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NESTLÉ’S BUDGET-FRIENDLY INNOVATION STRATEGY: ‘WE ARE FASTER NOW THAN MANY OF
THE STARTUPS”

By Elizabeth Crawford contact

21-Dec-2022 - Last updated on 21-Dec-2022 at 15:28 GMT

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Source: Getty/ Monty Rakusen

Related tags: Nestlé, Innovation, New product development


No longer a lumbering giant when it comes to R&D, Nestlé significantly increased
its number of new product launches and number of patents in priority areas by
simplifying its innovation process, fostering an entrepreneurial culture and
collaborating with external startups and retailers.

And it did all this while keeping its R&D budget flat despite the growth of the
company, Stefan Palzer, chief technology officer at Nestlé SA, told investors
and financial analysts during the company’s recent investor day.

“When it comes to speed to market, we were able to shorten the time to market by
60% since 2016. We moved from an average project duration of 33 months to 12
months,” said Palzer, adding that within food and beverage, projects can take as
little as six to nine months to move from ideation to market.

“We are faster now here than many of the startups which are out there."

Nestlé launched and tested 12% more innovations in 2021 vs 2020, most of which
offered meaningful differentiation in the market place, he claimed.

“We still have 30% of our growth coming from products we launched in the last
three years, but the percentage of innovation in that 30% has increased to about
25%” between 2019 and 2021 with the remaining portion focused on renovation, he
said.

As another indicator of the significance of these innovations and proof they
were more than simple line extension, Palzer said Nestlé increased its number of
new patents in priority areas by 90% between 2019 and 2021.


STREAMLINING INNOVATION PROCESSES AND CROWDSOURCING IDEAS FUELED GROWTH

Nestlé was able to increase and speed its innovation pipeline in part by
simplifying its existing process – reducing the necessary approval gates from
six to three – and building 53 new pilot lines across the company to speed
production and go to market earlier, he revealed.

The company also created 14 R&D accelerators, which operated on a tight timeline
of only six months from idea to shop. These ideas were then tested in real-life
conditions either online or in stores through the 30 partnerships Nestlé
cultivated with retailers.





Nestlé’s fostered differentiation within innovation by crowdsourcing product
ideas internally, externally and digitally.

“We established an internal Shark Tank for our employees,” who pitch their ideas
and through a voting and evaluation process the best options are funded, Palzer
said. This led to innovations such as a food-based teething tool, pitched by an
employee in the pet food business whose child was teething but who she didn’t
want chewing on plastic. Other winners include an adult chocolate milk protein
beverage and a line of frozen bowls.

“Furthermore, we established 60 new collaborations with startups” that combined
their creativity with Nestlé’s ability to scale, Palzer added.

Finally, Palzer said, Nestlé invested in AI-based concept generation.

“We have all those social media insights on social media activities in the
world. And to leverage that or to create very innovative concepts, we
established an artificial intelligence concept engine, which is transforming
these insights into concept proposals, which are then evaluated by our
employees, by our staff. The one or the other, we do prototyping and then we
test it with consumers,” he explained.

Other artificial intelligence and data processing tools developed by Nestlé
focused on mining clinical data for new discoveries, recipe development,
targeted plant-breeding, real time surveillance of raw material quality and
preventive maintenance among others, Palzer said.


INCREASING INNOVATION WITHOUT INCREASING THE R&D BUDGET

Each of these steps took money, but to keep the R&D budget’s flat, Nestlé
streamlined its R&D footprint by closing a third of its R&D sites and
consolidating research.

With additional funds freed from these closures, Nestlé opened new research
institutes focused on packaging sciences, agriculture sciences, dairy research
farms and pilot coffee farms. It also opened innovation centers in China and
Latin America and 14 R&D accelerators across nine markets.


FOCUS ON HIGH-GROWTH CATEGORIES INCREASE INNOVATION EFFICIENCIES

Nestlé also made the most of its R&D investments by concentrating on high growth
categories, including food safety & quality, taste & aroma, nutrition & health,
affordability, sustainability, alternative proteins, coffee & systems,
early-life & medical nutrition and science-based pet nutrition.

Within these areas, Nestlé developed breakthrough technologies, including one
for sugar reduction that relies on a “fermentation transformation of intrinsic
sugars found in our raw materials, for instance, lactose in milk, maltose in
malt, fructose in … fruit juice,” and transforming them into prebiotic fibers,
Palzer said.

The result was technology that could cut sugar up to 50% and calories up to 25%
with little loss in sweetness and cleaner labels without additives all at little
to no additional costs.

“We are already deploying this technology at large scale. Until the mid of next
year, we will have 200,000 tonnes of product produced with the new technology,”
Palzer said.


YOU ALWAYS SEE NOW THIS DISCUSSION IN THE PUBLIC THAT PLANT-BASED IS SLOWING
DOWN. NOT FOR US

Beyond sugar reduction, Nestlé focused its innovation efforts on bringing more
than 100 plant-based innovations to market in two years across brands, formats
and geographies.

“Contrary to many companies out there, we do not restrict ourselves to only meat
and dairy or fish alternatives,”  said Palzer, noting innovations in ambient
plant-based products, an egg replacement, a vegan KitKat and plant-based
creamers.

“You always see now this discussion in the public that plant-based is slowing
down. Not for us. For us, it is still a very successful journey, and we are
leveraging those developments, our various expertises along the value chain...
to get to the best product by the end,” Palzer said.

Beyond plant-based, Nestlé also is investing in animal-free dairy, which it shop
tested in the US in the fourth quarter of 2022, and cultured meat through a
partnership with Believer Meats, which it plans to shop test in 2023.


PARTNERSHIPS ARE ESSENTIAL FOR ONGOING GROWTH

Looking forward, Palzer said that Nestlé’s innovation journey is just getting
started and that it plans to “accelerate translation of fundamental science into
discoveries, into innovations, which we will leverage across multiple categories
and brands.”

But to pull this off, he added, the company will continue to cultivate
partnerships with retailers that can help test highly differentiated product
concepts, as well as invest in technology and agriculture practices to improve
sustainability of products 



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William Reed Ltd - All Rights Reserved - Full details for the use of materials
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Related topics: Manufacturers, Suppliers, Markets, R&D, Views, Beverage, Healthy
Foods, Prepared Foods, Snacks, Healthy snacking, Trendspotter, Health &
Wellness, Carbohydrates and fibers (sugar, starches), Cereals and bakery
preparations, Dairy-based ingredients, Flavors and colors, Fruit, vegetable, nut
ingredients, Health and nutritional ingredients, Plant-based, alt proteins,
precision fermentation


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