More and more big brands are outsourcing their new product development to smaller, often specialised companies. Why would food businesses outsource NPD? Is there a right time or a right type of project to outsource?
Reports suggest that some of the bigger food and drink companies are increasingly choosing to outsource product development and innovation. Startups and smaller businesses are often seen as being more able to be innovative.
Sometimes big companies can suffer from ‘store cupboard’ product development syndrome. When you already have a range of products that are selling really well, it can hamper innovation. Knowing whether you need to do something to extend the range, or if it’s time to do something completely new, can be difficult. The tendency is to go and look in the store cupboard and see what new flavours can be added, rather than innovating in a more exciting way.
It also often makes sense for smaller businesses to outsource new product development. In a smaller operation, it can make sense to keep the core team focused on core business, quality control and your channels to market. Looking for the next thing, can be distraction and it helps to have an external team developing the ideas, bringing you options.
More agile, more innovative?
Often smaller companies are more open-minded, more willing to push boundaries and more able to create faster than a larger concern. Whilst they don’t necessarily have access to the same resources – marketing, legal, production and more – small food business aren’t restricted by established ways of doing things. Someone with an idea is often more able to develop it without having to follow formal procedures, or pitch it to a committee, just to get budget and a working prototype up and running.
Small businesses can be more agile and experimental. When you’re trying to create new ideas, that can be essential to success. It’s the main reason that bigger companies are looking to smaller brands to provide their next big idea, and bring it to fruition. Sometimes through partnerships, sometimes through outsourcing and occasionally through acquisition.
The advantages of outsourcing NPD
Generally speaking, smaller companies tend to be more creative in their thinking and can be more agile and responsive to consumer needs. Potentially, with an already busy production line and other pressing priorities, it could take a large producer years to create something a smaller one could execute in months.
What’s more, for big brands, outsourcing NPD to a specialist comes with a lower cost and reduced risk than setting up a new million-pound production line in-house and then enduring trial and error.
When is it right to outsource?
At Froghop, we work in a number of ways that help food businesses outsource NPD. Sometimes, the client’s internal expertise and facilities are augmented by working with a specialist food product development partner like Froghop. Sometimes a larger company want to add some unfettered creativity to its team.
When an established company wants to extend its offerings to include new product, it may not have the know-how or production capabilities to do so. For instance, if the hero product was ambient and the company wanted to try out frozen, or if it wanted to add biscuits to its cake business. In these cases, it would be wise to approach a company that specialises in frozen foods, or biscuits.
This has been done many times with real commercial success. This has been done successfully at a number of multinationals – although they use the term “innovation partnerships” rather than outsourcing.
When budget is an issue
It’s apparent some big companies have reduced spend on R&D, including cutting the number of staff employed in those roles and streamlining their facilities. This has meant they can’t be as responsive to consumer trends or capitalise on new growth. So, instead of developing the product in-house from scratch, it can make sense to temporarily use the resources and creativity offered by a smaller company. Lower cost, no need for capital investment and with less risk overall.