Product development overhaul at heart of Kraft Foods strategy
BOCA RATON, FLA. — From worst to first. That’s how Barry Calpino, vice-president of breakthrough innovation at Kraft Foods Group, Inc., described his company’s recent history of innovation.
“We were worst at innovation by almost any measure — qualitative, quantitative, outsiders, insiders,” Mr. Calpino said during a Feb. 19 presentation at the Consumer Analyst Group of New York conference in Boca Raton. “In 2008, almost everything we launched was considered a failure. In 2009: same story. We were right near the bottom.”
Poor execution, low investment and a lack of focus contributed to what the company called “Field of Dreams” launches — product rollouts with a “build it and they will come” philosophy that failed to prove true, said Mr. Calpino.
“We coined an expression, ‘spray and pray,’ launching dozens and dozens and dozens of new products, focused on how many new products we were launching versus how big they were,” he said.
Facing the “brutal facts,” Kraft Foods in 2010 overhauled its innovation strategy by leveraging its existing assets of research and development, sales organization and strong brands. The company adopted a “fewer, bigger, better” approach, investing more heavily in fewer platforms with an eye to multi-year performance.
“In my experience in innovation for close to 20 years, one thing I have seen is that every single study of innovation has said that year two is just as important and often more important than year one, and that most innovators and most companies pull way back in year two after the launch year,” Mr. Calpino said. “And the truth is that 80% of new products are smaller in year two than they are in year one. So, we made year two a focus.
“What we did for 2011 is we went through the whole pipeline at Kraft and we said, ‘Let’s pick the best we have, and let’s get serious, let’s focus, let’s invest and let’s launch those the right way,’” Mr. Calpino said.
Backed by strong sales support, the launches of MiO water enhancers, Oscar Mayer Selects and Velveeta Skillets — what the company called “big bets” — became $100 million businesses.
“MiO actually grew 67% in year two,” Mr. Calpino said. “MiO for us shows every single employee at Kraft that we mean what we say.”
Today, Kraft Foods has nine brands with more than $500 million in sales, eight of which lead their categories. More big-bet launches and a MiO expansion are in store for 2013, said Mr. Calpino. Additionally, the company is working to improve nutrition and reduce sodium across portfolios and leverage the voice of the Hispanic consumer in early product development.
“Innovation will be one of the pillars of the new Kraft,” Mr. Calpino said. “It has gone from one of our biggest weaknesses to one of our biggest strengths, but we still see unbelievable upside.”