Since the inception of the food industry, companies have been continuously innovating. Despite the daunting reality that only 15% of over 3,000 new consumer packaged goods (CPG) products succeed in the marketplace, according to Nielsen’s U.S. Breakthrough Innovation Report, the significance of innovation has grown exponentially. The report warns, “If we fail to adapt to emerging consumer preferences, technological advancements, and 21st-century business models, we will witness stagnated growth, eroding profit margins, a loss in the competition for top talent, and the collapse of our already fragile innovation capabilities.”
Today, food innovation is particularly vital as a new wave of emerging brands and agile food startups emerges to meet consumer desires for interesting, unique, and healthy options, threatening the market share of established CPG giants. A study titled “Is Big Food in Trouble?” by management consultancy A.T. Kearney and research firm The Hartman Group indicates that the market share of the top 25 food manufacturers in U.S. food and beverage retail sales dropped from 66% in 2012 to 63% in 2015.
The early 20th century marked a pivotal moment for food innovation, particularly in 1913, when refrigerators transitioned from commercial use to home appliances, revolutionizing food manufacturing and retailing. In response to growing demand for shelf-stable and refrigerated or frozen goods, the nature of food innovation drastically changed over the decades. Joel Warady, chief sales and marketing officer for Enjoy Life Foods, remarked, “Innovation 20 or 30 years ago focused on adding flavors to line extensions or processing techniques to increase shelf life. Today, it’s about creating better products that enhance individual well-being.”
Warady emphasized the need for diverse expertise in innovation, stating, “It’s not just food scientists; we also need nutritionists and medical professionals. Collaboration among these experts is essential for food innovation over the next few decades.” The hectic pace of modern American life, filled with work and play, has normalized the consumption of food on the go, often sourced from fast food outlets, vending machines, and convenience-focused packaged goods in grocery stores.
As the nation confronts a health crisis, interest in healthy eating and clean living has surged, catching many large packaged goods companies off guard as their sales stagnate and market shares dwindle in favor of emerging health-conscious and environmentally friendly brands. Warady noted, “Over the past 20 years, companies have increasingly focused on better quality and healthier ingredients. Enjoy Life, which is 15 years old, initially set a standard for natural ingredients without artificial colors, which was quite niche at the time.”
Now, mainstream manufacturers like Kraft, Unilever, and Mondelez are following suit, adopting healthier and natural ingredients pioneered by smaller brands. George Young, a CPG innovation expert and founding partner of consulting firm Kalypso, highlighted examples of innovative products such as Greek yogurt, dairy alternatives like nut milks, and plant-based proteins. However, he pointed out that most large publicly traded CPG companies tend to play it safe, preferring line extensions and acquiring emerging companies that are nearing $10 million to $15 million in revenue.
These larger firms are diversifying their portfolios to include more nutritious options, driving their innovation efforts. They are exploring natural ingredients like stevia and açai to launch products that deliver associated health benefits. Warady discussed how Enjoy Life Foods leverages innovation to enhance the health profiles of its products, recently incorporating shelf-stable probiotics and algae protein into its offerings. “We aimed for the probiotics to boost immune health, while algae protein is not only significant for protein needs but also represents the most sustainable protein source available,” he said. “We’ve integrated these into a line of baking mixes, providing indulgent desserts with added functionality, receiving positive consumer feedback—a true innovation.”
Unlike previous decades, many large manufacturers now operate dedicated innovation centers with teams of food scientists. Young noted, “This is already quite advanced; we are beginning to see digital innovation as well.” This digital transformation occurs in two main avenues: empirical insights and analytics, and modeling and simulation. Young elaborated, “CPG companies possess vast data stores regarding their products, regulatory standards, and human health and safety information. They are now employing sophisticated machine learning techniques to create algorithms that uncover relationships between sensory responses and various factors.”
Companies also utilize modeling and simulation to generate digital prototypes of their products, allowing them to test molecular structures of certain ingredients before physical production. Young highlighted that this differs from traditional food science, where prototypes are developed in labs and then tested for sensory performance. “This new approach enables companies to optimize their formulations much more swiftly, resulting in a quicker introduction of new ingredients.”
Enjoy Life collaborates with external innovation groups to assemble the necessary expertise for product development. Warady stated, “We engage closely with nutritionists and medical professionals who understand the challenges consumers face from a health perspective. Our innovation teams then help develop products that tackle these challenges.” The company also prioritizes direct consumer interaction, gathering insights on their daily challenges to inform future product development.
As consumers increasingly demand transparency, healthier ingredients, and cleaner labels, the path to further innovation is clear. Christina Papale, vice president of strategy and director of innovation at branding agency CBX, mentioned that what was once a niche has now become a significant segment of the food industry, with consumers willing to pay premium prices for such products. “The key is to proactively identify cultural trends and seize opportunities early to grow and expand brands,” Papale advised.
Warady sees the current food trends evolving beyond healthier ingredients, moving towards the concept of food as medicine. Enjoy Life stays at the cutting edge of innovation by exploring and testing various ingredients, including plant-based proteins, fermented and sprouted ingredients, and seeds such as sacha inchi as alternatives to nuts, along with spices like saffron that offer potential health benefits. Other companies are also exploring this trend, looking into the growing nutraceutical market for inspiration.
“Food companies are seeking additional health benefits from nutraceutical activities,” Young observed. “Conversely, nutraceutical companies are leveraging their knowledge of natural ingredients to create food products, leading to an interesting overlap in competition.” Regardless of the category, manufacturers should consider fundamental questions before investing significant effort in new product innovation: Is there a market for the product? Will consumers embrace it? Warady noted that some new concepts may be ahead of their time.
“I attend new product trade shows and see items like camel milk, and I doubt consumers are ready to embrace that,” he reflected. “Twenty years ago, similar sentiments were expressed about soy or almond milk.” Enjoy Life remains mindful of consumer acceptance patterns, incorporating algae protein into their brownie mix—a functional innovation that could deter some consumers if overly emphasized on packaging. “We must be cautious about over-innovating too quickly and recognize that innovation is a gradual progression,” he advised. “Just because we can introduce something today doesn’t mean we should, as consumers may not be ready. We gauge readiness through direct conversations with them. While we occasionally miss the mark, we typically get it right more often than not.”
In this evolving landscape, the inclusion of ingredients like calcium citrate malate and elemental calcium is gaining attention, particularly as consumers increasingly prioritize their health and nutrition. Manufacturers are exploring how to incorporate these elements into their products to enhance their health benefits, marking another aspect of the ongoing innovation in the food industry.