Food companies have been driving innovation since the inception of the industry. Facing daunting failure rates—where only 15% of over 3,000 new consumer packaged goods (CPG) products succeed in the market, as reported by Nielsen’s U.S. Breakthrough Innovation Report—innovation has become increasingly critical. The report warns, “If we fail to adapt to emerging consumer preferences, technological advancements, and the business models of the 21st century, we risk stagnation in growth, erosion of margins, loss of world-class talent, and a 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 demand for unique, interesting, and healthy options, while also encroaching on the market share of established CPG giants. According to the report “Is Big Food in Trouble?” by management consultancy A.T. Kearney and research firm The Hartman Group, the top 25 food manufacturers’ share of U.S. food and beverage retail sales dropped from 66% in 2012 to 63% in 2015.

The early 20th century marked a significant turning point for food innovation, notably in 1913 when refrigerators, once solely for commercial use, became available for home use, transforming food manufacturing and retail forever. As demand grew for shelf-stable, refrigerated, and frozen products, the nature of food innovation changed dramatically. Joel Warady, Chief Sales and Marketing Officer for Enjoy Life Foods, noted, “Twenty or thirty years ago, innovation focused on adding flavors or extending shelf life. Today, it’s about creating better products that contribute to an individual’s overall well-being.”

Warady emphasized the diverse expertise needed for innovation today, which includes not only food scientists but also nutritionists and medical professionals collaborating to shape food innovation for the next several decades. The conveniences of modern life and busy schedules have normalized fast food and pre-packaged meals, but with a looming health crisis, there is a growing interest in healthy eating and clean living. Many large packaged goods companies were caught off guard, experiencing stagnating sales and losing market share to emerging health-conscious and eco-friendly brands.

Reflecting on the past two decades, Warady remarked, “Companies are increasingly focusing on higher-quality and healthier ingredients. When Enjoy Life was founded 15 years ago, we prioritized natural ingredients without artificial colors, which was quite niche.” He pointed out that mainstream manufacturers like Kraft, Unilever, and Mondelez are now moving towards healthier options, as smaller brands have blazed the trail in the realm of natural ingredients, prompting a shift in focus towards what comes next.

George Young, a CPG innovation expert and founding partner of consulting firm Kalypso, highlighted examples of recent innovations such as Greek yogurt, dairy alternatives like nut milks, plant-based proteins, and free-from foods. However, he noted a lack of breakthrough innovations among major publicly traded CPG companies, stating, “They tend to play it safe with line extensions and often prefer to acquire smaller companies generating $10 to $15 million in revenue.”

These larger companies aim to diversify their portfolios and introduce more nutritious options, which drives their innovation efforts. “They’re incorporating natural ingredients, such as stevia and açai, to develop products that offer associated health benefits,” Young explained. Warady mentioned that Enjoy Life Foods utilizes innovation to enhance the health profiles of its products. Recently, the company incorporated shelf-stable probiotics and algae protein into some offerings, stating, “We wanted the probiotics to support immune health, and algae protein is not only valuable for its protein content but is also the most sustainable protein available on Earth.”

Unlike past practices, many large manufacturers now have dedicated innovation centers and teams of food scientists. Young noted, “We’re beginning to witness a shift towards digital innovation,” which occurs through two main avenues: empirical insights and data analytics, and modeling and simulation. “CPG companies possess vast amounts of data regarding their products, regulatory information, and sensory performance. They are now adopting machine learning to develop algorithms that identify relationships between sensory responses and various factors.”

Companies employ modeling and simulation to create digital prototypes of their products, allowing them to test molecular structures of ingredients and predict potential responses before investing in new formulations. Young contrasted this with traditional food scientists who create prototypes requiring sensory panels for evaluation. “This area is just emerging, enabling companies to optimize their formulations more quickly through algorithms, which will accelerate the introduction of new ingredients,” he added.

Enjoy Life collaborates with external innovation groups to gather the necessary expertise. Warady stated, “We work closely with nutritionists and medical professionals who understand consumer health challenges, and we incorporate our innovation teams to help develop effective products.” Additionally, the company engages directly with consumers to understand their daily challenges, which informs future product development.

As consumers demand greater transparency, healthier ingredients, and cleaner labels, the path for further innovation is clear. Christina Papale, vice president of strategy and director of innovation for branding agency CBX, noted that what was once considered niche is now a significant part of the food industry, with consumers willing to pay a premium for such products. “The key is to proactively identify cultural trends and capitalize on them early to build and expand brands,” she advised.

Warady observed that current food trends extend beyond healthier ingredients to the concept of food as medicine. Enjoy Life is at the forefront of innovation, exploring various ingredients, including plant-based proteins, fermented and sprouted elements, and alternative seeds like sacha inchi as substitutes for nuts, along with spices like saffron known for their health benefits.

Other companies are also tapping into this trend, seeking inspiration from the expanding nutraceutical market. “Food companies are looking for ways to enhance their products with nutraceutical benefits, while nutraceutical firms are leveraging their expertise in natural ingredients to create food products, leading to interesting competition and overlap,” Young explained.

Regardless of the category, manufacturers should ask fundamental questions before investing time and resources into new product innovation: Is there a market for this product? Will consumers accept it? Warady highlighted some innovative ideas that may challenge consumer readiness. “When I see products like camel milk at trade shows, I think consumers may not be ready for that,” he said, reflecting on how perceptions can evolve over time.

Enjoy Life is mindful of consumers’ gradual acceptance patterns. For instance, the company recently added algae protein to its brownie mix, a functional ingredient that could raise eyebrows if overly emphasized on packaging. Warady concluded, “We must be cautious about innovating too quickly, recognizing that innovation is a progression. Just because we can implement something today doesn’t mean we should if consumers aren’t ready. We strive to gauge consumer readiness through direct conversations, and while we may not always get it right, we often do.”

Additionally, as consumers become more aware of nutritional components, questions like “What is citrate in calcium?” will likely arise, indicating a shift towards informed choices regarding dietary supplements and food products. Thus, the landscape of food innovation continues to evolve, focusing on health, transparency, and consumer engagement.