KANSAS CITY — The phrase “if you can’t beat them join them” comes to mind when thinking about the latest trend a number of large food and beverage manufacturers have embraced to spur growth — the start-up movement. Chief executives are encouraging product development teams to move rapidly, focus on creating next-generation innovation, conduct a quick evaluation and move on to the next concept when an idea fails to resonate.
While the idea may sound promising, its execution will prove challenging given the changes in how consumers define innovation and the fundamental differences between large, diverse organizations that manage complex supply chains and their smaller, more focused and agile counterparts.
At Coca-Cola, for example, the focus is on testing and learning, and future product development leaders at the company will be expected to demonstrate curiosity and empowerment. “The culture we want is one in which the values of curiosity, experimentation, learning and excuse-less delivery are the values that are rewarded,” said Francisco Xavier Crespo Benitez, chief growth officer for Coca-Cola.
A part of Nestle’s change in product development focuses on adopting an entrepreneurial approach to innovation to quickly meet evolving consumer needs. The company has launched “internal start-ups,” said Rui Barbas, chief strategy officer, to rapidly develop new products with lean designs, fast prototyping, and quick in-market testing.
Mimicking the start-up innovation process is the latest concept large companies have embraced to spur growth. Past initiatives include open innovation, product reformulation with a focus on developing easier-to-understand labels and using venture capital to potentially capitalize on start-up concepts that resonate in the marketplace.
Mimicking the start-up innovation process is the latest concept large companies have embraced to spur growth.
While each initiative may have its merits and challenges, the approaches may miss a fundamental change taking place in the market for consumer-packaged goods. In its New Product Pacesetters report the market research company Information Resources, Inc. (I.R.I.), provides a stark example of how market forces are reshaping the relationship between companies and consumers.
“New product success is not about launching the next $100 million brand,” the I.R.I. report said. “It’s about building relationships that will last a lifetime. Millennials are moved by products that allow them to express themselves as individuals and stewards of benevolence. Consumer-packaged goods marketers must invest in innovation that supports these critical priorities.”
The I.R.I. report adds that the choices millennials and all consumers have in the food and beverages they buy is essentially limitless. To aid the decision-making process consumers today are now considering a broader range of product attributes.
The attributes consumers seek were summarized nicely in a 2016 report published jointly by the consultancy Deloitte together with the Grocery Manufacturers Association. The authors said transparency, health, safety, social impact and experience have become as important as price, taste and convenience in the consumer’s purchasing decision.
Consumer-packaged goods companies may adopt an endless variety of product development initiatives in the search for market growth. What must not be lost in the search is the consumer’s definition of what is innovative has changed and is now focused on more than just the products they buy.