In the last ten years, the pace of innovation in the Food and Beverage (F&B) and Consumer Packaged Goods (CPG) industries has accelerated dramatically. Social media and e-commerce enable trends to spread rapidly among consumers, and the impacts of digital technologies have only quickened since the pandemic.
“The pace of change, the need for rapid agility–to be able to formulate, source, test, evaluate, and do your shelf-life–has gotten shorter because of world events,” explained Frank Sabella, Senior Vice President of R&D for Global Beverages, Gum, Candy & Meals at Mondelēz. “Then layer on top of that consumer expectations, trade, and customer expectations. Everyone is saying, ‘I want it faster, I want it customized. I want it now.’”
In my role at Veeva, I have the opportunity to meet with CPG and F&B executives from some of the world's leading companies to understand how they deliver superior products. The 2023 Veeva Industries Executive Summit featured two panel discussions on product innovation and research and development (R&D). My goal in this article is to share some of the biggest takeaways from these discussions to help you as you look ahead to 2024.
It’s clear that it’s more difficult than ever for established companies to keep their fingers on the pulse of rapidly shifting consumer needs and desires. And it’s become easier for new companies to identify opportunities, launch products, and emerge as viable competitors.
Craig Slavtcheff, Chief R&D and Innovation Officer at Campbell Soup Company, talked about the concept of “minding the gap” as a way to stay ahead of competitors of all ages and sizes. “It’s a notion of constantly understanding your competitive advantages—or disadvantages in cases where the competition has caught up and exceeded you,” he said, “and then just being mindlessly focused on bridging those gaps.”
There’s a lot of pressure on global F&B and CPG companies to connect with consumers in new ways and deliver products that are superior to the competition. Industry leaders are succeeding by focusing on consumer-led innovation, gaining greater insights from a wealth of data from diverse sources, and reducing the time needed to go from idea to production.
The key to meeting customer needs
With the growing impact of Gen Z on consumer trends—and breathtaking changes in the digital world—companies need to do everything possible to get closer to this growing cohort of consumers.
Innovation leaders are working to understand what Gen Z needs on a human level. “We see what's really going on in their lives, everything from the morning run to the flop on the couch at the end of the day,” explained Tara Glasgow, Senior Vice President R&D, Global Beverages at PepsiCo. “You start to see entirely new needs that they didn't know how to tell you they needed. You start to understand their needs and develop a pipeline that serves them.”
For example, customers in this cohort prefer single-serving pouches of powdered sports drinks like Gatorade that can be kept in a gym bag, rather than purchasing larger containers.
PepsiCo is leveraging the virtual world to reach its global consumers at scale. Where the company used to bring in focus groups of consumers to help with design thinking, moving the process from physical to virtual allows it to operate in a more human-centric way and reach greater numbers of geographically diverse consumers.
Mondelēz International also took a consumer-led approach when it created a plant-based version of its Philadelphia Cream Cheese packaged product. “We tested it [plant-based cream cheese] stage-wise with our consumers,” explained Sabella, “eventually leading to a test-and-learn in a marketplace in Europe where we could evaluate price points, usage, and velocities of the product, and then make adjustments. Now, we're launching across six or seven different markets in Europe, but it's launching successfully because of the rigorous work we did in the innovation—understanding the consumer, making changes quickly.”
Data is essential for gaining an edge
CPG and F&B leaders are increasingly relying on data for deeper insight. “We treat data as an asset, whether it's consumer data, whether it’s our product data, whether it’s our process and specification data,” explained Sabella. “Today, to keep up with the pace of innovation, you have to be taking advantage of all the data you have.”
For most companies, the first step is to take a hard look at where and how their data is stored. Breaking down data silos helps facilitate deep analysis to identify patterns faster. By structuring and standardizing your data, you gain the insights necessary to drive innovation.
“There's this highway of data where hundreds of thousands of consumers are talking about their behavior and their habits,” explained Michael Ott, Chief R&D Officer at The Clorox Company, referring to social media. “Combining these technical platforms with a lot of this consumer data—being obsessed with the consumer—is really how we bring differentiated products to market.”
Campbell’s Soup has cast a wide net to fuel product innovation. “We built an insights engine about four years ago based on AI and machine learning that tracks early signals from the worlds of biosciences, food startups, cooking, and culinary combined with consumer behavior,” Slavtcheff observed. “It scans about 300 billion data points a year. That's been a real windfall in terms of building the front-of-funnel pipeline. The second part of it is around predictive analytics. Now you can actually get to a higher degree of statistical probability that a trend is going to happen in a certain category at a given time.”
“We're looking at predictive analytics so every developer can have it at their desktop—and making it much more accessible to the formulator as well as the consumer researcher,” added Sumit Bhasin, Senior Vice President, Global R&D at Estée Lauder.
Accelerating the path to production
Increasingly, digital technology is being used to reduce the time it takes to go from an idea to a product coming off the line. Organizations like The Clorox Company are pivoting to a “fail fast” mentality for consumer product innovation–“a quick capability, forming a small group and if it works out, we'll build it from there,” explains Ott. “The newer employees, they're very adaptable, very robust, and willing to try things quickly. And if it doesn't work, move on to the next thing.”
Gen Z workers, in fact, are demanding democratization of company data. “The power of digitizing your workflows is that you can make them accessible to everyone,” said Slavtcheff. “It creates a much more inclusive environment for folks to find their voice as part of the innovation process.”
Technology also helps to speed up the pace of innovation. “Ten years ago, we would not have had digital twins of our manufacturing lines,” noted Sabella. “Every one of our developers would be traveling somewhere with their laptops—conducting experiments, pulling in data, going through that data—to find the right model. Today, that's all done digitally. Modeling and simulation have changed things in terms of speed and accuracy.”
At PepsiCo, too, manufacturing is leaning into digital twin technology. “We’re doing it all virtual first,” confirmed Glasgow. “It's helping us reduce the demand on the R&D resources so we can do more with what we have.”
Many R&D leaders emphasize that they don’t expect to stay on top of innovation independently. Partnerships are becoming essential. Campbell’s Soup had help from several external partners for its insights engine. Estée Lauder is partnering with alternative packaging suppliers to increase sustainability and with biotech innovators to help feed its product pipeline.
Innovation is everybody’s job
Although the right digital tools are becoming critical to product innovation, people remain the essential asset for CPG and F&B companies to deliver superior new products to market.
Your strategy is only as good as your ability to communicate it to your organization. It all comes down to having clear goals: What do you want to achieve? And how can you leverage your team to achieve it?
Today’s workers want a broader range of experiences on the job. Campbell’s Soup has adapted ideas from the gig economy to meet this need. “We built a whole program where folks can stay in their current job, but they can do a different gig job for three to six months,” Slavtcheff explained. “It’s a great way to build bench strength in the organization. We had folks from supply chain want to get in on the gig action, and then finance. Now we have a gig posting website.”
Estée Lauder has taken a similar approach. “We've ended up creating collective special interest groups, where you're connecting with other functions amongst a special interest,” explained Bhasin. “We find that driving a lot of new, untapped opportunities. It also leads to much more of a collaborative, connected environment.”
Companies that harness the strengths of a diverse workforce, marshal consumer and other data for greater insight, and adopt targeted digital technologies to streamline the path to production will succeed at accelerating innovation and stay ahead of the competition.