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FM survey: Has the recession permanently changed spending habits?

By Elaine Watson , 08-Jul-2010
Last updated the 12-Jul-2010 at 12:25 GMT

With the economy still emerging from recession and many firms keeping a tight rein on spending, it should come as no surprise that blue sky new product development (NPD) is not top of the agenda at many food retailers, according to food manufacturers polled in Food Manufacture’s annual survey.

But this doesn’t mean that nothing new will hit supermarket shelves in 2010/11, with 57% of respondents to our survey planning to invest more in NPD this year than last year, even if more (68%) agree that customers “are more focused on price than groundbreaking NPD”.

Perhaps the most interesting result relates to whether consumers' spending habits have permanently changed during the recession, with almost equal numbers agreeing (40%) and disagreeing (45%) on this issue.

As for functional foods, the jury is also out, with a substantial minority (23%) agreeing that the uncertainty over health claims legislation has put them off using some health ingredients, which seems to support claims by ingredients suppliers that customers are refusing to commit funds to projects until there is more clarity over what, if any, claims they will be able to make on pack.

Reducing fat, sugar and salt still high on the agenda

Uncertainty over the future of the Food Standards Agency, which has been driving the reformulation agenda in the UK, has not slowed momentum in this area, with 58% claiming that reducing saturated fat, salt and sugar is a key part of their NPD strategy this year.

However, reformulation remains a highly controversial subject, not least because many UK manufacturers are competing with overseas firms that are not complying with FSA guidance on salt, fat and sugar levels, said one respondent.

“There is no level playing field on this. Retailers are still importing products without change and then they will challenge UK producers on lack of taste, which smacks of double standards.”

But who foots the bill?

Others were also frustrated by the clash between retailers’ demands and their expectation that manufacturers should foot the bill. As one factory manager noted: “Whatever the retailers say in public, price rules [in private].”

A technical manager responding to the survey said NPD investment was geared towards cost reduction in his business: “Are we investing more in NPD? It depends what NPD is being asked to do. If it is innovation, then maybe not. If it is value engineering - basically the mantra of more for less - then yes we are.”

English Farming and Food Partnerships business development and marketing director Mike Ader said the apparent “misalignment” between the willingness of food manufacturers to continue to invest and innovate in NPD and marketing and the price focus of retailers was potentially problematic.

“If these trends continue it could lead to a dysfunctional supply chain which doesn’t benefit any business or supply chain in the long term.”

However, he also encouraged manufacturers to invest in other areas to preserve margin issues and free up resources for NPD projects: “We would also encourage food manufacturers to invest in supply chain relationships - such as sharing customer and marketing data as relationship enhancing mechanisms with supply chain partners - particularly given this price pressure from retailers.

“By working together along the entire supply chain, they can identify new ways to reduce costs and thereby help to address margin issues.”

As for the changing consumer landscape, he added: “Based on our own findings and market analysis, including our ‘affordability index’, we feel that there has been a permanent shift in buying behaviour and that there will be a ‘new normal’ post recession.

“This ‘new normal’ will see consumers drift slowly back into ‘premiumisation’ but they will be more selective and discerning in what they spend their money on.”

Survey results: NEW PRODUCT DEVELOPMENT:

1. My company plans to invest more in NPD this year than last year.
• Agree 57%
• Disagree 28%
• Don’t know 15%

2. My customers are more focused on price than groundbreaking NPD.
• Agree 68%
• Disagree 22%
• Don’t know 10%

3. Consumers' spending habits have permanently changed during the recession.
• Agree 40%
• Disagree 45%
• Don’t know 15%

4. Reducing saturated fat, salt and sugar is a key part of my firm's NPD strategy.
• Agree 58%
• Disagree 29%
• Don’t know 13%

5. The uncertainty over health claims legislation has put my company off using some health ingredients.
• Agree 23%
• Disagree 51%
• Don’t know 26%

For the full survey results, click here.