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  1. Analysis
January 1, 2018

just-food’s 2018 Confidence Survey – how you see innovation, digital sphere and sales channels

The final part of the just-food 2018 Confidence Survey looked at innovation and sales channels.

The final part of the just-food 2018 Confidence Survey looked at innovation and sales channels.

What will your R&D and innovation expenditure be in 2018?

While more than a third (35.7%) of respondents to the just-food 2018 Confidence Survey expect their companies to increase expenditure on research and development (R&D) and innovation in the coming year, this represents a fall from the 40% in the corresponding survey going into 2017.

The results also means the proportion of respondents expecting investment in R&D and innovation to increase has now fallen for two years in a row, having been 47% in the 2016 survey.

Meanwhile, the proportion stating expenditure will remain at last year’s levels went up marginally from 57.1% to 59.5%, and the percentage anticipating a decrease in expenditure on R&D and innovation rose from 2.9% in last year’s survey to 4.8%.

Constant renewal through innovation and new product development is a necessity in FMCG sectors, but research from PriceWaterHouse Coopers (PwC) underlines simply putting the investment in place is no guarantee of success. According to PwC, the world’s leading companies invest around US$650bn in research and development (R&D) every year, but 85% of that investment is fruitless with the innovation projects ending in failure.

With eight out of ten R&D projects failing, the challenge is not just to put the investment in but back the right projects and ensure their best chance of success.

In a guest column for just-food in October, Will Rees-Hooper, innovation director at strategic brand design and innovation consultants Webb deVlam, outlined eight ways food companies operating in the UK can increase the success rate of your innovation projects and improve return on investment.

He wrote: “Companies are under increasing pressure to launch the next big thing. The stakes have never been higher, or the need for a more effective approach to innovation greater, yet so much falls at the first hurdle. To survive and flourish, businesses in the ultra-competitive F&B sector need to accept, in today’s market, the output of innovation programmes can determine whether an organisation lives or dies.”

What key trends do you expect to drive your innovation initiatives in 2018? (Select all that apply)

With the heightened focus on reformulation and producing foods that contribute positively to a healthy lifestyle, it is no surprise reformulation and health are identified in the just-food Confidence Survey as key drivers of innovation for the coming year.

The proportion of respondents to the poll expecting reformulation to be a driver of innovation in the coming year has risen to 27.9% from 16.7% in last year’s survey.

Health is identified as a driver by 67.4% of respondents and ‘free from’ by 41.9%, both more or less on a par with last year’s survey.

Underlining other consumer demands cannot be neglected even if health factors are featuring so prominently in public debates, quality (48.8%), flavour (32.6%) and convenience (37.2%) all feature prominently among respondents’ choices. Indulgence is nominated by 23.3%, up from 16.7% in last year’s survey.

Interestingly, the proportion of respondents nominating price as a driver of innovation initiatives has fallen to 27.9% from 43.1% in last year’s survey. There is also a rise in the proportion of respondents nominating sustainability as a driver from 43.1% to 48.8%.

How many new products do you plan to launch in 2018?

Again underlining it is quality not quantity that matters most in successful NPD, the number of respondents expecting their companies to launch more new products in the coming year than last year has fallen slightly from 39.4% to 38.1%.

Those expecting the flow of new products to be about the same has increased from 49.3% to 52.4%, while 9.5% expect their companies to launch fewer products in 2018.

Which parts of the retail channel will your business prioritise when it looks to grow the presence of its products in 2018? (Select all that apply)

A question asked for the first time this year. With regard to priorities for food companies in the retail channel in 2018, the just-food Confidence Survey again points to the growing importance of online retailing.

While 25.7% of respondents say supermarkets will be the priority and 22.9% say their companies will be prioritising speciality channels, such as natural and organic, some 20% of respondents say online will be the focus.

Interestingly, in spite of the growth of the discount sector in many markets and the upward pressure on food prices anticipated in 2018, only 5.7% say the discount sector will be a focus in the coming year. 

Will you increase your expenditure year-on-year on building your business’s/brand’s digital presence?

The importance of the digital sphere for companies in the food industry is reflected in the just-food 2018 Confidence Survey, with some 62.9% of respondents saying their companies will increase spending on building their brand’s digital presence in 2018, compared with 53.6% in 2017.

Interestingly, the figure anticipating increased expenditure has not quite returned to the level seen in the 2016 survey (65.9%).

In which areas will your business or brand increase its investment in digital in 2018? (Select all that apply)

Regarding which areas of the digital sphere respondents expect to receive increased investment in 2018, the top three answers are social media (45.7%), strengthening their brand’s or company’s relationship with physical retailers online (42.9%) and selling directly to consumers (37.1%).

Social media has topped the poll in the last three years, although the proportion of respondents that selected the area as an answer has declined in each survey.

The percentage that cited increased investment in selling directly to consumers has risen from last year’s poll and points to growing interest from food manufacturers in what is a niche part of the business.

Do you expect competition from smaller, up-and-coming companies to increase in 2018?

Innovation is essential if established companies are to offer an effective response to nimble and creative start-ups bringing new ideas to the food sector.

And some 59.1% of respondents expect competition from smaller, up-and-coming companies to increase in 2018, down marginally from 62% in last year’s survey but still a majority view – unsurprising, given the inroads smaller brands have made in certain categories, particularly in North America.

Only 4.6% anticipate this type of competition will decrease in the coming year, while 36.4% expect it to remain at the same level as last year.

Will you increase investment in growing your business’s/brand’s presence in the foodservice channel in 2018 compared to 2017?

Some 51.4% of respondents expect their business or brand to increase investment in the foodservice channel in 2018, against 37.1% who expect spending to be on a par with 2017 and 2.9% anticipating reduced investment in the coming year.

The proportion anticipating increased investment represents a marginal increase from the 2017 survey (50%) but is below the 64.5% recorded in the 2016 survey.

Nonetheless, that increased investment again topped the poll points to the fact food manufacturers are looking at the foodservice channel as, in overall terms, the sector is growing more quickly in many markets than grocery retail.

In which parts of the foodservice channel will your business look to grow its presence in 2018? (Select all that apply)

When asked in which foodservice channels their companies would be looking to expand their presence in 2018, the top answer by some way was supermarket foodservice, which was nominated by 48.5%, followed by fast-casual (30.3%), quick-service restaurants (27.3%) and schools (21.2%).

For grocery retailers in North America and some markets in western Europe, supermarket foodservice is becoming strategically important.

In the US, for example, most leading supermarkets have identified foodservice as their leading strategic priority, with the result being long-term growth of over 10% annually in supermarket foodservice over the past ten years.

Food retailing is more competitive than ever, creating a much more competitive environment and encroaching on supermarket territory. With the blurring of channels, share of stomach is becoming more and more fragmented. Supermarkets need a unique offering to shift decisions about store choice beyond price and location. 

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