can help navigate pressures on the supply chain.