7.8.1 Production and distribution: quality and efficiency

On the production side, the raw material quality and quantity must be monitored, the process variations studied and, most important, the yield and quality of the product checked. Equipment breakdowns and the response of employees need to be monitored. Distribution and marketing are also monitored. This monitoring usually leads directly to improvements in the product, in production, in process control limits and in quality assurance, and also often to changes in distribution and marketing methods. The time after launching is a time of constant improvement of the product, reduction in production costs and increase in the effectiveness of the marketing methods.

Measurements of these factors are followed in many companies during the launch. The raw materials and direct processing costs are continuously watched to check if they are improving and are within or better than target. The variation in the quality of the raw materials, the process conditions and the distribution conditions are recorded and analysed, and most important the technical standards for the product continually monitored. The wastes from the production and costs of their disposal also need to be measured.

The distribution costs, delivery times and product losses are recorded so that improvements can be made. Also retailers can be surveyed to see how they regard the distribution. An important consideration is the return of product because it is damaged, too near the use-by date, or not as specified. Such returns are costly in terms of both money and company reputation, but also the acceptance of the product in the market as summarised in Example 7.2, and the production and distribution has to be controlled to reduce them to a minimum.

Example 7.2 Failure of production in small and medium sized companies Failure was caused by: 1. A lack of understanding of the properties of the raw materials used, and an inability to control or monitor these materials. A company producing surimi (finely ground fish paste) from fish waste did not understand that the raw materials varied due to the season and the type of fish and they had no method of testing the properties of the fish waste. So the frozen surimi was rejected by the market because of variability in quality. 2. A reluctance to invest in resources not seen to contribute directly to the bottom line, and an inability to control the production environment. A new small company built up a strong market for their pies during the winter months but during the summer, there were complaints and they lost orders. This was shown to be caused by lack of control of the temperature and humidity in the processing area causing problems with the pastry when made at the summer temperatures. 3. Undertaking projects with requirements that exceed the skills and knowledge of the development and production teams. A small company developed a range of tomato sauces packed in sachets for individual use. Sales increased and they adapted the production, but then they received customer complaints regarding blown product, due to microbiological contamination. They did not have a food safety programme and had no controlled shelf life testing because they did not have technical staff to do this. (From Sorensen, T.(2008) ‘Up-scaling from development to production by small manufacturers – fishing, baking and sauce industries’ in Case studies in food product development, by Earle M. and Earle R., (eds.) Cambridge, Woodhead, pp 222-243.)

7.8.2 Product and marketing: quality and efficiency

The advertising and promotions are checked in consumer surveys, usually by telephone, to determine if they have been seen, whether the message was remembered, and whether consumers were encouraged to buy. Prices are monitored continuously to record what the actual retail prices were and whether any price specials had taken place; these are then related to sales. A more practical relationship between price and demand can be developed, in particular if there are any psychological effects of pricing on consumer buying. The total marketing costs also need to be recorded and reviewed, particularly the sales and promotional costs.

The sales analysis only provides the overall sales, and if there is a need to know who is first-buying and who is re-buying, then information compiled from buyer diaries can be obtained. Consumer panels record purchases, and from this data companies can determine the re-buying pattern, the timing and the amounts for each purchase. They can also determine from what particular other brands it is gaining customers, to what other brands the product is losing customers, what types of customers are showing the most interest in the new product, and which type of customer has never bought it, and so on.

There is also need for information on consumers' behaviour and attitudes towards the product and the marketing mix. A survey of buyers can be made either just outside the supermarket after they have made a purchase or later after they have used it. Another method is to attach a return card on the package, perhaps with some inducement such as a free sample or a discount voucher. This survey will indicate how the product can be improved and how the marketing mix can change to improve sales.

The competitors' reactions to the new product should be constantly surveyed to see what tactics they are using either to prevent success or to attach their products to the success. Also the reactions of the retailers should be studied - are they enthusiastic, or do they only want to give the product a month's shelf space? How can their aspirations for the product be fulfilled?

7.8.3 Nutrition, health and safety

These are important evaluations as regards both the consumer and society. If the nutrition is not what is expected of the product, then suspicions about the product may be raised. As shown in Case Study 7, the nutritional value of a product is becoming more and more important, and the company needs to have sufficient knowledge to recognise, control and communicate the nutritional value during the launch. Are the right values being emphasised to fit current market aspirations or should they be re-jigged? Are the claims backed by scientific evidence? Do they agree with changing regulations?

Today with the increase in specific health claims, particularly with functional foods and nutriceuticals, there is a need to carefully monitor any changes that are occurring in acceptance, both by the consumer and the society. There may arise disagreements between individual nutritionists and health professionals on the validity of some health claims as more research results become available. This may become serious and the food regulators may ban a product or at least not allow claims.

Case Study 7 Understanding the Food Market To understand the food system in this day and age and, more importantly, to predict future markets requires a thorough knowledge of the factors which influence the food habits of whole populations. It is important to understand that the modern world is a rapidly changing environment, particularly with respect to the harmonisation of international trade boundaries. The dynamic changes which are occurring in Europe, for example, will significantly affect the food system, even in markets as far away as Australia. What is changing about the food system? Issues such as urbanisation, the changes in hours spent at work, how food is distributed within a family, family size, and who provides the food within the family are all very important. In addition, there has been a wide range of technological innovations which affect, for example, the way in which food is preserved, packaged, transported and promoted. There is less seasonal market variation because of the delocalisation and internationalisation of the food supply. All of these factors have contributed to a possible destabilisation of traditional food habits. The difficulty for the producers is that they must respond to a market which is much less stable and predictable than in the past. In a situation where the food producers remain isolated from the consumer, they are less able to respond to a market which is becoming more selective and segmented. A major role for nutritionists in the food industry is therefore to establish a new knowledge about what people are eating, and why, and to communicate this both to the operational (sales, marketing, production, etc.) and innovative (technological) sections of the industry. It is equally important for nutritionists to communicate information in the other direction along the food chain, translating new technological information into a form that is readily understood and usable by the consumer. (Source: Somerset, S.M. (1991) ‘Nutrition: a driving force behind food industry innovation', British Food Journal, 93(6), 7-11.)

Safety is of course a factor which needs to be checked very carefully. Obviously, it will have been considered during the development, but it must be monitored in the distribution system, in the retail outlets and in the home. If there are any doubts, then the product has to be withdrawn. Any adverse effects of the product on the consumers' health will 'kill' a new product, perhaps forever. In the USA, a product liability study is especially important in new product development.

Think Break 7.3 Food safety: raw materials control Recently there have been two serious food safety breakdowns which have been identified as from the raw material used - melamine in liquid milk, and food poisoning organisms in peanut butter. This emphasises the need in product development to identify the sources of raw materials and the safety of the raw materials at all times. (1) What precautions would you take in using in product formulation:       raw chicken pieces or mince in delicatessen meals       non-pasteurised liquid milk in cheese making       dried coconut in children's breakfast meusli       dried protein chunks in pet food (2) How would you advise distribution and market staff selling so as to ensure the safety of:       aseptic packed pouches of sauces stored at ambient temperature       shaved ham sold at the delicatessen counter       custard filled pastry squares or tarts sold at ambient temperatures       non-pasteurised fruit drinks sold in self-service units

7.8.4 Environment: physical, social and legal

These include assessments of the effects on the physical, social and legal environments. Are there waste/effluent problems which are affecting the community? Is the new technology in some way threatening to the society, for example biotechnology at the present time? Are the products obeying the legal regulations and known cultural or religious taboos for foods, for environment, for the geographic area? These especially must be monitored when launching in an overseas country with which the company is not very familiar.

The wastes are not only the wastes from the production facilities but the waste occurring in the distribution and also with the consumers. Packaging is a waste area which causes controversy and there are regulations in some countries to control it. Another type of waste today is ‘energy’ – some supermarkets may view foods which are transported over long distances as wasteful.

‘Technology’ may cause suspicions about the product, especially if this is a new technology which the consumers and the society do not have a great deal of knowledge. Genetically designed products may be accepted in some countries and be banned in others.

7.8.5 Customer response

The most basic analysis is to study the consumers and customers’ responses as the acceptability is what will make this a long-term product or just a ‘one day wonder’. In the case of industrial and food service products, the service as well as the product has to be studied. Who are buying the product? How much are they buying? Are they re-buying once, two, three times? What is the interval between re-buying – a week, a month, a year? These are the important demand questions to ask so that one can predict future sales. But it is useful to know which customers are migrating to the new product and what are the products that the new product is replacing,

Especially with an innovative product, it is important to survey the consumers and discover what are the product attributes and benefits that have caused them to buy the product and if the product delivered their expectations in cooking, serving and eating. Was there anything that they disliked about the product? What improvements would they like to see in the product? How does this product compare with other products they have bought? eaten?

It is useful to know how the consumer heard about the product – advertising, in-store tasting or from a friend - so that the communication can be improved and made more noticeable and attractive.

7.8.6 Company-fit

Such an evaluation includes how the product is affecting the total product mix or the category product mix, the product's relationship to the other new product introductions, its relationship to the company image and the effect on strategic planning. Any launching difficulties or problems should be studied and the method used to overcome then recorded for future use.

An important consideration for the company is the future for the product - is it to become a long-term member of the product mix? Will it be either an important member giving a large share of the profits or only a minor product as regards sales but useful for marketing and maybe filling production capacity?

Think Break 7.4 Evaluation of the launch: market channel and distribution A new variety of apple was developed over many years, taking into consideration the product qualities (sensory, nutritional, composition, use, safety), production qualities (ease, disease resistance, yields), handling qualities (deterioration after harvest and storage). It has now been launched on international markets – Europe, U.S.A. and Asia – through overseas agents, who distributed them to wholesalers and retailers.       In evaluating the launch, on what important areas would you concentrate?       How would you find the relevant information?       What results would trigger an emergency and how would you deal with this?       How would you analyse the information? (From Earle, M. and Earle, R. (2000) Food Product Development, pp 319-26 Cambridge, Woodhead Publishing)