Rising Development Costs and Supermarket Fees Hurt New Products

Consumers can expect little in the way of innovative new food products in the coming months, according to a leading industry analyst.

Spiraling development costs as well as increasingly high fees charged by supermarket chains for access to shelf space are reasons for the drop, said Martin Friedman, editor of Gorman’s New Product News, a Chicago-based trade journal.

Adding to manufacturers’ timidity is that several promising items brought to market last year did poorly, he said.

Hardest hit by the combination of these three factors are the small firms, often a fertile ground for product development.

“Retailers’ aggressive pursuit of slotting allowances made the cost of getting on the shelf much more expensive and even prohibitive for smaller companies,” he said.

The supermarket chain practice of, in essence, charging rent to manufacturers for a store’s shelf space has become commonplace. The fees, though an annoyance, are manageable for the giant food processors with a host of major brands. However, regional firms find the payments much more difficult to absorb.

Friedman said that the grocers have been getting bolder in demanding failure fees from food companies trying to bring an item into markets for the first time.

“If a new product doesn’t make its sales quota for the store, then the manufacturers pay for it (with a failure fee),” he said.

Despite the negative trends, manufacturers still managed to bring 10,558 new food items into retail channels in 1988, a modest 4% increase from the previous year. However, the jump was “dismal” compared to the wild 20% increases of just a few years ago, Friedman said.

The pace has slowed even further in the first few months of 1989. New Product News reports that 1,987 food items debuted in the first quarter of this year, or 3.4% more than in the same period in 1988. The totals are deceiving, however, because many of the introductions are simply new flavors, sizes or variations on existing brands.

“In addition to a slowdown in the quantity of new food items coming on stream in the last 12 months, there also was a shortage of truly major, significant new brands or even innovative categories,” said Friedman. “Instead of full-blown new product introductions, manufacturers are expanding their established brand (lines).”

Although there are no so-called breakthrough products on the horizon, several interesting items are appearing in markets.

Poultry Personality--The Geo. A. Hormel Co. is hoping that a former Miss America can help sell marinated chicken breast. Currently being test marketed in Minneapolis and Denver is Chicken by George. The product, however, is not named after the meat company’s founder but for television personality Phyllis George.

The vacuum-packed, ready-to-cook chicken, which is skinless and boneless, sells for about $1.99 per 5-ounce serving. There are eight different versions featuring marinades such as lemon-herb, mesquite barbecue, teriyaki and others.

“I never dreamed I’d have my picture on a chicken package,” said George. “Jewelry, perfume or clothes, maybe. But chicken? Never.”

The product was developed in 1986 at the George household with the help of her husband John Y. Brown, ex-governor of Kentucky and a former principal in Kentucky Fried Chicken fast-food chain. Hormel purchased the line last year and expects nationwide distribution within a year’s time.

The product is designed to offer convenience and ease of preparation--it can be microwaved, broiled, baked or sauteed.

“After being a beauty queen and a sportscaster, what’s left? Being in the chicken business,” said George. “The goal is to do for chicken what Baskin-Robbins did for ice cream. . . . I want to be the Betty Crocker of the 1990s.”

Sales during the test market have exceeded expections, and Hormel has announced it will expand the concept to beef, fish, pork and turkey. A spokesman for the company said Chicken by George should be available in Southern California by July.

Microwave’s Menu--Now that between 70% and 75% of all American households already have microwaves, products designed especially for the quick-cooking ovens are proliferating, according to Friedman of New Product News.

Convenience is also central to a new product by Beatrice/Hunt-Wesson Inc. The firm’s new Minute Gourmet provides seasoning, sauce and a cooking bag to prepare any of several fresh meat items. Consumers need only add one pound of fresh meat along with the other ingredients to the product’s specially designed packet and then heat according to directions.

Hunt’s Minute Gourmet produces a “gourmet meal for a family of four in minutes,” according to the firm.

Five flavors are offered in the line, including Chicken Cacciatore, Oriental Beef and Cajun Pork.

Hunt-Wesson acknowledges that consumers have been reluctant to prepare meat in the microwave because of uneven results in the past. However, Minute Gourmet addresses any perceived microwave shortcomings with its new cooking system. The shelf-stable product will retail for about $2.29.

The company is even offering a toll-free number to provide information on the Minute Gourmet cooking process, for which a patent is pending. The number is (800) 468-7638.

Microwaveable side dishes are also a burgeoning category. General Foods’ recent entry is Minute Brand Microwave Dishes, which include four different rice preparations and the same number of pasta presentations. Other firms with similar offerings include Ronzoni, Kraft, Betty Crocker and MJB Rice.

Today’s Catch--Seafood is not without a few novel items. Slowly making its way onto restaurant menus and into supermarket fish counters is Le Topper’s Aquagator, or farmed alligator meat from Louisiana. The Lafayette-based firm, which has had success with its soft shell crayfish, has a way yet to go with Aquagator. Apparently, company officials are still wrestling with how to attractively package the gator fillets. And as with many exotic meats, Aquagator is said to taste “just like chicken.”

There are no such identity problems for a new seafood product being marketed as Mox Lox. The imitation smoked salmon is from Sea Legs, which has used surimi, or a highly processed fish paste, to create a full-line of shellfish imitations. Ten years in development, Mox Lox, sells for about 50% of the price of real smoked salmon, or $1.99 per 3-ounce package. Calories, fat and sodium are also reduced.

“Branmania”--There has been an explosion in the number of products attempting to appeal to consumers’ health consciousness. Most prominent among these are the wide variety of processed foods containing oat bran.

“The cereal companies are stumbling over each other, trying to get more oat bran products and product claims out to the public,” said Friedman.

In fact, some of these items have gotten quite aggressive in stating the case for oat bran’s ability to lower cholesterol.

For example, General Mills’ new Benefit cereal states in bold lettering on the package that it can “reduce cholesterol.” Only in fine print does the label further state that the reduction is possible “when (the cereal is) part of a low-fat diet.”

Benefit does provide an indication, confirmed by industry analysts, that brans other than oat will soon become prevalent. In addition to oat, Benefit contains wheat bran as well as sugar beet fiber.

The cholesterol concerned will now be able to add oat bran to those few products that, at present, do not contain the compound. J&J; Snack Foods Corp. is distributing Pride O’ the Farm Oat Bran Shake. The 88% pure bran is used as topping and pours easily from its 8-ounce container.

The Pennsauken, N.J.-based J&J; has also added oat bran into a version of its soft pretzels. Under the Superpretzel label, shoppers can buy cholesterol-free soft pretzels in stores’ frozen food sections. If salt is omitted during preparation, then the 10% oat bran pretzels are a veritable health food.

Among those items hoping to ride oat bran’s coattails, is Tastee Apple Fiber. Lost in the attention lavished on bran is that fiber can also play a role in lowering cholesterol. The Newcomerstown, Ohio, firm is encouraging consumers to also use apple fiber as a topping or baking ingredient.

Liquid Assets--Everyone is talking about seltzer-like carbonated soda, but Sparkletts has actually done something about it. The Walnut Creek, Calif.-based firm has devised a plastic copy of the old seltzer bottle complete with push-button siphon. The reusable top helps maintain the fizz in the specially designed two-liter bottles. Four flavors are available in the “never-goes-flat” Sparkletts Seltzer Original line.

Mendocino Beverage Co.’s new Truffle Mineral Water can be easily classified as a specialty item with a limited audience. Truffles, known for their pungency, are not normally associated with sparkling water. But that did not prevent Santa Rosa-based chef John Ash from collaborating with Mendocino on this unusual product. An acquired taste, the truffle water will retail at about $5 per six-pack.

Prince of Peace Enterprises Inc., have acknowledged from the start that they are providing an “alternative drink” in Blue Mountain Gold Ice Coffee. Packed in 8.5-ounce cans, the drink can be served hot or cold. The firm claims that the beans used to brew the coffee are those from Jamaica’s Blue Mountain, considered among some of the most expensive. Unanswered in the firm’s promotional material is why such costly beans are used to make coffee-in-a-can.

Sweet Anniversary--Finally, what all newly introduced products have in common is their manufacturer’s dream of having healthy sales for at least a few years. In that context, the accomplishment of Hostess Cupcakes is noteworthy. The cream-filled chocolate treats with the signature swirl of white icing were introduced in 1919. Today’s clamor for convenience foods is apparently nothing new. Hostess Cupcakes were originally promoted as a way of reducing the time women spent in the kitchen.