New product introductions in the food industry: results from a Danish survey

Abstract

<p>This study reports on new product development and introduction by a sample of Danish food industry firms. A review of relevant literature identifies several recent trends and tendencies, including an increasing number of new food products on developed markets and a majority of products being copies of those sold by other firms (so-called "me-too" products). Furthermore, product life cycles are reported to be shortening and the processes of product introduction speeding up. A survey, yielding 131 observations (30% of the firms a stratified sample) indicates that although Danish food industry firms introduced more new products in 2005 than they did in 2000, product life cycles have slowed down and the speed of new product introduction has declined. However, firms consistently identify few barriers to new product introduction although 15-20% of firms claim that regulations constitute such a barrier. Average numbers of products introduced far exceed removals, indicating an increasing number of products on the market.</p><p> Survey results indicate that Danish food industry firms use a small proportion of total expenditures for either research and development or new product introductions. Moreover, firms report that these do not feature strongly in their strategy set. The majority of firms in the survey favour a strategy of "a core of existing brands with few new introductions and removals" over strategies involving new product introductions. The survey reveals interesting patterns of changes in the time taken to carry out the tasks of new product development and introduction, particularly that the early (conceptual) stages and phases dealing with regulatory issues have both become longer.</p><p> The survey generated substantial data on branding behaviour and the nature of firms' new products. Surveyed firms claimed to favour "truly new" products over me-too products and revealed that local and traditional brands are not favoured for new product introductions. Moreover, surveyed firms' branding profiles increasingly favour larger numbers of products per brand over a single product per brand. Retailers' own-label brands play an increasing role in firms' sales.</p><p> The shortage of empirical work in the field of new product introductions precludes comparisons with other sectors and other countries. Clearly, it is of interest to know whether the unexpected results (slowing down of product life cycles, many "truly new" products) indicate Danish food industry leadership of a trend, laggard performance and behaviour, or simply occupancy of some specific part of a broad distribution. More specifically, this report questions whether there are any problems apparent in firms' new product development and introduction.</p><p> If there are such problems, few firms in the survey identified them as explicit constraints on new product development. Surveyed firms claim to spend few resources on new product introduction and that it is not a widespread strategic action. These results suggest few policy options that would have the effect of accelerating new product introduction by Danish food industry firms. Evidence found of the exercise of market power as a barrier to new product introduction was fragmentary, with no clear lead given to policy makers on competition policy: indeed, competitive markets may offer to firms lower returns on new product introductions, than do concentrated ones. Further research recommended in this report focuses on metrics and measurement, clarification of definitions, and benchmarking across sectors and countries. Preparation for the survey included intensive training of interview staff on definitions of terms (e.g. "new product" and "brand"), while some scope was retained for respondents to use terms they were familiar with. Performance measures, however, were as difficult to define and use in this study as in most studies of this subject. A major econometric modelling exercise using data from this study is currently underway.</p>