Research centers flourish with commercial applications

Prepared Foods, April, 1989 by Daniel Best

Research centers flourish with commercial applications

University research centers are taking wing, and the timing couldn't be better. Global competition, mergers, acquisitions, and restructuring are hindering the ability of many corporations to invest in research. But these may yet turn out to be blessings in disguise--if they help corporations to find more effective ways to conduct research.

What will likely emerge from the turmoil is a leaner, more effective way of managing R&D resources, and one that makes full use of the R&D assets of academia.

Lewis Springer, retired senior vice president of operations for Campbell Soup Co., points to accounting principles to explain what is happening to the food industry.

Springer says that companies are focusing upon their "Return on Assets," or ROA, an indicator of profitability described by this equation:

(Sales/Assets) x Profit Margin

In the past, Springer explains, the focus of companies has been either to increase sales through new product introductions and marketing promotions, or to focus on ingredient and labor cost-cutting to widen profit margins. Slotting allowances, sky-rocketing marketing costs, and high rates of new product failures have dampened the enthusiasm of companies to go the new product route. Profit margins can be widened, but often at the expense of quality--and often consumer loyalty.

The alternative is to reduce a company's asset base to increase ROA.

From R&D's point of view, that means to produce more with less. It may well be that corporate research campuses will become a luxury of the past as companies focus on tightly managed applied research programs.

What research centers can contribute

This, the third annual Prepared Foods "Industry & Academia" survey confirmed that food industry research programs at universities are flourishing. The survey identified a total of 25 food-specific research centers located at 19 universities in the U.S. and Canada. And there are more.

The collective R&D budget of the 15 institutions that revealed their annual R&D allocations was $32 million. Considering that university capital and labor assets are, to a large extent, underwritten by the state or federal government, universities offer industry an enormous capital asset base to tap.

The industry should note two trends:

1. The oft-stated need of food companies to have access to timely and proprietary research is getting serious consideration from universities vying for industry research grants.

2. Universities and research centers are seeking niche markets and correspondingly developing their own research specialties.

At a time when R&D is being subjected to so many economic shocks, the food industry should take note.