New Product Directions – Some Challenging Thoughts for the Future
The challenge and opportunity exists to change the whole direction of Chocolate and Confectionery development and to offer the consumer a series of radical new choices, relevant to now and the future rather than being rooted in the past. This also signals the opportunity for new and creative businesses to exploit the changing market and consumer environments and to make a real mark on the confectionery business. One of the main engines of economic growth are the “SMEs” – Small and Medium sizes enterprises, the new challenges emerging are a huge opportunity for them in the confectionery industry.
A vital part of this is realising that the way consumers communicate has changed. Sharing experiences online on social media allows consumers celebrate good experiences, spread the word about what they think would interest their connections and to warn people if they find something unsatisfactory. The “21st century word of mouth”, social media gives smaller businesses, more reactive to the wants and needs of the market, the ability to compete on the same footing as much larger businesses which have massively greater resources. Social media gives confectioners the opportunity to increase awareness and communicate in a different way. More than that, it gives small businesses a great opportunity for broadly based consumer research (as you can literally ask people what they want) and provides a channel for response and customer service. Not sure what consumers want – ask them!
The confectionery industry manufactures products which are not generally meant to be part of the basic diet, rather to be consumed in modest amounts to give variety, pleasure, indulgence and sometimes reward to the consumer. As society has changed, increasing disposable income has led to our products (and many others) being considered less “special” and so consumed on a more regular and utilitarian basis. This has in turn led to our products being viewed in the same light as basic food items and condemned by nutritionists, however wrongly, as concoctions of fat and sugar, with no beneficial role in the diet and a leading role in the increase of obesity and the rising incidence of poor nutrition. This situation is not restricted to the European marketplace – it is as much an issue in rapidly developing markets such as India and China.
It is legitimate to ask what alternatives we offer our potential customers if they want the pleasure and indulgence of confectionery without – for whatever reason – consuming a significant level of calories, fat and sugar. The answer to that question must be “very little”. In the mass market at least, the industry has become transfixed with “bulk” products rather than with offering an “exquisite experience”. A look at a typical confectionery display will show plenty of “Bar and a Half” and “Double” products, but none which promote the intensity and quality rather than the “size” of the experience. This is, I believe, where a significant opportunity lies.
In addition to calorie content and nutrition issues, there are other important factors in the changing modern world which are going to challenge the conventional approach to product formulation and ingredient usage in the confectionery industry and present the opportunity (or more likely the obligation) to explore new directions and approaches to provide consumers with the products and experiences they are seeking.
An important and immediate challenge for manufacturers large and small is the availability of ingredients and issues of quality, price and reliability of supply. With the possible exception of sugar, most of our ingredients and natural flavourings are sourced from countries which have relatively warm climates, where high value crops have a degree of competition for land and labour, and which in a few cases are not particularly politically or economically stable.
Climatic conditions are relevant because high temperature and humidity often increases the vulnerability of crops to pests and diseases while consumers are increasingly led to believe that any detection of pesticide or fungicide residues is unacceptable.
Availability and cost of labour often affects crop choice because if companies and individuals see a better return from a different crop they will quite reasonably substitute it – even in relatively poor societies people have aspirations for less arduous and better paid work. Short term (annual and biennial) crops can often become very volatile in supply and price – when price rises they are planted and come into surplus, but when the price subsequently falls they are no longer grown, particularly if they are being grown outside their normal range and require exceptional inputs.
Longer term crops such as Cocoa and Coffee can take a significant time to return to production if they are removed due to alternatives being more profitable. Some of the hoped for “new” crop areas for Cocoa have fallen to the higher profitability and lower labour requirements of palm oil and even rubber, and price volatility has discouraged planting and maintenance inputs in others. Skills and experience in essential primary processing techniques can also be lost when crops are removed and this can seriously affect quality when and if they return.
Lack of political and economic stability in many important crop areas are a real weakness in the longer term supply chain. These factors introduce a degree of uncertainty for users and growers with few compelling answers, as long term investment in primary agriculture in distant environments is seen – quite reasonably – as extremely difficult and risky and not part of the mainstream business of companies focussed on consumer products.
Integral with a changed approach to products and their formulation will be convincing the consumer of the value and benefit of such products, which will be physically smaller (and may therefore at least appear relatively expensive) than current products and may need to be consumed in a slightly different way – for example by consciously holding product in the mouth and savouring it rather than chewing and swallowing rapidly. However, we must not lose the essential pleasure and enjoyment which confectionery provides as its core value. It will certainly be important to ensure that the experience provided by a “piece” lasts for at least as long, and preferably significantly longer, than at present.
Another area of challenge is the presence and affordability of alternative products on which the consumer can spend his or her disposable income. This includes a wide range of opportunities including music downloads, mobile phones, lottery tickets and many others. Whilst these sorts of products may not seem obvious competitors to confectionery, they do compete for the same segment of disposable income. They are aspirational, easily accessible and provide status and pleasure – roles which confectionery had almost to itself in the past. Real innovation and new modes of communication will be a key in modernising our image and competing for the consumers’ attention.
Educating and convincing the target consumer is going to take time and concerted effort and probably has to be linked to genuine innovation in product, marketing and communication. Because they are tied to a huge business and technical model such initiatives are unlikely to come from the existing major confectionery businesses, rather from innovative and dynamic companies willing to think in new directions. This represents a real opportunity for niche players and new entries which can establish new products and new credibility with new ways of communicating benefits to attract a new generation of consumers
People have always had an emotional connection with confectionery, forming a relationship with brands and products at an early age and remaining remarkably loyal to those early choices. Now, through social media, their ‘relationship’ can take on a new dimension. To show an openness to understand your consumer and an ability to give them change based on their needs/wants is very powerful in building trust between a new company and its consumers and followers.
There will be the opportunity to change the “Route to Market” quite radically and to erode the strong position of conventional marketing, sales and distribution systems. This will include changes to the way the consumer is informed, monitored and motivated using new communication techniques such as social media
Branding and image is likely to be even more important than it is at present and finding new ways of building that brand and consumer awareness will be important but at the same time practical, even where a small company operates locally or regionally rather than nationally. This kind of relationship reinforcement is already becoming common in some service and retail sectors and is a model which can be quite readily adopted.
Consumers can feel not only an emotional connection with developments but a strong loyalty and can act as advocates wanting ‘their’ products to succeed. The power in social media is empowering advocates to spread the message for you. Empower bloggers to blog about the products by sending them samples, follow up on their articles – respond to rather than hide from negative comments and highlight the positive ones. People like to feel they have an influence and smaller businesses who can respond quickly to what people want now have the opportunity to find it out and act on it through social media. Ask the question, respond and make sure people feel they have been heard, show that developments are directly as a result of their needs/wants, give them an opportunity to be the first to try, listen to feedback and respond, empower advocates the ability to spread the word – tell them what you want as if asking a friend. Give the networks the chance to make your message go viral. Amplify the good and address the bad.
However, the fact that people can share bad as well as good experiences can make businesses wary of getting involved. The fact is, the conversations will be going on anyway. Isn’t it a good idea to be aware of them, part of them and then have an influence over the outcome? In the past if one person had an unsatisfactory experience of a product it could affect the views of a few tens of friends and family. This is why rapid and efficient response to consumer complaints has always been essential. Now that has snowballed to a situation where thousands of people can become aware and companies need to develop new ways of responding quickly and effectively, even where the problem may be illusory or highly localised.
Because the opportunities and options that are going to be presented are so varied and so reliant on inspiration and innovation, it is not possible within the scope of this article to present specific “solutions” to the issues raised. However there are some general points which can be considered.
The historical model of a large dedicated plant which produces the same small range of products for many years is almost certainly going to change. If the industry is to compete with the constant innovation from its competitors for the consumers’ disposable income, it is going to have to innovate itself and that is going to mean flexibility and constant change. Both food and non-food sectors compete aggressively for consumer spending power and the active recruitment of new consumers with disposable income. The confectionery industry has to find ways of combating this by providing the new experiences which people demand.
There will be smaller, more flexible manufacturing facilities able to adapt to new products quickly, and radical changes in the role and design of packaging. There may be some move towards the “Circular Economy” concept using flexible manufacturing blocks leased and exchanged rather than investment in conventional, high capital value plants. This has been the model in the aviation and some other industries for many years and there is in principle no reason why it should not be used more widely. It has the added advantage of facilitating much more flexible approaches to financing and investment and consequently making change easier. These flexible plants will require flexible facilities and ingredient handling systems and so are likely to be installed in modern, purpose built facilities situated at convenient locations for transport and distribution.
It will be important to incentivise primary producers to maximise the functionality and required quality parameters of their products and to have ways of rewarding consistency of quality and supply. There may also be opportunities to anticipate some of the effects of climate change and to initiate the introduction of certain crops into new locations which may become appropriate as (and if) significant climate change takes place. These are issues fraught with practical difficulty, but not ones which can be ignored and even modest success may pay significant dividends. This again may represent an opportunity for smaller, more adaptable businesses to develop new types of relationships with growers and suppliers as has started to happen with some small niche manufacturers. Companies may even encourage deliberate links between growers and consumers to strengthen loyalty – social media is global, not local!. There may also be opportunities to change and partially automate some agricultural practice in order to reduce the labour needed and make the actual work more attractive and profitable to the finite supply of agricultural labour. The “Fairtrade” system will continue to be of increasing importance both to producers and consumers and may ultimately provide the incentive to growers for improving quality and consistency of supply.
New methods of crop and disease control will also be valuable in reducing the use of pesticides and other chemicals. Whilst current limits certainly appear to present no human health hazard in products, there is constantly the perception that “any” detectable residue is unacceptable in an environment where detection limits change by orders of magnitude fairly regularly. However there is also the issue of relatively unskilled labour handling and being in the presence of toxic chemicals in the field – and anything which can be done to reduce this must be welcome – as well as reducing the cost of these inputs. This may well be a area in which user businesses can invest effectively or at least encourage others to do so
More intense products will be smaller and formulated differently and will probably use intense sweeteners, particularly as more “natural” products emerge in this field. It is unlikely that a generic solution will simply involve new bulking agents to replace sugar or fats as these ingredients are not only expensive but large amounts of low molecular weight material which is not digested conventionally can give gastro-intestinal problems, particularly for small children.
One of the key selling points for the new generation of intense products will be the “natural” nature of their ingredients and the innovative nature of the experience they offer as well as the reduced calorie, fat and sugar content per unit of consumption.
In order to deliver products which are much more efficient users of scarce and expensive resources – to provide “more with less” – we will have to move away from many conventional processing techniques. As part of this, the isolation and concentration of important flavour components and the creation of them in isolation from product formulation will become important.
Manufacturing processes will have to be designed to consume less energy and other resources and produce less effluent, byproducts and scrap. Furthermore the opportunity will exist to reduce the energy content of distribution. With smaller units and flexible manufacturing processes, the opportunity will arise to move closer to a true “just in time” distribution system with internet based ordering from even the smallest outlets. Again, this is common in other industries and even in parts of the food industry.
Using social media can provide a cost effective way of creating the initial buzz around new products, providing a way to proactively get involved in discussions going on about the products and addressing any issues before they become a problem. It is also important to understand that a social media campaign is not a marketing campaign. It can enhance one, make a low cost local campaign genuinely effective, drive traffic and increase awareness. However, to be truly effective, it needs to form part of a consistent message that consumers come in contact with on and offline.
Social media can also be harnessed to monitor sales and promotional programmes, with the access created being used by a wide consumer base to express their preferences on a routine basis and this information being used to predict quite specific demand accurately and hence to set more focussed purchasing, manufacturing and distribution programmes.
Innovation and radical thinking will have its rewards in recruiting new generations of consumers and extending the range of consumers we attract. The young consumer is likely to be very receptive as long as the new concepts are exciting and deliver what they promise. Consumers in every segment are highly receptive to innovation and seek it avidly in so many fields – technology, communication, social media, entertainment – yet our industry currently fails to deliver it and so will potentially face a fading future unless we become as radical and aggressive as the our competitors. Both food and increasingly non-food compete aggressively for consumer spending power and the active recruitment of new consumers with disposable income. We have the opportunity to be creative and an expanding force in the new world, we have to grasp it if we want a growing future.
The Authors
Graham Godfrey is an independent consultant working in the confectionery and food industries. More details of his work can be found on www.ggconsult.co.uk
Sarah Gorev is an independent consultant working in social media. More details of her work can be found on www.socialmediaspice.co.uk