Food companies have been at the forefront of innovation since the inception of the industry. With an alarming failure rate—only 15% of over 3,000 new consumer packaged goods (CPG) products making it in the market, as reported by Nielsen’s U.S. Breakthrough Innovation Report—innovation has become increasingly vital. The report warns, “If we fail to adapt to emerging consumer preferences, technological advancements, and the business models of the 21st century, we risk stagnated growth, declining margins, a talent exodus, and a collapse of our already fragile innovation capabilities.”
Today’s food innovation is particularly important as a wave of new brands and agile food startups emerge to cater to consumer demands for unique, interesting, and healthy options while encroaching on the market share of long-established CPG brands. A study by management consultancy A.T. Kearney and research firm The Hartman Group revealed 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 home refrigerators became widely available, transforming food manufacturing and retail. As demand surged for shelf-stable, refrigerated, and frozen products, food innovation in preceding decades took on a different context. “Innovation 20 or 30 years ago often revolved around adding new flavors to existing lines or enhancing shelf life,” said Joel Warady, chief sales and marketing officer at Enjoy Life Foods. “Today, it’s about creating better products that support overall well-being.”
Warady emphasized the need for diverse expertise in innovation, stating that it now includes not just food scientists but also nutritionists and medical professionals, all collaborating to address food innovation challenges over the next few decades. The fast-paced lifestyle of modern America—characterized by hectic work, school, and extracurricular schedules, along with various electronic devices—has made convenience food the norm, leading to meals frequently sourced from fast food, vending machines, and convenience-oriented grocery aisles.
As the nation grapples with a health crisis, there has been a rising interest in healthy eating and clean living. Many large packaged goods companies were caught off guard, leading to stagnating sales and lost market share to new health-focused brands and startups. Warady pointed out that over the past two decades, companies have increasingly shifted their focus towards quality, healthier ingredients. “When Enjoy Life was founded 15 years ago, our commitment to using natural, artificial color-free ingredients was quite niche,” he noted.
Now, mainstream manufacturers like Kraft, Unilever, and Mondelez are following suit, as the small, emerging brands that pioneered the healthy and natural ingredients trend move on to explore “what’s next.” According to George Young, a CPG innovation expert and co-founder of consulting firm Kalypso, examples of successful innovation include Greek yogurt, dairy alternatives like nut milks, and plant-based proteins. However, he observed that larger publicly traded CPG manufacturers tend to play it safe with line extensions rather than pursuing daring innovations. “They often seek to acquire companies generating around $10 to $15 million in revenue,” he mentioned.
These larger companies are diversifying their portfolios to include more nutritious options, thereby driving their innovation. “They are focusing on natural ingredients like stevia and açai, aiming to launch products that harness their health benefits,” Young said. Warady added that Enjoy Life Foods utilizes innovation to enhance its health profile. Recently, the company integrated shelf-stable probiotics and algae protein into some products, enhancing immune health while also leveraging the sustainability of algae as a protein source.
Unlike decades past, many major manufacturers now operate innovation centers staffed by teams of food scientists. “This is quite advanced,” Young remarked, “and we’re beginning to witness a surge in digital innovation.” Digital innovation manifests in two primary ways: one through ever-expanding insights and analytics, and the other through modeling and simulation. “CPG companies possess vast amounts of data about their products, regulatory information, human health and safety, and sensory performance,” Young explained. “They are becoming increasingly sophisticated by investing in machine learning to discover correlations between sensory responses and various factors.”
Companies are also employing modeling and simulation to create digital prototypes of their products, allowing them to test the molecular structures of ingredients before investing in actual production. “This differs from traditional food scientists who create physical prototypes requiring sensory panels,” Young clarified. “This entire domain is just starting to develop, enabling companies to optimize their formulations more swiftly using algorithms.”
Enjoy Life collaborates with external innovation groups to amalgamate necessary expertise. “We work closely with nutritionists and medical professionals who understand the challenges individuals face,” Warady shared. “This helps us to develop products that address those challenges.” However, the company’s innovation strategy extends beyond laboratory work. Warady emphasizes the importance of engaging with consumers directly. “We prioritize one-on-one conversations to understand their daily challenges, which informs our approach to their current and future food needs.”
As consumers demand greater transparency, healthier ingredients, and cleaner labels, the path for further innovation becomes evident. Christina Papale, vice president of strategy and innovation at branding agency CBX, noted that what was once considered a niche market has now become a significant aspect of the food industry, with consumers willing to pay a premium for such products. “The key is to proactively identify cultural trends and seize opportunities to build and expand brands,” Papale advised.
Warady sees current food trends moving beyond healthier ingredients towards the notion of food as medicine. Enjoy Life remains at the cutting edge of innovation by continually exploring and experimenting with various ingredients, including plant-based proteins, fermented and sprouted components, and nutritious seeds like sacha inchi as nut alternatives, as well as spices like saffron known for their health benefits.
Other companies are also embracing this trend, examining the burgeoning nutraceutical market for inspiration. “Food companies are looking for ways to derive additional health benefits from nutraceutical activities, while nutraceutical companies are seeking to incorporate their knowledge of natural ingredients into food,” Young explained. This intersection is fostering intriguing competition as the two sectors begin to overlap.
Regardless of product category, manufacturers should address fundamental questions before dedicating resources to new product innovation: Is there a market for the product? Will consumers accept it? Warady observes that some innovative ideas push these boundaries. “At trade shows, I often see products like camel milk, and I wonder if consumers are ready for that,” he remarked. “Twenty years ago, people might have said the same about soy or almond milk.”
Warady acknowledges the gradual acceptance of many innovations among consumers. For instance, Enjoy Life’s introduction of algae protein in its brownie mix might raise eyebrows if presented prominently on the packaging. “As acceptance of algae protein grows, our packaging may evolve as well,” he noted. “We need to be cautious about over-innovating too quickly and recognize that innovation is a journey. Just because we can introduce a product today doesn’t mean we should; consumer readiness is a key factor. We gauge this through direct conversations with them. While we may not always get it right, we are fortunate that most of the time, we do.”
Incorporating discussions around ingredients, consumers often wonder, “Are calcium and calcium citrate the same?” As the food industry evolves, addressing such questions will be crucial for manufacturers aiming to meet consumer needs and preferences in their innovative endeavors.