"Health-enhancing" Products in the Italian Food Industry: Multinationals and SMEs Competing on Yogurt
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AgBioForum, 12(2): 232-243. ©2009 AgBioForum.
“Health-enhancing” Products in the Italian Food Industry:
Multinationals and SMEs Competing on Yogurt
Giacomo Boesso, Nebojsa St. Davcik, and The purpose of this research is to present a detailed analytical
Francesco Favotto (qualitative) study of the new “health-enhancing” products in the
University of Padova Italian marketplace, with a focus on both the multinational cor-
porations and the small and medium enterprises (SMEs). The
analysis is based on a new products development framework
(NPD) which is operationalized by isolating four key strategic
elements and other support variables from the literature. The
theoretical framework is matched with seven health-food cate-
gories and seven yogurts marketed by international corpora-
tions and local SMEs in the Italian marketplace. The research
provides an in-depth analysis of the emerging strategy in the
food industry using the NPD theories in a national context (Italy)
where the attention to food quality is well-known worldwide and
the appeal of the so-called “functional food” seems to be
barely—or poorly—investigated.
Key words: health-enhancing foods, new product development
strategies, Italy, multinational enterprises, small and medium
enterprises.
Introduction “natural or manufactured food or food ingredients
which confer specific health-enhancing benefits beyond
If you believe the vendors of the major world their basic nutritional functions.” Recently, the new term
food conventions, you may soon be able to eat of “functional food” has been used when the food touts
and drink your way to better health. On display its added health-value to consumers (Bozzi, Perrin, &
as well as in the research pipeline are aisle upon Schilter, 2006). Despite the existing regulatory uncer-
aisle of foods made to do more than provide tainties, functional food products have been launched in
basic nutrition. There are kinds of yogurt to Europe since the mid-1990s. According to Bogue, Cole-
lower cholesterol and others to curb appetite; man, and Sorenson (2005), implicit consumer demand
cheese cubes that supposedly increase energy for healthy, health-enhancing, and functional foods has
and strengthen the immune system; desserts not materialized into positive dietary changes, particu-
laced with heart-healthy fish oil; and pomegran- larly among males and the lower socio-economic
ate-flavored water containing fiber to promote groups. In summary, a new, promising niche is emerging
digestive health. The primary talk is what might in the food market, but the industry’s players are still
be the next big thing in a market with some so- defining the boundaries and strategies.
called functional foods—like energy drinks and This article refers to “health-enhancing food,” or a
probiotics, or products containing beneficial broad category of healthy products (dietary, organic,
bacteria. Will probiotics be supplemented by pre- functional, integrative, etc.) in which “functional foods”
biotics (non-digestible ingredients that promote are a specific sub-group characterized by a functional
the growth of healthy bacteria in the intestine)? ingredient added to regular food and adequately pro-
Or will it be coenzyme Q10, known as CoQ10 (a moted to the final consumer. Functional products have
vitamin-like substance that is said to enhance been mainly launched in the soft drink, confectionery,
stamina)? dairy, bakery, and baby food market. Among these prod-
ucts, dairy products are probably the “key product.” The
(adapted from Martin, 2007, in the yearly growth rate is above 10% for yogurt (Romeo,
New York Times) 2006) and 6% for drinks (Wiggins, 2007).
Given these strong premises of growth and innova-
A growing body of scientific evidence supports the tion, this article aims to analyze the situation in the Ital-
argument that certain foods can improve human health ian marketplace, discussing an original framework for
more than traditional ingredients (Tuley, 1995). Bogue new product development (NPD) in the food industry
and Sorenson (2001) define health-enhancing food as and matching it with a sample of popular new dairyAgBioForum, 12(2), 2009 | 233
products. The article presents a detailed analytical (qual- the company as well as in the market. Accordingly, this
itative) study of the new “health-enhancing” yogurts in research first adopts these four common points in identi-
the Italian market with a focus on multinationals, as well fying the factors of NPD success in the food industry:
as small and medium enterprises (SMEs). We investi-
gate whether and how local SMEs compete with large 1. research,
multinationals by handling the NPD value-creating pro- 2. testing,
cess differently. Data availability is limited to the Italian 3. consumer adoption, and
market (as a result of a national research grant); conse- 4. marketing communication.
quently, the nature of the study is mainly introductory
and descriptive. These four factors are pillars of our quality analysis
The article provides a literature and industry review and are named as “key NPD variables” in the following
on an existing theoretical framework in the NPD litera- text and tables. While these four key variables may form
ture from which we extract the base for our qualitative a first, parsimonious group of factors that explain the
analysis. Subsequently, we present our research hypoth- NPD in the food industry literature (Bozzi et al., 2006;
esis and methodological approach. Then, the article pro- Mark-Herbert, 2003; Rizzo, 2006), other variables are
vides a detailed description of the NPD framework also often discussed by the management literature in
applied in this study. The best- practices cases are pre- terms of strategic factors that might facilitate the launch
sented next. We then interpret and discuss our findings of new products. In particular, a complete managerial
and conclude with the implications of the study and pos- framework for the analysis of the targeted industry
sible future enhancements. should also include an analysis of the average customer,
competitor and supplier analysis, potential entrant and
Literature and Industry Review substitute analysis, as well as micro and macro sur-
roundings analyses (Bagozzi, Rosa, Celly, & Coronel,
New Product Development Process 1998; Kotler, 1999; Porter, 1998). According to these
According to Cooper and Kleinschmidt (1996), product authors, a market analysis approach can undertake the
success in the NPD is most dependent upon a high-qual- average profile of the consumer and competitor analy-
ity new product process, clearly defined as new product sis, with special emphasis on a target segment and sales
strategy; this includes adequate resource allocation trends (Bogue et al., 2005; Gilbert, 2000). Furthermore,
(people and money), senior management commitment analysis of the industry barriers, such as legal and/or
and accountability, as well as properly defined and orga- trade obstacles, is a necessity in the enriched-food
nized cross-functional teams. Building on these prem- industry because there are conflicting rules and stan-
ises, several researches in the food industry better dards for functional products (Mark-Herbert, 2002).
indicate factors associable with the NPD success: (1) Supply-chain analysis is also a necessity for the pro-
high-quality, unique products; (2) consultation of ducer in order to facilitate procurement of the appropri-
experts and cooperation during the product development ate raw materials and ingredients (Folkerts & Koehorst,
process; (3) a source of inspiration able to increase the 1998; Ibeh, Ibrahim, & Panaydes, 2006). In fact, only a
market/consumer knowledge (i.e., suppliers, customers reliable food control procedure can reduce the risk of
and research centres); (4) involvement of a food tech- food scandals in the long run (Jahn, Schramm, & Spiller,
nologist; and (5) technical and marketing skills (Mark- 2005). Finally, in order to meet product reliability and
Herbert, 2003, 2004; Stewart-Knox & Mitchell, 2003; market validity, companies often follow international
Stewart-Knox, Parr, Bunting, & Mitchell, 2003). Once standards and labels, such as: ISO, HACCP, organic
the food mass market is targeted, however, it is possible standards, etc. In these processes, an independent orga-
to scale down to the interaction of only four comprehen- nization manages the control and certification of prod-
sive cornerstones (research, testing, consumer adoption, ucts in order to guarantee the quality and/or benefits of
and branding). This interaction contributes to creating a the products claims (Crespi & Marette, 2001; Hatanaka,
sustainable competitive advantage, which may result in Bain, & Busch, 2005; Unnevehr & Jensen, 1999).
continued growth of sales and profits to meet the finan- A more complete framework of the health-enhanc-
cial objectives. Successful introduction of new “health- ing food industry analysis will thus include four addi-
enhancing” products in the food market is thus deter- tional variables:
mined by selected key activities performed internally in
Boesso, Davcik, & Favotto — “Health-enhancing” Products in the Italian Food Industry: Competing on YogurtAgBioForum, 12(2), 2009 | 234
5. market analysis, significant shift in the food industry and its strategies.
6. industry’s barriers analysis, Companies search for the possibility of offering to
7. supply chain analysis, and receptive people specific benefits that call for higher
8. external production control. prices and more profitable margins (Bogue et al., 2005;
Menrad, 2003). Despite a growing number of defini-
These four variables are included in our industry tions in the scientific literature, companies have entered
analysis framework and are named as “support NPD the market of “health-enhancing” foods, designing prod-
variables” in the following text and tables. ucts that are often only related to consumers’ vague
desire for a “better” life. This equivocal attitude repre-
Products’ Qualitative Analysis sents an easy move toward the so-called “health oppor-
tunity” that represents an attractive, emerging niche for
Research Hypothesis the food industry (Rizzo, 2006). Accordingly, the grow-
When analyzing the supply structure of any “health- ing number of functional yogurts launched in the market
enhancing” food, and in particular probiotic yogurts, may be explained by the different patterns taken by
difficulties emerge because the industry is almost as companies in NPD. In particular, one would expect to
fragmented and difficult to define as is the overall mar- see different types of new products targeting different
ket. Taking into account these difficulties, six main segments of customers/consumers, deploying different
types of actors in the commercial segment are generally types of innovations, exploiting different types of label-
identified in the EU market (Menrad, 2003). ing, and so on. Accordingly, the basic hypothesis which
we aim to test with a qualitative analysis is the follow-
• Multinational food companies with a broad prod- ing: “The large variety of health-enhancing products
uct range recently launched in the Italian marketplace is the
• Pharmaceutical and/or dietary product-produc- result of the different interactions among the variables
ing companies that characterize any new product development (NPD)
• National “category leaders” strategy.”
• Small and medium-sized companies (SMEs) of
the food industry Methodology
• Food retail companies with proprietary brands This article performs a qualitative analysis of the dairy
• Suppliers of “functional ingredients” industry in Italy; coherently with other qualitative stud-
ies, the analysis is developed discussing the features of
Food companies fight on a daily basis for consum- products of competing companies according to a com-
ers’ attention and develop strategies in order to become mon NPD research framework (Kumar, Chandra, & Sto-
relevant to them. Researchers claim that the prevalent erginzer, 2001; Kumar, Massie, & Dumonceaux, 2006).
strategies in the standardized food industry over the last The first research task is thus to classify the different
years have been limited to (Nestle, 2002) product types in order to create homogeneous groups
that then will be matched with the NPD framework in
• providing attractive taste, which favors men’s order to highlight if—and how—the NPD process varies
apparently innate preference for energy-dense across different product categories.
food; A “market pull” business model is often described as
• offering a low cost as a basis for competition and creating consumers’ awareness about new products in
consumption creation, leveraging food process- the functional food industry (Mark-Herbert, 2003). In
ing to create perceived value; this model, the consumer segment labeled as “sufferers”
• developing convenient offering to make it easy to is presented as the most inclined to try a new product
buy and eat larger amounts of food anytime and able to relieve symptoms from the onset of a disease
anywhere; and (obesity, cholesterol, or others). Next, for “at-risk” peo-
• offering a natural production and supply chain in ple, the target looks similar to that of the sufferers,
order to meet the organic standards. except that this group is twice as large as the sufferers
segment. Positive personal experience from any of the
In recent times, the above-discussed concept of above consumer segments also helps spread the news to
functional foods represents a unique opportunity for a the “prevention” segment and its broader market.
Boesso, Davcik, & Favotto — “Health-enhancing” Products in the Italian Food Industry: Competing on YogurtAgBioForum, 12(2), 2009 | 235
Table 1. New product development (NPD) framework.
NPD key variables NPD support variables
1. Research into the benefit and proof of it: 5. Market analysis:
1a. Research challenge 5a. Consumer base
1b. Type of innovation 5b. Potential margin
5c. Packaging
5d. Placement
2. Production and organoleptic testing (taste, color, astringency, 6. Analysis of industry’s barriers (legal barrier)
aroma, etc.)
2a. Way of production (conventional, organic, mixed, etc.)
2b. Fit with product’s nature (taste, color, aroma, etc.)
3. Control for the ease of adoption 7. Supply chain analysis (procurement of raw ingredients)
4. Labeling and communication 8. External production control (independent certification)
Finally, efforts are generally made to target health maga- New Product Development (NPD)
zines and papers to raise general awareness of the prod- Framework
uct and its benefits. Once consumers reach this final
For all the NPD key variables presented in Table 1,
level of awareness, the product takes on a new shape. A
companies have different options in terms of specific
medical product may thus become an ingredient in a
activities to be implemented. In more detail, academic
food product. While the medical aspect plays a major
literature shows how multinational corporations invest-
role in the functional segment, this attribute can be par-
ing large amounts in research (NPD variable 1) are often
tially substituted for by different claims attached to
present in the mass market with new products; however,
other types of “health-enhancing” products, such as
also, SMEs conducting little or any basic research and
dietary, natural, wellness, or organic foods. In these lat-
development are often able to get new ideas and market
ter cases, the main claim is not related to an additional
solutions through cooperation or partnership with exter-
functional ingredient, but to the absence of specific
nal players and partners (Chesbrough, 2003). As a result
components such as fat or sugar or to other “wellness-
of the innovation model moving from disruptive innova-
related” benefits, such as “light tenure” or organic pro-
tion (breakthrough and radical new process or technol-
duction (Rizzo, 2006).
ogy in the production and/or in the product’s features) to
The product’s claim, usually attached to any new
incremental innovation (improvement or change in the
product, provides an excellent proxy for isolating the
production system and/or in a product that already
products’ features among “health-enhancing” foods.
exists), it is possible to identify at least six new innova-
These claims can generally be classified (Rizzo, 2006)
tion categories (Bagozzi et al., 1998; Kotler, 1999).
as minus claims (“low in” or “free from”), plus claims
(“rich” or “high”), natural and organic claims (with the
• New-to-the-world products: New products that
last one strictly related to the certified production), and
create an entirely new market
clinical claims (based on internal testing, available basic
• New product lines: New products that allow com-
research, or independent specific study of the product).
panies to enter an established market for the first
Accordingly, the yogurts analyzed in this study are
time
grouped according to seven large product categories
• Additions to existing product lines: New products
(absence of negatives, presence of benefits, natural well-
that supplement company’s already-existing
ness, organic production, natural functional, clinical
product lines
functional, nutraceuticals/nutricosmetics). Furthermore,
• Improvements and revisions of existing products:
in accordance with our hypothesis, the next section
New products that provide improved perfor-
associates with each product category a possible differ-
mance or greater perceived value and that replace
ent characterization of the NPD process that—it is con-
existing products
tended—might have contributed to the increasing
• Repositioning: Existing products targeting new
variety of “health-enhancing” yogurts.
markets or segments
• Cost reduction: New products or processes that
provide similar performance at lower cost
Boesso, Davcik, & Favotto — “Health-enhancing” Products in the Italian Food Industry: Competing on YogurtAgBioForum, 12(2), 2009 | 236
Table 2. The new product development variables in the food industry.
Absence of Presence of Natural Organic Natural Clinical Nutraceutical/
Product type negatives benefits wellness production functional functional nutricosmetic
Right
Standard Free-from or Rich or high Naturally good 100% organic Enriched Consumed assumption
claim low in … in … and healthy production with … regularly … causes …
1a. Research Good taste Good taste Good taste Good taste, fit Good taste, fit Good taste, fit Fit with brand,
challenge and structure and structure, and structure, with the with brand, with brand, heavy clinical
fit with brand fit with brand production vague proof of clinical proof of test and
and trend standards benefit benefit description of
benefits
1b. Innovation Repositioning Improvement Addition New product New product New to the New to the
category lines lines world product world product
2a. Way of Conventional Conventional Mixed Purely organic Mixed conven- Conventional Pharmaceutical
NPD key variables
production conventional tional and
and organic organic
2b. Fit with High High High Very high Medium: Low: requires Very low: it is a
the requires some change of the different product
product’s changes very nature of
category the product
3. Ease of Easy Easy Easy Medium: Medium: Difficult: need Difficult: need to
adoption higher price higher price to stick to a stick to a
may be a may be a regimen, regimen,
barrier barrier ongoing ongoing
4. Suitable Standard Standard Standard Detailed Detailed Detailed Information
labeling & labeling and labeling and labeling, labeling, labeling, labeling, sheet,
promotions coupons or coupons or advertisement, advertisement, advertisement, advertisement, advertisement,
discount discount and discounts and public and seasonal and public and public
relations discounts relations relations
5a. Consumer Large Medium Medium Medium-low Medium-low Low Very low
base
5b. Potential Low Medium Medium Medium-high Medium-high High Very high
margin
5c. Packaging Same as Same as Similar to Similar to Brand-new Brand-new Brand-new
conventional conventional conventional conventional packaging packaging packaging
NPD support variables
products products products or products or
higher in higher in
quality quality
5d. Placement Mainly Mainly Mainly grocery Grocery Mainly grocery Mainly grocery Grocery chains,
grocery grocery chains and chains, beauty chains and chains and beauty and drug
chains chains and beauty shops and bio shops beauty shops beauty shops shops,
beauty shops pharmacies
6. Legal None None Low Very high In progress In progress In progress
barriers
7. Ingredients Make and buy Make and buy Make and buy Make Make Make Make
8. Certification Private Private None National and Private Possible Probable
standard standard international standard medical medical
standards certification certification
It is contended here that the transition from conven- Next, the literature points out how the final product
tional to health-enhancing yogurts covers the entire needs to be tested for both the fit with the category
typology, and Table 2 shows how the different innova- (NPD variable 2) it contributes to create, establish, sup-
tion categories can be easily associated with the previ- plement, or reposition (i.e., yogurt, juice, milk, etc.), and
ously defined product types. the ease of adoption (NPD variable 3) by the final con-
Boesso, Davcik, & Favotto — “Health-enhancing” Products in the Italian Food Industry: Competing on YogurtAgBioForum, 12(2), 2009 | 237
sumer (Rizzo, 2006). Any new product is expected to a niche strategy or, vice versa, toward a mass-market
meet the general expectations of the food-category it strategy, and Table 2 summarizes how the decision is
targets (plain yogurt, for example) and to be easy to con- often made based on the consistency of the consumer
sume despite its new functional benefit (i.e., when regu- base and on the potential profitability associated with
lar and repeated consumption enhances the immune the new products.
system). Many observers cite failure rates in the food Furthermore, in the food industry there are (possi-
NPD as high as 90 to 95%; thus addressing changing ble) industry barriers (NPD support variable 6); at pres-
tastes and needs with new products is essential in main- ent, there are numerous rules and standards for creating
taining customer loyalty. Consumer testing, such as sur- and distributing functional products. Therefore, it is
veys and prototypes, is thus critical in such a turbulent possible that firms cannot cover all legal requirements
market, especially if it brings in consumers’ views on for every national market because of the wide array of
products’ new features (Suwannaporn & Speece, 2003). ingredients that can be subject to different standards,
Accordingly, Table 2 summarizes which of the different legal procedures, and practices. On this controversial
product types represents the major change in consum- point, Mark-Herbert (2002) argues that specific product
ers’ habits. health arguments in marketing of functional foods in
Finally, in the food industry, labeling and promotion Sweden are related to food products and not to food
(NPD variable 4) are mandatory activities for launching additives. On the contrary, in the US market, food addi-
new products in the mass market. Based on innovative tives are less legally restricted and therefore are easier to
benefits and on the targeted segments, companies will market. Accordingly, managers can design the product’s
make decisions on suitable marketing strategies, as well features based not only on the targeted consumers’ pro-
as on the right approaches to educate consumers about file, but also according to the characteristics of the legal
the new product (Kotler, 1999). Especially for the func- requirements. Table 2 shows how a higher legal com-
tional segment, product information and health claims plexity is generally associated with the most advanced
should be presented in a number of iterations: on the functional claims.
product’s label, in the media, and at doctors’ offices. The influence of the supply chain (NPD support
Many consumers are also developing the belief that variable 7) on the future product is based on the
foods can be used to reduce their use of drugs, and 78% dilemma of whether to buy the raw materials (ingredi-
of consumers sharing this belief always or usually read ents) in the open market or to engage in direct produc-
labels when shopping (compared with 22% of other tion (buy vs. make). In the food industry, firms offering
shoppers). However, considering that healthy eating and unique and specialized products gain distinct competi-
deriving adequate nutrition and health protection from tive advantages, and often the internal production of all
natural sources are also strong trends, it may be success- ingredients drives this advantage (Ibeh et al., 2006). In
ful to market the functional yogurts as just one of the fact, the external material supply may result in unstable
ways to take better care of oneself (Gilbert, 2000). offers, quality, and price. The strength of the concept
Accordingly, Table 2 points out different marketing lies in the fact that direct production ensures a stable
techniques as associated with the different products’ supply of raw materials and makes it possible to better
claims. control the cost of the final product itself (Folkerts &
Also for the NPD support variables summarized in Koehorst, 1998). Both options seem to be always avail-
Table 1, the literature points out plenty of different able in the yogurt industry, and Table 2 hypothesizes
options that managers may consider undertaking in strict “make” choices only for the most advanced func-
order to gain a sustainable competitive advantage. Mar- tional claims.
ket analysis (NPD support variable 5) refers to targeted Finally, any large industry is also the object of atten-
segments, sales trends, price, packaging and placement, tion by consultants and other external players who
and providing any company with an insight into the develop relevant knowledge and facilitate the innovative
trends of the monitored markets, the sales results, and aptitude of companies willing to buy their services. For
the possible niches of new customers for the newly example, certification schemes are often used to ensure
introduced product (Bogue et al., 2005; Gilbert, 2000). marketing claims for unobservable quality attributes. A
This information will provide additional help in defin- certification organization is an independent third player
ing suitable marketing to be used, determining the distri- (NPD support variable 8) that deals with the control and
butional channels, as well as assessing the price levels certification of products. Its task is to determine the ori-
(Kotler, 1999). This analysis may lead managers toward gin and method of production of the target product and
Boesso, Davcik, & Favotto — “Health-enhancing” Products in the Italian Food Industry: Competing on YogurtAgBioForum, 12(2), 2009 | 238
to guarantee quality and/or benefits. The recent global- experiments in proprietary branding in the Italian
ization of agrifood production and distribution intro- organic food industry. Accordingly, Esselunga Magro
duced private retail standards as well as international has been inserted in the research sample. It is a low-fat
food standards—such as ISO (International Standard yogurt that clearly builds on the emerging trend of the
Organization) and HACCP (Hazard Analysis Critical low-fat dairy products; as such, it represents an example
Control Point)—and shifted this task to third-party certi- of cost leadership in the yogurt industry. The production
fiers (TCP), such as BSC Oko Garanteie, ISC, or QAI of it is 100% outsourced to one of the company’s long-
(Crespi & Marette, 2001; Hatanaka et al., 2005; term suppliers.
Unnevehr & Jensen, 1999). Accordingly, internal qual-
ity controls and independent certifications are likely to Valsoia
be adopted any time a new product claim is proposed in Valsoia is an SME started in 1990, with the aim of pro-
the market, as presented in Table 2. ducing meat-free functional foods. Its mission incorpo-
The above-proposed NPD model provided a com- rates the idea of improving the quality of life through
prehensive set of basic elements to be considered in ana- nourishment. All products leverage the high nutritional
lyzing new yogurts proposed by different competitors. properties of soya, and over the years the product lines
The eight research variables are proposed here as an have grown along all the classical daily needs: milk,
accurate synthesis of the NPD marketing and food liter- cookies, yogurt, snacks, pasta, pizza, hamburgers,
ature analyzed (Bagozzi et al., 1998; Jago, 2000; Kotler, cheese, vegetable meals, ice cream, and dietary dress-
1999; Mark-Herbert, 2003; Stewart-Knox & Mitchell, ings. Its operating profitability is often above 10% of
2003); the variables’ typology (key NPD vs. support total sales, and the 2006 turnover closed at 50€ million.
NPD variables) is an original theoretical contribution of Valsoya Yosoi is a soya yogurt proposed for controlling
this article (as such, questionable and arguable) which and enhancing an organism’s natural balance and vital-
was generated in order to accurately match the NPD lit- ity of the intestine. The advertising is based on the phar-
erature with the yogurt industry. macological properties of soya: hypocholesterolemic
effects, protection against osteoporosis, and protection
Best Practices against some types of cancer. As such, it is inserted as
In order to investigate the basic theoretical hypothesis an example of the improvement of the classical yogurts.
presented above (Research Hypothesis section) and bet-
ter detailed in Table 2, for each of the seven product cat- Yomo
egories, one success story in the Italian marketplace is Yomo is one of the most popular Italian brands in the
briefly described and compared with the others. yogurt industry. Started in 1947, it became the national
category leader with a 32% market share in 1993 and is
Esselunga one of the most successful SME businesses in the food
Esselunga is a major retail grocery chain in Italy with an industry. In 2003, due to heavy competition with the
8.5-10% market share and approximately 130 supermar- multinational brands and to a sort of manager myopia,
kets and hypermarkets. It is a family business still con- the market share was reduced to 14% and the total turn-
trolled by the founder. With a 4,9€ billion total turnover over fell to around 240€ million. The group was
and 180€ million of net revenue (2006), it is among the acquired in 2006 by another national competitor (Grana-
most profitable and certainly one of the most reputable rolo), which is the national leader in fresh milk. The
companies in its industry. Esselunga competes with the new group made its name in high-quality milk, and
international grocery chains (Auchan, Carrefour, etc.) nowadays it keeps competing in the yogurt arena by
and local actors (Coop and others), providing an upscale launching new and highly differentiated products. Yomo
and sophisticated environment and its management is Frutta e Verdura (Fruits and Vegetables) is one of the
particularly attentive in analyzing the consumers’ needs. latest issues that leverage the natural idea of wellness by
On its shelves, successful products are offered both by mixing the tastes of fruits and popular vegetables (such
multinational brands and by the Esselunga proprietary as tomato, carrot, pumpkin, spinach, and fennel). It is
brand. Decisions about proprietary branding are gener- advertised as naturally healthy, light, and enriched with
ally taken in isolating the “blockbuster” products and all the benefits of the specific vegetables. By adding the
the emerging volume trends. For example, the Esse- vegetable ingredients, it enlarges the existing product
lunga Bio label, started in 1999, was among the first line.
Boesso, Davcik, & Favotto — “Health-enhancing” Products in the Italian Food Industry: Competing on YogurtAgBioForum, 12(2), 2009 | 239
Table 3. Italian best practitioners and main competitors in the yogurt segment of the dairy industry.
Absence of Presence of Natural Organic Natural Clinical Nutraceutical/
Product type negatives benefits wellness production functional functional nutricosmetic
Yomo Fattoria Latterie
Esselunga Valsoia Frutta e Scaldasole merano Nestlé Danone
Case analyzed Magro Yosoi verdura Biovitalis ActiFControl LC1 Essensis
Other - Centrale Torino - Bifisoy soia - Auchan - Bergamin - Auchan - Danone - Danone
competitors defilè - Nestlé svel- naturé fattoria bio Equilibrio activia danacol
- Centrale tesse - Berga-min - Danone bio - Carefur - Danone - Emmi benecol
Vicenza - Parmalat bontà viva - Trentinalatte regulactis actimel - Emmi evolus
slimmy phisiCal - Despar bio - Parmalat - Fattoria - Latterie
- Danone - Yomo fibrya Prodring - Yomo bio Omega3 scaldasole Merano
Vitasnella - Coop vialactis - Latteria - Auchan bio - Techno food lactobac actifage
- Fage siloutte - Amalattea Merano bella - Granarolo Omega3 - Granarolo - Maya pro-
- FinIPER magro probiotico vita prima natura - Trentinalatte vivivivo active
- Granarolo - Natura più probiotico - Parmalat - Parmala jeu-
magro nanoyo - Valsoia actionis nesse
- Mandriot - Nestlé fruttolo soiattiva - Parmalat - Yomo equicol
magro bere KIR
- Torre in pietra - Stuffer vivita
magro - Yomo ABC
- Trentinalatte
magro
- Yomo leggero
Fattoria Scaldasole lipids—tested at the university level—which are useful
Fattoria Scaldasole was started in 1986 and was among to reduce and curb the desire for food (or appetite) for a
the first brands exploring the growing business of few hours after the product’s consumption. It is pre-
organic production. It actually opened the organic mar- sented in the sample as an improvement and reposition-
ket in Italy, highlighting this new niche, and became the ing of the existing product line.
national leader in the 1990s. In 1998 the company and
its popular brand were sold by the two founders to Plas- Nestlé
mon, a company belonging to the Heinz US food group, Nestlé developed its first milk for infants in 1867 in
and it was next passed to the French company, Andros, Switzerland. Nowadays, it is the world’s biggest food
in 2005. Fattoria Scaldasole’s founder is still celebrated and beverage company. Total turnover in 2006 was 98
as an ecological guru. Its organic yogurt, Biovitalis, is billion Swiss francs, with more than 265,000 employ-
the organic leader in the Italian market and the probiotic ees, factories all around the world, and an operating
version has been recently added to the existing product profit around 11% of total sales. Dairy products account
line. This product has an independent certification for for approximately 25% of its turnover. Nestlé LC1 is an
organic and biodynamic production. It is included in the innovative yogurt developed by the R&D internal
sample as an example of a new product line that allowed department. With its probiotic cultures, it provides inde-
the company to enter a new market (the functional one). pendently certified, healthy benefits for the consumer.
Launched in 1998, it was the first international probiotic
Latterie Merano yogurt on the Italian market, second only to the Italian
Latterie Merano is a social cooperative started in 1954 Parmalt KIR, which was very poorly advertised in its
by the mountain farmers operating around Merano in functional properties. As such, it is presented in this
northern Italy, close to the Austrian border. The total research as a product “new to the world.”
turnover is around 40€ million, of which 90% is gener-
ated by yogurt. In 2005 it launched a joint-venture with Danone
another local researcher who is well known for his well- The French corporation Danone is the current leader in
ness studies and related business: Dr. Henri Chenot. A the Italian yogurt market, with a market share of almost
new line of yogurt was thus launched under the Henri 30%. Established in 1919, it has developed several busi-
Chenot brand; Bionessere ActifControl is rich in natural ness units that are today reduced to dairy, mineral water,
Boesso, Davcik, & Favotto — “Health-enhancing” Products in the Italian Food Industry: Competing on YogurtAgBioForum, 12(2), 2009 | 240
and cookies. In each unit, Danone pursues personal visit). All prices are gross (including VAT at 4%) and
wellness and healthy nutrition. Danone Essensin was promotions were not considered, if offered. Legal and
launched in 2007 as the first “cosmetic yogurt,” which procurement analysis are based on industry literature
feeds the skin from the inside. Developed by the internal reports available in the AIDA (Accessible Information
R&D product department of the corporation, this “new on Development Activities) database and local newspa-
to the world” product is a major innovation that should per database.
reinforce the 13€ million turnover and 13% operating
profit of 2006. Discussion
Overall, the above-discussed companies with the The dairy industry in Italy presents a large variety of
seven selected products plus their other yogurt lines products, which is a tangible sign of the maturity level
control more than 60% of the Italian yogurt market- reached by this market. In addition to the seven cases
place, a market that has shown in the last years a stable described in Table 4, this study acknowledges another
two-digit growth rate (more than 10% yearly). The 49 competitors grouped in the same categories (Table
remaining 40% of the marketplace is controlled by 3), and the actual number of products available for the
customer is three-times larger, according to AC Nielsen
• other multinational brands such as the Italian Par- (Infoscan; 2005).
malat (5.3%), the German Muller (15.3%), the Despite this huge offer, it seems possible to organize
Swiss Emmi, etc.; the leading companies’ strategies according to specific
• local SMEs such as Bergamin (6%), Mandriot, variables. As predicted with the analysis of the literature
Stuffer, Trentinlatte, etc.; summarized in Tables 1 and 2, the NPD key variables
• some municipal milk consortiums (centrali del (research, testing, consumer control, and branding)
latte); and matched with the support variables represent a meaning-
• other food retail proprietary brands. ful set of attributes for segmenting the companies’
offers.
A selection of these main competitors is also listed in First, it was easy to isolate best practices for each of
Table 3. the standard claims proposed to consumers in order to
The seven selected success histories provide a differentiate the products’ features. Next, it was always
detailed framework for the analysis of the NPD model possible to compare these best practices according to the
discussed in Tables 1 and 2, and a comparative analysis selected New Product Development variables. In detail,
is carried out in Table 4. Information about the products’ a popular grocery chain such as Esselunga proposes—
claims, research accomplishments, production accom- under its proprietary brand—an appreciated low-fat
plishments, and certifications are available on the com- yogurt, which is the cost leader in the sample analyzed
panies’ web sites or directly on the packaging of the (2.8€/kg). Conversely, a yogurt national leader, such as
products. The ease of adoption accomplishments are Yomo, builds on its longtime history of being a natural
measured; the consumer ranking is available at yogurt maker (preservative- and colorant-free) by
www.ciao.it, one of the largest open-source consumers’ launching a new product that targets meeting the cus-
blogs. On the blog, each of the selected products is tomers’ need for natural products with simple R&D but
listed in the discussion forum with a minimum of four high originality and medium price (4€). Furthermore,
(Esselunga) and a maximum of 15 (Essensis) comments multinational research-oriented corporations explore
(as of September 2007). Comments are always orga- new niches of the market with tested functional foods
nized according to a suggested standard, which includes (Nestlé) and “new-to-the-world” cosmetic yogurt
a ranking based on taste, tenure, price, packaging, bene- (Danone), charging top prices (6.5€ and 8€, respec-
fits, and other product features. This ranking is within a tively).
range from zero to five stars. Promotion accomplish- However, the more profitable niches of the market
ments are based on the data from a company website as apparently are not impossible for local SMEs to enter;
well as the financial press analysis published near the Valsoia differentiates its offer, transforming a vegetarian
product’s release date. Market analysis is based on the and cholesterol-free yogurt into a wellness product
information gathered by researchers in 10 hypermarkets enjoyable for every diet (5.8€). Fattoria Scaldasole pro-
in Northern Italy during the month of September 2007 tects and allocates its product under the larger umbrella
(the average of 10 price observations for each product as of certified organic production and, accordingly, it mar-
collected in 10 different hypermarkets during a one-shot
Boesso, Davcik, & Favotto — “Health-enhancing” Products in the Italian Food Industry: Competing on YogurtAgBioForum, 12(2), 2009 | 241
Table 4. Italian best practitioners analysis in the yogurt segment of the dairy industry.
Absence of Presence of Natural Organic Natural Clinical Nutraceutical/
Product type negatives benefits wellness production functional functional nutricosmetic
Rich in inulin & The wellness Enriched with Reinforces
fibers, naturally of fruits & From natural lipids, the intestines Feeds the
cholesterol- vegetables’ organic it curbs the & the immune skin from
Claim Only 0.1% fat free properties agriculture appetite system inside
Yomo Fattoria Latterie
Case Esselunga Valsoia Frutta e Scaldasole merano Nestlè Danone
analyzed Magro Yosoi verdura Biovitalis ActiFControl LC1 Essensis
National
Retail category
Type of actor company SME leader SME SME Multinational Multinational
1. Research Repositioning Improvement of Adds popular Product and A unique mix Drinkable Drinkable
accomplishment of a popular the classical vegetables to packaging of probiotics, healthy yogurt cosmetic
product with a yogurt for milk- the fruit reflect new fructose and with a milk yogurt with
low production intolerant and/or organic and Fabuless®, it LC1® culture Pronutris®
cost healthy people ecological matches of over 1 natural
approaches health and billion nutrients, it
fitness ferments matches health
NPD key variables
& beauty
2. Production Free of Low in fat Product Low in fat Low lactosium Low in fat Low in fat
accomplishment synthetic (1.8%), high in similar to a (0.7%), high (0.1%), (0.9%), high in (1.5%), traces
flavors, but fiber (1.3%) and shake (min. in calcium vegetable oils fiber (0.03%) of vitamins
ferments are sodium (0.5%) 4% veg., 20% (0.01%) (1%) and sodium (0.02%) and
the basic ones fruits & veg.) (0.05%), with antioxidants
colorants and (0.04%) with
preservatives thickeners
3. Adoption 4 (web rating) 5 3 5 4½ 4 3½
accomplishment
4. Promotion Extra point for Company Product Company Little Product Product launch
accomplishment the fidelity general launch general promotion, co- launch campaign
card campaigns campaign campaigns branding campaign
5. Market It builds on the It is a product for Respecting First mover It exploits the First probiotic First
analysis brand name a niche, but it the brand in the joint milk in Italy, it nutricosmetic
for marketing a targets the tradition and organic knowledge of builds on in a fridge, it
popular general formats it; industry, it two companies research and crosses the
product with a wellness; opens a new leverages on physically new bridge with a
low-cost plastic pots; natural high brand located in the packaging; different
NPD support variables
strategy; avg. price: segment; awareness; same city; plastic bottles; industry;
classical plastic 5.8 €/kg plastic pots; glass pots; plastic bottles; avg. price: plastic bottles;
pots; avg. price: avg. price: avg. price: avg. price: 6.5 €/kg avg. price:
2.8 €/kg 4 €/kg 6 €/kg 7 €/kg 8 €/kg
6. Legal None None None Enforced EU Call for future Call for future Call for future
analysis rules EU regulation EU regulation EU regulation
7. Procurement Outsourced— Internal—make Internal— Internal— Alliance— Internal— Internal—
analysis buy make make make and buy make make
8. Certification The entire It guarantees None Externally Tested with the The Nestlé Internal clinical
supply chain is GMO-free certified by University of Research test on 72
“certified” by products, BioagriCért Ulster center is a women
the company certified by CNR site
itself CSQA
kets its yogurt with a larger mark-up (6€). Finally, Latte- (7€) proposed in joint venture with one of the most pop-
ria Merano takes advantage of a clear example of open ular and media-exposed health and wellness leaders.
innovation by entering the wellness arena with a price
Boesso, Davcik, & Favotto — “Health-enhancing” Products in the Italian Food Industry: Competing on YogurtAgBioForum, 12(2), 2009 | 242
While heavy research investments are possible only trademarks, contracts, and other forms of immaterial
for the multinationals, innovation is a clear driver of property rights are used to protect the return on invest-
NPD for six out of the seven cases analyzed (excluding ment for the high-margin products and to prolong the
only Esselunga). Specifically, disruptive innovation value-added innovation life cycle. Competition, how-
(new components and ingredients for new-to-the-world ever, leverages on the porosity of the boundary between
products) seems accessible only to the research center of organizations and competitive environment, allowing
Nestlé and Danone, while all other SMEs successfully ideas, technical, and commercial solutions to move eas-
mix a so-called “incremental innovation” (improve- ily around entry barriers and to implement both incre-
ment, addition, and new product lines) with additional mental and disruptive innovations that target in different
elements of the NPD framework, such as certification ways the increasing need for enhanced “wellness.”
(Valsoia and Fattoria Scaldasole), co-branding (Latteria Based on these premises, pricing strategies become
Merano), or brand awareness enhanced by a specific fairly aggressive and the “functional” Danone Essensis
product launch campaign (Yomo). Only three compa- yogurt is marketed up to 2.85 times more than the “well-
nies claim proprietary rights on their innovations, two ness” cost leader Esselunga Magro (+285%). This price
from the so-called closed model (Nestlé and Danone) bracket increases to 520% if we consider the cost leader
and one belonging to the open model (Latterie Merano). in the plain yogurt sample (on average 1.78€/kg) versus
Large and costly marketing campaigns specifically the cholesterol-lowering probiotic marketed by the
designed for the launch of the new product were under- Swiss Emmi under the Benecol brand at 9.36€/kg. The
taken by both the two multinationals (Nestlé and qualitative nature of this study does not allow any
Danone) as well as the national category leader (Yomo). detailed discussion of these data; however, it certainly
Organic production faces enforced national and opens interesting lines of research. While the consum-
international rules (Fattoria Scaldasole), while calls for ers’ demand is changing, companies react by following
future regulations are becoming popular in the func- different innovation patterns that need additional analy-
tional food arena. Probably in order to anticipate these sis in their determinants. Furthermore, an analysis of the
future norms, all companies—except the national cate- cost structure of each strategy would offer a better pic-
gory leader (for whom innovation is certainly simpler, ture of the actual mark-up of new products. Finally, the
the addition of vegetables to the regular yogurt)— overall profitability of the strategy would be better
clearly promote internal and external certifications of investigated by analyzing volumes of sale as well.
their products. Despite these limitations, the shift toward health-
All the analyzed yogurts seem well designed to meet enhancing products is successfully accomplished by all
consumers’ habits—taste, tenure, described benefits, the analyzed competitors via the addition of functional,
and suggested consumption behavior are appreciated natural, organic ingredients as well as through partner-
according to consumers’ comments (always above three ing policies or cooperation with other industry and dis-
stars). Bottom line, the good research and production tributional channels. Consumers’ comments are
accomplishments of each company probably reflect the reasonably positive, despite the disruptive innovations
attention paid to this highly competitive and mature seg- and high prices, and the future of functional food might
ment of the dairy market. foresee more joint ventures between drug companies,
cosmetic companies, and nutritional/food companies.
Conclusion This evolution will be interesting to watch as long as
Selling a health-enhancing yogurt through a food retail people see nutrition as a powerful and meaningful tool
channel assumes large volume and a willingness to com- for reinforcing health, beauty, and wellness. Drawing
pete for exposure on the shelves. Consumers compare lessons from best practitioners may influence the strate-
prices of new products with those of existing products gic options for other companies in industries with
and certainly match their expectations with the prom- mature, yet competitive, environments. Options may
ised benefits. This article shows how in the Italian dairy include taking steps to differentiate the product lines and
industry research in the area of the so-called functional to emphasize process innovation and the benefits of new
foods pushes new technologies (trademarks, patents) ingredients. Who is to say, for example, that Italian food
and new business models (alliances, organic production, companies will not be able to change the color of milk,
natural ingredients, certified supply chains, etc.) as tools yogurt, or cheese by adding natural antioxidants
to differentiate the advertised products’ features. Ideally, extracted from the radicchio’s (popular Italian red
salad) production residuals? This and other process
Boesso, Davcik, & Favotto — “Health-enhancing” Products in the Italian Food Industry: Competing on YogurtAgBioForum, 12(2), 2009 | 243
innovations are already available for multinationals and industry. Industrial Management and Data Systems, 106(3),
SMEs interested in adding accessible ingredients to 285-306.
mature products. Mark-Herbert, C. (2002). Functional food for added value. Devel-
oping and marketing a new product category. Doctoral disser-
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