Organic market drives innovation spending

Consumer preferences are having a dramatic impact on research and development (R&D) in the Fast Moving Consumer Goods (FMCG) industry, according to a recent Deloitte survey of Australian manufacturers.

The movement towards a healthier lifestyle, for instance, means manufacturers are focussing their R&D on fat-free, low-carb, reduced-salt, nutritious foods. “The trend away from highly processed, salted and sugared products has led the way for the R&D budgets of the FMCG industry,” Deloitte R&D Tax Partner Karen Stein said. “80% of manufacturers surveyed said they have had their R&D impacted by the change to organic and natural products.

The organic market is currently estimated to be worth $450 million per year and is growing at 14% per annum.

“Many R&D teams are focussing on the benefits of low or no trans fat products, as well as gluten and other allergen-free products,” Stein said.

Deloitte’s survey, Innovation from the inside out — R&D in FMCG looked at the drivers of innovation in the industry.

“Competition is incredibly high as the 20 largest manufacturers make up 50% of the industry with only a couple of food and beverage companies owning 50% of the product categories,” Stein said. “This means that innovation plays a key role in helping manufacturers meet constantly changing consumer needs, while driving down costs.”

According to the company, 60% of manufacturers are now using R&D to see how they can better meet the needs of the ageing population by developing easy-to-open products as well as functional foods, like cholesterol-lowering spread and vitamin-packed fruit juice.

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