With annual sales of $13 billion, Kellogg Company reigns as king of breakfast foods, a segment that makes up 22 percent of its sales. It’s also a major producer of cookies, crackers, and savory snacks like Cheez-It crackers and Pringles, and a leader in the frozen food space. But as fewer people sit down to eat a bowl of cereal in the morning, Kellogg’s sales have been dipping since 2013. That has prompted the company to diversify into areas like waters, adult cereals with health benefits, and cereal bars. In October, Kellogg paid $600 million to acquire RXBAR, a maker of protein bars. The company says that more than 15 percent of its sales thus far in 2017 are coming from new product innovations (on a three-year rolling basis.)
InnoLead discussed Kellogg’s approach to innovation with Nigel Hughes, Senior Vice President, Global Research, Quality, Nutrition and Technology at the Kellogg Co., who joined the company earlier this year from SC Johnson, where he was Senior VP Research, Development and Engineering and CTO. Highlights from the conversation are below. Hughes leads the 90-person Global Innovation Team, which reports to Kellogg’s Chief Growth Officer. (This interview was part of our research for our 2017 report, “Best Practices: Scouting Trends & Emerging Tech.)
How has Kellogg Co.’s approach to innovation changed over the years?
I’ve been in the consumer goods business for almost 30 years, and I see more change and opportunity than ever. Having innovation in [the] future vision and strategy is critical for any company, specifically for Kellogg, with the changes happening in nutrition, ingredient sourcing, and the level of transparency our consumers expect. The changes in the way we can design and fine-tune products to deliver certain consumer experiences are just transformational:
- Consumers’ expectations are going up massively.
- Health and wellness expectations are going up.
- The experience and personalization expectations are going up.
These are all huge, huge changes. One of the key elements is: How do we shift our thinking away from counting on individual products to do things, and more to driving these bigger-scale platform areas such as nutrition and wellness. How do you then combine your world-class, in-house research (we’ve got a phenomenal pilot plant — W.K. Kellogg Institute for Food and Nutrition Research) with all the external world-class players?
What are the challenges of bringing products to market? Is Kellogg expanding into new areas?
It’s not just a matter of expanding into new areas. There are some areas that are on the edges of where Kellogg Co. has been in the past. The critical thing is: How do you select within the many areas of opportunity there are? That’s one of the biggest challenges in innovation today.
We do a tremendous amount of work on the commercial side with the consumer insights people to understand where the consumer is moving. And from a science and technology point of view, within the R&D organization, a lot of work is [done] around where the science is moving. We’ve got to be looking at not just the next year or two years; we’ve got to be looking at five years, 10 years out, as to where the science is moving. And then it’s a matter of bringing those two things together.
Take for example the whole area of energy. There are many different kinds of energy: The energy you have first thing in the morning, the pick-me-up in the afternoon, and managing your energy so you sleep well at night. We need to best understand how to play that from a brand point-of-view. Where are the technology breakthrough opportunities in that whole spectrum that are going to give us product opportunities?
How do you distinguish between food fads and seismic shifts?
Some things will come and go, and some things are — at least within a reasonable timeframe — permanent changes. Another example that we’re talking about a lot within the company is the change within the core understanding of nutrition… How do you modulate your health and wellness? We look at creating food that works in harmony with that microbiology. We need to get better at understanding how that microbiology impacts your health and wellness over time. On the other hand, there are certain things that are, excuse the pun, quite literally, “flavors of the month.” A quick consumer trend comes up and it’s the flavor in this part of the world right now. That’s part of our innovation thinking, but that doesn’t form a platform of our innovation thinking.
Innovations at Kellogg
Kellogg’s NYC: In 2016, Kellogg’s NYC opened as an upscale cereal cafe in Times Square. Kellogg partnered with Co.create NYC, a retail developer, and chefs Anthony Rudolf and Sandra Di Capua on the 1,600-square foot café, which experimented with new cereal and breakfast food concoctions and gleaned real-time consumer insights. Menu toppings for standard Rice Krispies, Frosted Flakes, and Special K cereals, for instance, ranged from fresh and dried fruit, nuts and seeds, to “boosts” such as green tea powder or the more decadent — like Pop Tart crumble and marshmallows. The store closed in August while Kellogg scouts out a larger location in downtown Manhattan, with plans to reopen this winter.
Is it difficult to get management buy-in for your work?
As a company, we have a commitment to grow through innovation, so clearly there is a management support. The key challenge is to be clear and to communicate into the organization if this is a transformational change versus a trend… Kellogg has a track record to grow through innovation and wants to continue that track record. It’s much more a matter of ensuring that we socialize and we communicate and we share in the right areas.
Packaging innovation is another area of focus for Kellogg. Could you tell me a little about some of the successes you had in this area?
Obviously, a lot of products have been sold the same way for many years in a bag and cardboard box. Now we’re seeing a lot of breakout from that, be it cereal sold in resealable bags or the snack products we have in standup pouches.
The other big change that’s happening across the board in packaging, but particularly relevant to us, is that the consumer cares more and more about the provenance of their food—where it came from, what it’s made of. They want to be able to see it… We have a whole mantra around “what you see is what you get.” So the consumer can see our food; they can judge it visually, rather than looking at a picture [on the box.]
We still have many examples where we have products that are in packages where you can’t see the food, because that’s a big technical challenge. We need food that is shelf stable, and obviously packaging has an impact on the shelf stability. But that’s a huge push for us… One of the big challenges with packaging is that we make a lot of food. A lot of money gets tied up in the capital [equipment] to pack our foods and the like…
Do you have advice for other innovation executives?
It’s not easy. In order to be successful in innovation, you need bring together brilliant consumer insights and brilliant science and technology. The interface between those two is where the magic happens. When I say science and technology, it can be food technology in terms of a great, delicious tasting food. Also scientific insights into a particular consumer benefit.
If you look back to the history of Kellogg, you have J.H. (John Harvey Kellogg, MD.) and W.K. (Will Keith Kellogg). Essentially they represented those two elements. W.K. represented consumer insight. He was the guy who was an entrepreneurial industrialist in food manufacturing. His brother J.H. represented science and technology insight; he had passionate insights about the role of food and health. There’s nothing new in this.
The other thought is the combination of content and context. Yes, you need to create great content, you have to produce great products and great food, you need to have strong claims and support them in a robust way. But always, you need to manage the context. You need to manage the communication — the way you engage with consumers and the influencers that influence your consumer… It’s when you manage both of those in a very congruent way — in terms of the insights, in terms of the food you create and the claims that you make — that’s again where the magic happens. A lot of innovation failures have been because the focus is on one or the other. It might be a great product or great food, but if the context isn’t very clear, consumers don’t know how it fits into their lives and there aren’t other people advocating for it and sharing how it should fit into their lives.
Are there new types of talent Kellogg is trying to bring into the R&D organization? What kinds? Are you recruiting that sort of talent in new ways? What works?
Yes, in a couple of dimensions. Obviously there are a couple of capabilities we need to build. From an innovation point of view, I’d focus even more on the softer skills. We’re in a world now where everybody needs to be a storyteller, and the members of the R&D team are no exception to that, because creating that engaging content we like so much relies on the capacity to tell stories—scientifically based stories, fact-based stories to be clear—but stories nonetheless. More and more, I’ve brought in the R&D team to work more closely with our ad agency partners, because there’s an incredible richness of stories with both of those creative groups. As you can imagine, it’s not necessarily something that all scientists have built-in skills for.
Another thing: we’ve got a lot of very capable people in terms of food, food design, and culinary skills, but we’re constantly striving to increase the food intellect within the company. What I mean by that is: ensuring that people have the right language, the right lexicon to be able to describe the food—to really be able to create phenomenal, delicious food. I always try to draw a parallel with the wine industry, where over the last 20 to 30 years, you’ve seen a complete transformation of the wine industry in large parts of the world. Go back 20 or 30 years, and people said, “I like red or I like white [wine],” because there just wasn’t that intellect or lexicon out there. What’s happened is that whole lexicon has been built; you’ve got experts to do it. You’ve got oenologists, sommeliers, etc…
You really have a richness of language that allows you to be more creative. That’s something we’re constantly striving towards and driving within the company. We’ve got a tremendous passion for food; we need to match that passion with our food intellect.
What do you think about what the R&D organization of the future needs to look like, or how it will need to operate?
We’re way beyond trade secrets and the old notions of IP and patents—not that those aren’t important in some instances. There’s a massive move around scouting supplier partnerships, open innovation, venture capital as we discussed, incubators, etc. Really, R&D is moving from an ideas factory to a solution factory. That’s a massive change, because in the past, R&D tended to be populated with people who prided themselves on invention, and now we have a group of people who pride themselves on finding solutions and really are working in lockstep with their commercial colleagues. It’s a very different profile.
I can tell you the other dimension that’s changed—the opportunities today. There are so many incredible changes that are happening and so, R&D is more at the center of things today than it has been in any time in my career. It’s a fun place to be.
The R&D I started my career in was much more built on the model of academic institutes, internal R&D buildings. That’s long gone, and the change will continue.
(Cereal bowl image, by Marco Verch, is used under Creative Commons 2.0 license.)