To speed up product innovation Nestle streamlines its R&D

Swiss Food giant Nestle is set to combine its scientific research operations into a single unit in an effort to speed up development of new products at a time when competition from smaller rivals is escalating.

The company will merge its Nestle Research Center and Nestle Institute of Health Sciences (NIHS) into one organization called Nestle Research.The new entitywill continue to be based in Lausanne, Switzerland and will employ around 800 people.

By linking the “blue-sky” research done at NIHS with the more commercially focused Research Center; it hopes to accelerate the translation of scientific discoveries into marketable products.

It also hopes this will help it compete with smaller, nimbler rivals who have been eating away at the market share of Nestle and other big firms like Danone, Unilever, Kraft Heinz and Kellogg.

Nestle Chief Technology Officer Stefan Palzeracknowledged earlier this month that his company had to keep pace with rising demand for goods that are organic, gluten-free or vegan. He added that big trends are embraced by smaller companies a bit more actively than the big companies.

In the United States – the world’s biggest packaged food market – small challenger brands could account for 15 percent of a $464 billion sector in a decade’s time, up from about 5 percent last year, Bernstein Research predicted last year.

Palzer, who took over Nestle’s innovation and research and development operations in January, is also supplementing long-term research projects with incremental product launches made faster by experimenting with new ideas more quickly.

Other steps include efforts to apply specific developments to more products, such as Nestle’s recent designer sugar crystals launched in low-sugar Milkybars in March, which will go into other products in the future.

The importance of agility was underlined by Nestle’s recent struggle to capitalize on resurgent demand for frozen foods.

The company says it reformulates one third of its product portfolio every year.

Nestle spent 1.72 billion Swiss francs ($1.73 billion) on R&D last year, down slightly from 2016 but up 22 percent from 2012. The company’s sales fell 2.6 percent over the same period.As a percentage of sales, its expenditure has fluctuated only a little, but demands on the unit have increased.


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