At a time when consumers demand value, branded retail food companies no longer can afford a dysfunctional approach to R&D. Gone are the days of  emphasizing development over consumer research.

Before I go too far, I’ll admit part of me wants to examine the increasing friction between branded packaged food processors and retailers. Just a week after the Grocery Manufacturers Association and Food Marketing Institute talked about collaborative conferences, officials at SuperValu and the Great Atlantic & Pacific Tea Co. publically blasted manufacturers for high pricing. Pricing also led Brussels’ Delhaize SA group to pull Unilever products off Belgian store shelves. Although Unilever has since relented, the Wall Street Journal says Delhaize also threw in this dandy: there are many Unilever products the retailer simply does not want to stock because they are unpopular. Ouch.

Retail news keeps coming. Value-driven consumers are flocking to private label in droves and Wal-Mart is prepared to re-launch its own Great Value brand. Meanwhile, CPG giants Kraft Foods, H.J. Heinz and others are admitting that they simply have too many products to make, market and distribute (including several of Kraft’s South Beach Living frozen entrees). Thus, these companies are moving quickly to identify and eliminate underperforming businesses.

So — whether it’s to fend off private label or simply spend your money more wisely — why not restructure R&D and invest in consumer research that literally pays dividends? New York City-based consultant McKinsey & Company recommended as much in a recent quarterly article (“Upgrading R&D in a Downturn”). Rather than slash R&D budgets, McKinsey advocates companies use “today’s difficult economic environment as an opportunity to upgrade the R&D organization’s focus, practices and management.”

That’s no easy task admits new product researcher Barry Curewitz (Whole-Brain Brand Expansion, Hulmeville, Pa.). In a November 2008 column for Advertising Age, Curewitz recalls a survey of 128 senior marketers from leading companies. Those officials agreed that the element “most critical” to success is “developing differentiated products.” Then again, 88 percent of those marketers described that area as their “biggest hurdle.”

Why not take a new approach to these obstacles? One example involves Schwan’s Consumer Brands North America, the Bloomington, Minn., parent to Freschetta, Red Baron, Tony’s and Wolfgang Puck frozen pizzas; Mrs. Smith’s and Edwards frozen cakes and pies; and Asian Sensations frozen entrees and appetizers.

Schwan just named Travis Bautz vice president in charge of a newly formed Product Innovation team. This new group is responsible for innovation platform ideas that are 18 to 24 months away from launch.