Heinz working hard at innovation
Published: Sunday, January 13, 2008 at 4:40 p.m.
Last Modified: Sunday, January 13, 2008 at 4:40 p.m.
WARRENDALE, Pa. - At a sleek office building outside Pittsburgh, garlic and vegetable aromas mingle in the air. Chefs handle frying pans behind industrial stoves and lab-coated technicians scoop morsels of food into their mouths.
It's a clinical staging area for what H.J. Heinz Co. hopes will become household favorites — packaged foods and condiments designed to please palates and entice shoppers across the United States and around the globe.
The Heinz Global Innovation and Quality Center, which opened about two years ago, has significantly bolstered the research and development capabilities of Heinz, one of the world's largest food companies.
Like other big food industry players, Heinz has invested heavily in product and packaging research in recent years. Companies such as Switzerland-based Nestle SA, the world's biggest food and drink company, have operated sophisticated research facilities for years. But more companies are now shifting their focus to product innovation, experts say.
And with commodity prices soaring, Heinz executives say their facility gives them new flexibility to adjust ingredients, lower costs and quickly adapt to consumer trends, such as a demand for healthier foods.
"Consumer tastes are still very local," said Ted Smyth, Heinz's chief administrative officer. "And you'll talk a bit about how they're ... a little bit more international, but we still like our recipes to be very locally tweaked, even in ketchup."
Catering to the culinary desires of consumers around the world has been vital for the Pittsburgh-based company, founded in 1869 and known best for its namesake ketchup. Sixty percent of its sales revenue comes from outside the United States.
Its products — from soups to baked beans and frozen entrees — are sold in more than 150 countries worldwide, and Heinz executives say that having local managers, brands and facilities has helped the company penetrate diverse markets.
Perched in the hills of southwestern Pennsylvania, the Innovation Center serves as a research hub for Heinz's global operations. Heinz carries out other research and development for canned foods in Britain and infant foods in Italy.
Heinz's chief executive, William R. Johnson, said when the center opened in 2005 that the company would dedicate nearly $100 million to product innovation in North America alone over the next five years.
The cost of making a product at the facility remains low because all the departments needed to develop a packaged food item are in one location, said Heinz spokesman Michael Mullen.
The center's 200 workers include food scientists, chefs, engineers, package designers and quality assurance specialists, among others. Some have been relocated to the center from other countries to help devise new food products.
Focus groups gather in rooms lined with one-way mirrors and surveillance equipment. Workers assess the taste and texture of experimental foods in laboratories. Packaging experts build three-dimensional models of containers or operate machines that simulate the wear-and-tear of trucks and other vehicles that might transport Heinz products.
Elsewhere at the center, employees run a so-called pilot plant — a scaled-down packaged food and condiment factory. A mock supermarket invites consumers to browse aisles stocked with Heinz and competing products while employees monitor them.
James E. Matthews, vice president of innovation and quality at Heinz, said the pilot plant can produce between one and 10,000 samples of a prototype product daily.
The success rate of new Heinz products — measured by whether a product meets or exceeds sales targets set before its introduction — has more than doubled, from about 40 percent to more than 85 percent since the center opened, he said.
Nancy M. Childs, a professor at the Haub School of Business at Saint Joseph's University in Philadelphia, said Heinz's packaging, such as upside-down bottles, and consumer-friendly products such as colorful ketchup had been effective.
She said "sleepy corporate entities" like chewing gum maker The Wm. Wrigley Jr. Co. had "suddenly kind of woken up" and unveiled an array of new products.
Heinz says its renewed emphasis on the consumer has been a key driver of performance during the first half of the fiscal year 2008, when sales grew 11 percent and profit increased 12 percent.
"When you look at the investment required to get a new product to market and to promote that product, you have to get that success rate up," Matthews said.
Heinz carefully watches palate sophistication trends, he said. "People are looking for broader and newer tastes."
Lee Linthicum, head of packaged foods research at Euromonitor International, a market research firm in London, said an industry trend toward health and wellness had changed little in recent years, but that new types of products had emerged.
The food industry has seen a gradual shift from products with reduced ingredients — lowering their caloric or carbohydrate content, for example — to ones fortified with nutrients, he said.
Heinz recently introduced a line of its Weight Watchers Smart Ones meals with fruit. Such products succeeded because people want more nutrients from natural sources such as fruits and vegetables, without sacrificing taste, said Matthews, the Heinz vice president.
Roger A. Clemens, a spokesman for the Chicago-based Institute of Food Technologists, a nonprofit scientific group, said food companies are also establishing health and wellness centers and scientific advisory boards.
Heinz has been recognized internationally for its products, but not its research — a reputation the company apparently is trying to change, said Clemens, who worked for Nestle for 20 years.
"Heinz wants to be known as investing in the future through its quality research," he said. "They want to be innovators in food and nutrition."
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