Why do major FMCG manufacturers spend more in innovation?

Why do major FMCG manufacturers spend more in innovation?

Both Nestlé and Kraft Heinz have just announced new research and development investments. The major brand manufacturers are feeling the heat from innovative start-ups and want to speed up.

Food industry 3.0

RetailDetail already reported last week that major brands are under pressure but that smaller brands have achieved global growth, partially because they are closer to their market and can react more quickly to evolving consumer needs. Two major brand manufacturers have illustrated  that they do not underestimate the importance of research and innovation. Nestlé and Kraft Heinz will now new innovation centers to shorten their “time to market”.

Kraft Heinz will invest 90 million euro in a new “Global Center of Excellence” in Amsterdam and employ 450 people. “This is where the Kraft Heinz of the future will be invested”, European CEO, Rafa Oliveira, told Het Parool. “We are looking for new ways to grow and this center is to create the boundaries of the food industry 3.0.” Research and innovation in one location will help cut costs and free more resources for products and marketing. Its location near Schiphol should attract international talents.


Remain relevant

Nestlé also wants to speed up the production process and has announced the merger of its Nestlé Research Center and its Nestlé Institute of Health Sciences (NIHS) into Nestlé Research in Lausanne. It will employ about 800 people and the goal is to translate scientific findings into commercialized products faster. The Swiss group has struggled with growth over the past few years.

“Big trends are embraced by smaller companies a bit more actively than the big companies”, Chief Technology Officer Stefan Palzer told Reuters. He points out trends like organic, gluten-free or vegan. “We are adjusting our portfolio, doing many innovations and renovations to make the portfolio more relevant and to address those trends, but smaller companies are more agile.” Nevertheless, Nestlé is on the right track, he felt. To illustrate: his team invented a new vegan product during a business trip. “Thursday we had an idea, Friday we returned to Switzerland and Monday evening I was able to taste the first prototype,” Palzer said. “Wednesday, this prototype was shown to the executive board, and Friday it was in the global pipeline. Nestlé reformulates about a third of its product portfolio on an annual basis and invested nearly 1.5 billion euro in research and development last year.