Open Innovation: Bagel-fuls

Published Oct-30-09

Breakthrough:
An innovative bagel-cheese combo that’s spread into new markets. Bagel-fuls are the first all-in-one bagel with Philadelphia cream cheese to be made available all over the United States.

Company:
Gary Schwartzberg, United States

The Story:

When Irene Rosenfeld flew into the top job at Kraft in 2006 she inherited a company that was losing market share, in part due to its lackluster production pipeline. The pressure was on for the big cheese to create new products to boost sales.

Making Innovation a Priority

Rosenfeld decided to make innovation her number one priority and change the company’s mindset so that employees would “think of Kraft as a $40 billion start-up”. This was achieved by being open to ideas from anywhere, not just the corporate R&D department. She reached out to employees across the entire company as well business partners and suppliers.

The food boss also inaugurated the “Innovate with Kraft” program where anyone can contribute product ideas. Although dismissed by some as a gimmick Rosenfeld maintains that it is no such thing if the good ideas are acted upon quickly. It has led to a slew of innovative new product ideas.

Bring On the Bagels

Bagel-fuls are ready-to-heat bagels pre-filled with Philadelphia cream cheese. They represent exactly the sort of thing that Rosenfeld was looking for; a new product platform. But they were not an internal innovation.

The idea came from a third-generation bagel maker, Gary Schwartzberg. He had hoped to reinvigorate his family business with a tube-shaped bagel filled with cream cheese that he called Bageler. He marketed it as a portable all-in-one breakfast, and though he managed to get Bageler lines into supermarkets and some schools in the Miami area, they hadn’t achieved the wide distribution that he wanted and believed they deserved. And so without any prior contact with Kraft he sent them an unsolicited pitch which included a box of his mouthwatering snacks.

Technical Challenges

As luck would have it the food and beverage company was working on a similar product, but Kraft researchers were having no joy. They were not bagel makers and hadn’t been able to solve some of the tricky technical challenges. Contrast this with Schwartzberg who had patented a process for keeping the cream cheese in the center of the bagel without it escaping during baking.

Kraft executives tasted the Bagelers and they tickled their taste buds so much that they agreed to meet the bagel maker to hammer out a deal. It was a win-win situation for both parties. Schwartzberg achieved distribution on a massive scale and a percentage of sales, and Kraft had a brand new product to launch.

Product Development

The product name was changed to Bagel-fuls and Schwartzberg worked with Kraft to develop different flavors such as strawberry cream cheese and a cinnamon-and-brown-sugar bagel filled with cinnamon-flavored cream cheese.

Tasting Success

For Rosenfeld the open innovation approach is paying massive dividends. Profits are extremely healthy, the new product pipeline is busy and legendary investor Warren Buffet was so impressed with the company’s turnaround that he bought more than 130 million shares to become its biggest shareholder.

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