Diversifying and Innovating with New Products Can Lead to Success

A New York Times story from January reported that, “Beatrice Foods is now turning out camping trailers and selling insurance. General Mills, maker of Wheaties, is now a builder of trains — of the Lionel toy brand. And Swift & Co. is drilling for oil.”

The story continued: “A medium-sized Georgia baking company, Flowers Industries, is becoming a pacesetter in baking technology, with an Atlanta plant where six workers turn out 14,000 pounds of bread an hour.

“Hampered by slim profit margins and pressed by rising costs, food companies” such as Flowers, Nabisco and Pepsi-Cola, “are going into other businesses, becoming increasingly multinational and seeking technological improvements. Already under way, these trends are expected to continue … and for some companies the changes will be none too soon.”

Here’s the thing: The story is from January 1973. But unless you’re an OG food industry professional — Beatrice Foods was sold off between 1987 and 1990, and Flowers Industries, now Flowers Foods, is the second-largest baking company in the U.S. — that message of diversification might have sounded as if it came from 2021.

Diversifying your portfolio is as relevant today as it was 48 years ago, and for every Crystal Pepsi or New Coke bust, there’s an Oreo Thins or Folger’s 1850 Coffee boom. And while no one is necessarily suggesting the food companies of today should get into the toy train game, there’s a lot to consider — from food safety and quality concerns to the reason you’re diversifying or innovating in the first place.

“Innovation causes you to go up one level and ask, ‘Why are we innovating?’ ” said Bruce Perkin, principal consultant at Robust Food Solutions. “We’re innovating because there’s an opportunity. We want to make money because we’re a business.”

But, because there’s so much opportunity for growth, diversification is also where there’s the highest risk. From ideation to a product that makes it through a consumer focus or taste group, your chances are about 1 in 10, said Perkin, who served in a variety of technical and research and development roles for brands such as Pizza Hut, Yum! Restaurants International and Masterfoods Australia, which is part of Mars Foods. And to go from that point to a finished product ready for the shelf, your chances are also about 1 in 10.

"The investment is high. The failure rate is high. But when you eventually get one, it’s well worth it.” Bruce Perkin, Principal Consultant at Robust Food Solutions

“And then 5 years down the track, probably only 10% of those are still there,” he said.

Plus, Perkin pointed out, the investment costs in a new product are high. Even if it’s a hit, it could take a long time to recoup those costs. At Mars, he said, the thought process was that it took about a decade to fully recover all the investment made on a new product.

“When we did the retro analysis on products like a Snickers bar, it was 10 years after launch by the time it fully recovered all of the expenses that had been incurred during the phase of development,” he said. “The investment is high. The failure rate is high. But when you eventually get one, it’s well worth it.”

Right Time.

Knowing when and why to diversify goes beyond just the desire to make more money though, and it can’t be hinged solely on the fact that you think you’ve got an idea consumers will crave. Instead of thinking about what consumers want, think about why they should want it.

“You’ve got to get to the why pretty quickly in order to get an idea that's going to be strong,” he said. “A lot of entrepreneurs think they have a great product that is a what rather than a why. Just because you can, doesn’t mean you should.”

For example, Crystal Pepsi’s creator, David C. Novak, the former CEO of Yum! Brands, told Fast Company that he still thinks it was the best idea he ever had, but that it wasn’t properly executed.

“A lot of times as a leader you think, ‘They don’t get it; they don’t see my vision,’ ” he told the magazine in a 2007 interview. “People were saying we should stop and address some issues along the way, and they were right. It would have been nice if I’d made sure the product tasted good. Once you have a great idea and you blow it, you don’t get a chance to resurrect it.”

Someone as capable as Novak was (and still probably is) can be completely blindsided that the product failed.

“If you talk to David Novak, he’ll tell you why now is the time to relaunch Crystal Pepsi,” Perkin said. “He’s a guy that really does understand the concept of insight. And yet one could argue that Crystal Pepsi is still a what idea and is missing the consumer-based why.”

Starting Block.

Once you think you’ve got the right product, getting it off the ground is your next challenge.

Stage-gate or phase-gate, where each chunk of development is divided into distinct stages or phases, separated by decision points, is a popular concept for its ease of control and consistency. But Perkin, who has worked for companies that have developed and released hundreds of products a year, said many firms have switched to a design thinking approach, which puts the consumer more at the center of each phase.

Using your facility’s floor plan, sketch out new product flows using a combination of different colored or patterned lines.

“I happen to believe that the right solution is somewhere in between,” he said. “Integrating stage-gate with design thinking and keeping the consumer at the heart of it all is a much more disciplined and consistent way of generating strong results that are likely to be here in the long term rather than the short term.”

It’s also at this point (or even earlier) when the quality assurance and food safety teams join the process, if they haven’t already.

“We get involved right away because we need to figure out where a new product is going to fit in,” said Bobby Love, director of global food safety, quality assurance and regulations at Phillips Foods. “At our company, we’re involved in a weekly corporate meeting, pricing committees, everything. As soon as someone comes up with an idea, you have to validate and verify.”

Safe Spaces.

Usually, a new product can fit into an existing process, but in other cases, you might need to build out something new. Either way, you’re likely purchasing new equipment, introducing new ingredients — which could mean new suppliers — and all of this has to literally fit somewhere. All of those reasons are why food safety and quality assurance need to be involved from the jump.

For example, crab meat is one of Phillips’ key product areas, and the value of crab meat is in the size of the lump, Love said. The company had been mixing the crab by hand, which made it easier to leave the lumps large since a machine agitator might break them up.

But when expanding to a newer crab cake, the company had to bring in equipment that would mix and cut crab cakes and keep up with the same quality and safety standards Phillips was operating within.

“I had to look at the equipment and make sure it was cleanable and safe because it had so many pieces that were operating,” Love said. “If you’ve got new machinery, you’ve got new hazards.”

Also, Love said it’s important to look at whether this new equipment coming in means you need to add it to your existing HAACP plan. Or, instead, maybe you need to write an entirely new plan.

“A HACCP plan takes a good bit of time,” he said. “You have to do the flowchart, and you have to do the hazard analysis and you have to do the HACCP plan form.”

Plus, he emphasized, you need to do the Food and Drug Administration validation steps for every critical control point (CCP) you have. You also have to make sure your standard operating procedures (SOPs) and good manufacturing processes (GMPs) are up to par.

“It’s a lot of work,” he said. “Everything has to be matching up with what you’re doing now.”

As far as fitting new lines into a facility, you have to be prepared to map the entire thing out from receiving to shipping. That means pulling out your facility’s floor plan and actually sketching the flow out. Love suggested using different colored lines for different products. If you run out of colors, switch over to dotted or dashed lines, or some combination of those.

Mapping out your flow might show you that you need more tables or need to move equipment. If you don’t have enough rooms, you may need to bring in screens or partitions to segregate certain processes. This will also help you visualize the different smock or hairnet colors you might need to introduce, so you can keep track of which operators are supposed to be where.

However you do it, Love said understanding this new flow will help you identify the potential hazards.

Plus, new ingredients could mean introducing allergens — or products that have pathogenic risks — and understanding your flow will help you identify potential cross-contamination spots.

“Obviously, the test points that are harder to clean and closer to contacting the food — they’ll want to really think about those as key areas to test.” Taylor Lecy, Technical Sales Representative at 3M Food Safety

“Usually [manufacturers] have some sort of implemented food safety plan and testing protocols already in place and they can apply it to that new line,” said Annie Lundquist, professional services representative at 3M Food Safety.

Once a risk assessment is done, you can begin to assess the frequency at which you need to test for allergens, indicator and spoilage microorganisms or pathogens.

“Obviously, the test points that are harder to clean and closer to contacting the food — they’ll want to really think about those as key areas to test,” said Taylor Lecy, technical sales representative at 3M Food Safety. “Those will be the areas that are more at risk of being dirty or contaminated with organisms or allergens.”

Lecy also pointed out that many food manufacturers will usually start out by testing a new line more frequently to establish a baseline. For example, if a food manufacturer tests a new product for certain microorganisms, they might test a lot more upfront to establish what a normal limit is, and then start to wean off once a normal limit is established.

“Then they’d test over time to make sure that each time they’re producing the product, it is below that baseline or within the specification,” Lecy said. “With new equipment, they might start by testing a lot of the different areas on a more frequent basis so they can start to understand their environment and their cleaning process better.”

Quality Matters.

In addition to the impact your new product will have on your procedures and processes for food safety purposes, Perkin stressed that it’s important to make sure quality is maintained as well. But he said to make sure not to confuse quality with standards.

For example, a Mercedes-Benz car and GMC truck are built to different standards for different users. To achieve satisfaction, both need to meet their defined specifications. Quality, he said, is about performance within those specified guideposts.

“You’re making to a tolerance,” Perkin said. “And how you control the make to that tolerance is what quality’s all about. Great quality food, the way it should be defined, is food that always meets the design criteria and always tastes the way it was designed to.”

Perkin advised relying on what he calls the “seven tools of quality management,” which includes check sheets and control charts.

“Those tools are valuable in order to make sure the product you designed remains the product you designed, rather than drift off into some weird space,” he said. “Because at that point, you’re in uncharted territory.”