Module 3- Food Product Development 6cr3f

HSC Food Technology Summary-Module 3

Module 3: Food Product Development Students learn about: Factors which impact on food product development:

External Factors (the macro-environment)

PETE

Political

Ecological

Technological

Economic

External factors (the macro-environment) are factors are outside your organisation and beyond industry control.

x External factors (macro-environment) that impact on product development including the: -political environment Federal, state and local government s influence the AFI through policy, legislation and other activities. Placing controls in the AFI ensures a safe, reliable food supply. The controls have been essential for Australia’s “Clean Green” image. Government The political ‘systems’ influence 4 factors: 1) Price- taxation levels, competition, trading rules, licensing, subsidies and tariffs 2) The Environment- air, noise, water, chemical and additives 3) Education- food & nutrition education, food standards, handling and practices 4) Working conditions- awards, trading hours, OH&S Community influences and lobby groups: Communities can lobby politicians to implement changes in the AFI.

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HSC Food Technology Summary-Module 3 Vested interest is pressure from organisations/groups to make changes that will benefit that organisation. For example, Dairy farmers may put pressure on the Government to raise the price of overseas companies importing Dairy products into Australia. Pressure may also result from widespread concern in the community for issues such as waste management and GM foods.

-ecological environment In the context of the food industry, the ecological environment refers to the relationship between food companies and their surroundings Australia’s use of natural resources and energy is important in promoting the “Clean Green” image. Increasing concern for environmentally friendly food production and manufacturing behaviours had led to environmentally friendly practices in 3 main areas: 1) Use of natural resources (e.g. paper rather than plastics and metal) 2) Farming procedures (e.g. organic farming) 3) Waste management and packaging (e.g. reusing water, recycling packaging materials) These practices are not always most $$ effective but have due to long-term environmental benefits. Disregarding these practices not only makes for unhappy consumer, it also has political consequences.

-technological environment Improved technology has led to improved productivity and increased choice. The level of operation determines the level of technology employed. Although $$, technology becomes cost effective in large-volume production lines. Recent technological developments include: -Internet -UHT -Genetic modification -self-checkout Products developed as a result of technological developments: -tetra-pack soups -packaged drinks where the straw contains the flavouring -strawberries that bruise less easily than conventional strawberries -dried fruits, nuts etc. with resealable bag -microwave cook-in-bag frozen veggies -gluten free products -biodegradable chocolate packaging -meat in vacuum packaging -Spread and biscuit Robert Lee Chin

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HSC Food Technology Summary-Module 3 -Anti-tamper vegemite, peanut butter jars -Meal replacement shakes -herbs in squeeze-tubes

-economic environment The economic environment relates to the local economy where your business operates. Economic activity and conditions fluctuate- this affects employment, wages and hence whether or not consumer will be willing to spend. There are several factors which determine economic growth and stability. Exchange Rates: A low currency exchange rate for the Aussie $ (or a ‘weak Aussie $’) means that Australian products are less expensive overseas and increases the likelihood of foreign investment. Primary produce and manufactured goods are very competitive on the International market. Fluctuating Interest Rates: Fluctuations in interest rates create uncertainty for investors. Low interest rates encourage food companies to invest in capital (e.g. equipment, facilities, better technology). High interest rates mean that a food company may have to borrow money to develop a product. Inflation/Recession: Inflation/recession ↑or ↓ the cost of living, therefore, it influences people’s purchasing power. High inflation results in more $ being spent on value-added foods and meals eaten away from home. A recessionary period ↑ the consumption of generic brands and staple foods. Unemployment: Unemployment increases the % of people living on social security. These people have les $ to spend, so will be reliant on processed foods, cheaper cuts of meat and foods in season. High unemployment rates also mean more $ is spent by the government o deal with health care, welfare, law enforcement and education. Taxation: Taxes affect prices, available income and purchasing power. The Goods and Services Tax (GST) aims to ensure that equal tax is paid by all consumers on the items/services they purchase. Salary negotiations and award wages: Income affects spending power- the higher the income, the greater the choice in food products.

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HSC Food Technology Summary-Module 3 The AFI and the economic environment The AFI is essential to the economy: *17% of the manufacturing workforce is in the AFI *about 180 000 people are employed by the AFI *Employment in the AFI is ↑ due to ↑importance of value-added foods *However, ↑ technology and computerisation is balancing the ↑ employment *Foreign ownership dominates the AFI i.e. most food companies are overseas multinationals *Aussie families spend about 20% of their income on food *Despite producing enough food, Australia still imports billions of $ of food *To increase export volume, Australia needs to ↑competiveness in the International marketplace Economic stability is vital to both the AFI and the International marketplace. Fluctuations in the economy are known as the Economic Cycle There are 4 main stages in the economic cycle: 1) A recession characterised by high: unemployment; interest rates; inflation. Often results in business failure 2) An expansion characterised by high employment opportunities; confidence and a fall in interest rates and inflation. 3) A boom characterised by low unemployment; interest rates and increased spending 4) Economic contraction often precedes a recession. It is characterised by decreasing: confidence; spending and interest rates increase. These stages are often global situations. Government decisions such as lowering interest rates, wage freezes have little effect on the economic cycle. Economic conditions are influenced by the world economy. The Treasury and the Reserve Bank attempt to control fluctuations but this may be difficult because we cannot control the economies of overseas trading partners.

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HSC Food Technology Summary-Module 3

Internal Factors (the micro-environment)

PPFC

Personnel expertise

Production Facilities

Financial position

Company Image

Internal factors (the micro-environment) are factors within organisation which are industry based

x Internal factors (micro-environment) that impact on food product development, including: -personnel expertise Expertise in the workforce is ↑. Employees change jobs far more often in the past and the skills and knowledge from one job can often be used in the next. Generic skills: team skills, communication skills, demonstrating initiative, leadership, decision making can be adapted for a range of job settings. Education and training are key. Many employers provide on-the-job training programs and encourage staff to undertake ongoing training through a range of institutions. Flexibility is important in all jobs e.g. willingness to perform a range of tasks and adjust work schedules. Job opportunities for young families are ↑ e.g. part-time work, job-sharing, working-from-home. In the AFI, expertise is diverse: from production, packaging, transportation, marketing, quality assurance, sales, management… In some sectors, expertise is highly specialised, but a broad knowledge/understanding can impact on other aspects of the AFI.

-production facilities The production facility depends on the type of food product and the volume of production (relates to level of operation).

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HSC Food Technology Summary-Module 3 Types of production processes Small volume and one-off operations have limited production facilities, so domestic resources can be used. For example, a couple who wants a wedding cake would go to a cake shop specialising in ‘one-off’ cakes Batch production is the most common method in Australia. A batch of a particular product (e.g. jam, ice cream, cake) is made one at a time. Variations can occur due to minor changes in the type of facility used e.g. flavour changes, frozen vs. fresh sauces. Mass production occurs when assembly is the major step in making a product. Equipment is costly and staff must be highly skilled. Continuous process production is when production occurs 24 hours/day, 7 days/week. Uses costly machinery and few staff (taking shifts). Often used by Multinational companies to produce huge amounts of product for overseas. At all levels of production and sales, storage costs are an expense that must be carefully controlled. The most efficient process is ‘just in time’ deliveries and movement of stock. The other alternative process is MRP11 (manufacturing resources planning). This involves using a computer to estimate orders and plan to operate continuously so that production staff always has work. During the entire production process, random sampling, called process control, is performed.

-financial position The success of an operation is judged based on how well it manages expenditure and the margin of profit. Influences on financial success: -Investment capital -resource management (this includes raw materials, production facilities) -the quality of the product -the market share-competition (how much of the market for a particular product does the company own?)

-company image Company image is influenced by a number of factors: -Reputation (e.g. popular, poor reputation, well-known brand) -Quality -Marketing strategies (e.g. ments, community services) -Packaging (is packaging convenient, easily recognised) -Price (do they offer the best value for money?) Recently, incidents of company sabotage have had a significant effect on company image. Some companies portray themselves as “politically correct” by adopting philosophies that improve their image (e.g. environmentally friendly, healthy products, “clean green”) to enhance sales.

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HSC Food Technology Summary-Module 3

When deciding on developing a new product, food manufacturers conduct a

SWOT analysis

SWOT Analysis

Influenced by microenvironment

Strengths

Influenced by macro environment

Weaknesses

Opportunities

Threats

Strengths are what make a business better than its competitors. Strengths are influenced by internal factors.

Strengths could include excellent: -knowledge of manufacturing, distributing and selling product -company image (e.g. well-known for quality product) -personnel expertise (e.g. good marketing staff) -production facilities (e.g. lots of equipment available) -financial position (e.g. lots of shareholders)

Weaknesses are what a company does not do as well as its competitors. Influenced by internal factors:

Weaknesses could include poor: -financial situation (e.g. poor money-management) -company image (e.g. company not well-known) -personnel expertise (e.g. poor research and development, lack of staff) -production facilities (e.g. old equipment)

Opportunities are potential advantageous factors in the external environment.

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HSC Food Technology Summary-Module 3 Opportunities could include: -booming economy (i.e. low interest rates, high consumer spending) -political changes (e.g. government subsidies) -Technological developments (e.g. more efficient machinery) -competitors go out of business

Threats are potentially disadvantageous factors in the external environment. Threats could include: -Government legislation and policy changes (e.g. no more exporting to a country) -Ecological changes (e.g. consumers become more conscious of environmental impact of food manufacturing) -changes in the economy (e.g. global recession) -Technological changes (overseas competitor gains superior equipment)

Reasons for and types of Food Product development x Drivers of the development of food products: Markets and trends

Target market is the group a manufacturer or retailer wants to sell products to. If the seller knows the wants and needs of their target market, it is much easier to develop products for them. Taking into the target market size is important for the success of the product as it determines where and how much resource need to be spent. There are 3 main marketing approaches: 1) A concentrated marketing approach designs products for only one segment of the whole market. 2) A differentiated marketing approach targets a number of segments of the market (e.g. McDonalds targeting families, single people, teenagers) 3) A niche marketing approach identifies a small market segment for which there are few products to cater for this markets needs (e.g. developing meals for coeliac people) Food producers need to be aware of the recent trends occurring in Australia. The following trends are significant to the AFI: *Australia’s population is ageing *We eat out more, esp. Cafes *We are more environmentally aware *We are more conscious of nutrition *we are becoming more adventurous with our eating

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HSC Food Technology Summary-Module 3 *↑ demand for larger sized products *People have busier lifestyles, so want foods that are convenient to prepare

Reasons for food product developments

THE S

Technological Developments

Health Issues

Environmen tal Concerns

Convenience and cost

(Company) Profit

Specialised Applications

Technological Developments Manual labour has been replaced by mechanisation, which is faster, less demanding and more efficient. Automated machinery gives consistent quality and is often computerised, providing quality control checks as part of production process. All aspects of the AFI have been affected by scientific approach to food production. Consumer demands have led to ‘enhanced foods’ i.e. use of food additives, GM foods and functional foods. Food packaging has also changed. Convenient packages assist in food dispensing and reduce food wastage e.g. resealable pouches, squeeze bottles. Single serve portions, blister packs, cook-in-packages etc. added aesthetic appeal to food and means it can be eaten under a variety of circumstances. Health Issues A ↑ in diet related health problems such as diabetes, heart disease, high blood-pressure, dental decay, obesity, stroke and constipation have ↑ demand for food products that address a wide target audience. Product Line High-fibre

Health issue Bowel cancer

Low-sodium

High BP stroke

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Food and eating strategies -Wholegrain bread and cereals -Fresh fruit and veg -Primary rather than processed foods -Low sodium canned foods -Sodium substitutes (e.g. potassium chloride) Page | 9

HSC Food Technology Summary-Module 3 Low-fat

Low-sugar Cholesterol-free

Nutrient-enriched Caffeine-free Gluten-free Lactose-free

Obesity Heat disease Stroke Diabetes Dental caries Diabetes Obesity Heat disease Stroke Diabetes Low calciumdi e t constipation celiac Lactosesensitivity

-Low fat dairy -Lean cuts of meat (e.g. kangaroo, trim pork, lamb) -Healthier cooking styles (e.g. steamed, stir fried) -Low fat confectionery -Sugar substitutes (e.g. diet coke) -Reduced sugar foods (esp. Confectionary, desserts) -margarine -breads with added plant sterols -wholegrain bread and cereals -vegetarian options (e.g. tofu) -calcium and vitamin enriched bread and cereal -milk with increased calcium -yogurt with active cultures -decaf coffee, coffee substitutes, caffeine-free drinks -gluten free flours, pastas, snacks -soy milk, dairy free spreads, dairy free chocolate

Environmental Issues There are increasing consumer concerns for the environment due to food production practices such as: chemical fertilisers & pesticides; overfarming; overpackging; landfill due to packaging. The AFI has responded with an increase in organic farming, legislation for pollution (air, land, water), cost effective and environmentally responsible use of resources i.e. energy, packaging. The recommendation of reduce, reuse and recycle (packaging) has resulted in less packaging materials being used. These practices sustain resources for future generations. Convenience and Cost Changing lifestyles have led to ↑demands for quick, easy to prepare foods. ‘Value added’ foods are more expensive, but reduce time spent preparing food. Brand products and generic products compete in the marketplace. Consumers with less money will prefer generic alternatives while brand loyal consumers are willing to pay a price. (Company) Profitability For long-term sustainability, in the AFI, food companies need to secure a large portion of the market in their products. In order to be profitable over time, companies must: -produce products which are superior to their competitors -operate efficiently (meet costs and profit) -cut costs by reducing the quality/amount of raw materials and packaging -keep ahead of the market (research and development) -use promotion strategies that increase market share -produce value added products -enter overseas markets

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HSC Food Technology Summary-Module 3 Specialised Applications: Military purposes and Space missions Military purposes Wartime has resulted in increased needs of military groups for foods that are: -lightweight and easily transported -Non-perishable -Nutritious -Appealing and varied -Easily prepared and consumed MRE’s are “meals ready to eat”. Individual rations are packaged in plastic and foil pouches and last up to 7 years. They require no special tools for opening and include a plastic fork and moist towelette. To cook, a small amount of water is poured into a sleeve in the pouch and a chemical reaction creates heat, warming the food. MRE’s may contain: snacks, entrees, mains, desserts, beverage and condiments. B-rations are canned or dehydrated foods heated by conventional methods. Canned foods include fruit, vegetables, meat, fish, drinks, poultry and desserts. Dried foods include powered eggs, soups, fruits and drinks. T-rations are trays of a single food item that will feed 12-18 personnel. Completely airtight, the packages are placed in boiling water for 15-20 mins to cook, then opened with a can opener. Fluids are important in combat. UHT and aseptically packaged fruit drinks have increased variety for soldiers. Space missions A Spaceship ‘galley’ include a pantry, refrigerator, freezer, microwave, fan forced oven, rehydration centre, slide-out work surfaces and computer terminal to display menus. The aim is to provide an Earth-lie menu that meets nutritional needs and provides variety and choice. Water is limited so food is frozen, refrigerated or aseptically packaged.

Steps in Food Product Development *Food companies are always trying to ↑ their market share- however the success rate is only

25% *Even though failure rate is high, 60% of products we will purchase in 2015 are not yet available *Food products can be developed in multiple stages or isolated steps *Product development is expensive, so R&D is important to maximise profit and minimise losses

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HSC Food Technology Summary-Module 3 *’Line extensions’ are most successful, followed by ‘me-too’ products, then ‘new to the world’ *The design brief outlines the crucial step of identifying what consumers want and how much they are prepared to pay. It also describes the constraints on the producer in producing a new product. Company goals- A starting point Food companies have broad, long-term business goals, usually set out in their mission statement. A mission statement may be “to provide the highest quality food and service to consumers”. To achieve these goals, a company must identify specific objectives using the SMART principle

Food Company objectives SMART

Specific

Measureable

Achievable

Realistic

Timed

e.g. certain % sales ↑

Within the company capabilities

Within a sensible timeframe

Set time limit

Types of food product developments Robert Lee Chin

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HSC Food Technology Summary-Module 3

Types of Food product developments

New to the world

‘Me- too’

Line extensions

After assessing the macro and micro environments that influence food product development, food manufacturers have a good understanding of the type of product that would be most successful. To decide which food product development will be most suitable, food manufacturers may want to ask: *Does the consumer want/need the product? *How long will the development process take? *Can existing facilities produce the product? *When is production expected to begin? Who are the market competitors? What is the company’s current market share? *What are the costs involved in delivering the product to the market? New to the World New to the world products are unlike any other product in the marketplace. They are the least common product development. The innovation may be a food, a package or both. Although rare, they have the potential to become successful. Many popular brands e.g. “Sanitarium So Good”, “Kraft Vegemite” and “Pringles” were originally new to the world. ‘Me-Too’ These are slightly altered copies of existing products. A manufacturer attempts to duplicate the success of another product by developing a similar product, sometimes with reduced cost and quality. Most of the food products in the marketplace are me-too products, but they also have the highest failure rate. Examples include “Coles Smart Buy”, “Woolworths Select” and “Home brand” products. Line Extensions Line extensions are food products which are changed to increase market share. There are 4 types of line extensions: 1) Additions- flavours, sizes, ingredient variations 2) Improvements- new products with improved performance to replace existing line 3) Repositionings- Existing products targeted at new or niche market 4) Cost Reductions- similar products at lower prices Some may cater to health conscious consumers or ‘high end’ consumers. Examples include “Green seas tomato and basil tuna”, “Diet Coke” and “Vegemite Cheesy bite”.

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HSC Food Technology Summary-Module 3 There are 7 basic steps in food product development: 1. The Design Brief Description of a food ‘problem’’

2. Idea generation Description of a food ‘problem’’

3. Market Research Identification of consumer need: -Primary and secondary sources -product mapping -Quantitative research -Qualitative research

4. Product Specification -Requirements -Target market -Packaging -Pricing

5. Product Specification -Requirements -Target market -Packaging -Pricing

6. Prototype -Develop the prototype and trial to test consumer response

7. Test Prototype -Evaluate the trial

Step 1: The design Brief Robert Lee Chin

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HSC Food Technology Summary-Module 3 The food problem is identified and described. Design briefs may relate to: -packaging -Lifestyle -Health -Religious/ cultural beliefs -Aesthetic appeal -Economic situations The design brief should be a clear statement outlining the purpose/aims of the development, taking into consideration any constraints or limitations e.g. time, money, production facilities. Step 2: Idea generation Ideas are then generated to fit the design brief. When a number of solutions have been generated, they must be narrowed down to a smaller number of feasible solutions. Step 3: Market Research Market research is important to confirm consumer wants and needs. Research can be primary (gathered data from surveys, market shares etc) or secondary (Australian Bureau of Statistics). Information can be gathered in a number of ways. Product mapping identifies gaps in the marketplace to look for the potential to launch a new product. Qualitative research involves checks on small consumer samples in small groups to assess quality, performance, presentation, price and usability. Quantitative research involves a large consumer sample to determine opinion on five/six items. Success relies on:

-size of potential market -understanding market competition -available expertise for product -facilities/resources to develop product Step 4: Product Specification -detailed and accurate description of the product and all production requirements -identification of target market -packaging specifications, including materials -pricing strategy Step 5: Feasibility Study Product specification data is used to develop a feasibility study with a product analysis that includes an anticipated financial return (i.e. Financial feasibility) and a technical assessment (technical feasibility) of the available resources required Step 6: Prototype A prototype is a trial product that has undergone careful screening prior to commercial production. Screening may involve sensory evaluations, marketing tests, packaging tests and storage tests. Step 7: Test prototype

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HSC Food Technology Summary-Module 3 The prototype is tested and evaluated for performance. If successful, the product can begin production.

Marketing Plans Marketing mix is the marketing strategy used to satisfy the needs of the target market

Marketing Plans aim to increase sales 4 P’s

Price

Place

Promotion

Product

Product Includes all aspects of the product i.e. ingredients, quality, flavours, size, packaging. Product specifications are tested and change during prototype development. Price Price can be calculated as unit price or include variation depending on quantity. Prices are often compared with similar products to provide market competition. Generic brands are important because consumer believe they are value for money. Sometimes, consumers will pay a for a niche market. Place This is the availability of the product in the marketplace including: -where it is sold -how accessible it is to consumers Promotion Promotion is used to increase consumer awareness to make initial, then repeat purchases. Strategies include billboards, TV ads, taste testing and free samples and they must reach the target market.

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