Consumer Packaged Goods Companies Almost a Decade Behind in R&D and Product Development Practices; PRTM Benchmarking Identifies Trends in New Product Development.

WALTHAM, Mass. -- New research released by leading management consulting firm PRTM shows that the majority of Consumer Packaged Goods (CPG) companies are not getting the most out of their Research and Development (R&D) investments. Compared to product development capabilities in other industries, CPG companies are behind in the high-performance R&D practices that lead to greater profitability and growth.

"Our research shows that product development capability is a largely untapped opportunity for competitive advantage in consumer products," said Todd Bargman, director at PRTM. "The research indicated, however, that best-in-class CPG companies are starting to adapt the product development practices that contribute to profitable growth."

The study, PRTM's Consumer Products Innovation and Product Development Benchmarking Study, included 40 leading businesses at Fortune 100 organizations and smaller companies across North America, Europe, and Asia.

PRTM used its Product Development Maturity Model, a framework for evaluating a company's operational level in product development, to determine the state of product development capabilities across the CPG industry. PRTM has found the maturity model to be a strong predictor of companies' development efficiency, productivity and bottom line profitability from new products. (See Figure 1, http://www.prtm.com/assets/images/press_releases/2004.07.19_1.gif).

Benchmarking participants demonstrated a wide gap in new product profitability, as measured by the average gross margin per new product launched (see Figure 2, http://www.prtm.com//assets/images/press_releases/2004.07.19_2.gif). The results show that, on average, the leading companies outperform the average dollar profit per product by over 3.5 times. Best-in-class companies also launch more than three times the volume of new products than average performers.

The study results also demonstrate a significant difference in the abilities of companies to quickly complete the development of new products. Based on PRTM's analysis of over 100 recently completed development projects, the best performers can drive an initial concept for a product variant or line extension into a new product launch in less than half the time of average companies. For more complex developments, the best performers' products reach the market in one-third the time of average companies'. (See Figure 3, http://www.prtm.com//assets/images/press_releases/2004.07.19_3.gif).

"The results in no way imply that CPG companies have an inherent need to increase R&D spending itself," said Bargman. "Rather, these companies need to focus on getting more out of the investment they put into new product development. While consumer preferences and brand equity will always drive the success of new products in this industry, product development capability can be treated as an important resource to be managed alongside marketing and advertising and promotion spend to deliver maximum value and profit."

The survey results also highlight powerful trends in the industry including:

--An ever-accelerating rate of change of new product features and benefits - This rate of change is driving most companies to re-evaluate the front end of their process to ensure a steady flow of new ideas that meet customers' needs and preferences.

--Increasing industry pressure to deliver new products - PRTM benchmarking data indicates that the vast majority of CPG companies plan to shift to a first-to-market strategy, from 50% in 2003 to 75% by 2005.

--The need for a global presence to drive growth--Expanding into new categories and new geographies to maintain growth in crowded markets has led to a dramatic increase in different formulas, packaging, and artwork. This has had a negative effect on supply chain performance and development resource capacity. Leading companies are addressing this challenge through initiatives to reduce global packaging and formulation complexity.

--Growth rate expectations - PRTM's research has shown that targets of 7%+ annual growth are typical in the industry for the next three years. With spending for advertising and promotions expected to remain fairly constant, companies will be challenged to meet the pressures for top-line growth without successfully refreshing their current product lines.

PRTM's Consumer Products Innovation and Product Development Benchmarking Study included extensive quantitative and qualitative analysis of detailed data at the divisional level, at companies within major CPG segments including household care, personal care, and food and beverages.

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If you are unable to access Figures 1, 2 and 3 as referenced in this press release please contact Michele Duff at 781-434-1334 or [e-mail].

About PRTM

PRTM (www.prtm.com) works closely with leading companies worldwide to achieve breakthrough business results--fast. For over 25 years, we've delivered measurable value to our clients, earning one of the highest levels of repeat business in the management consulting industry. PRTM is also a recognized thought leader and innovator. Our proven frameworks and methodologies have become the industry standard, driving excellence in the areas of strategy, product development, customer service, information technology, and operations. PRTM has 14 offices in the U.S., Europe, and Asia, over 400 consultants worldwide.