Food companies have been at the forefront of innovation since the inception of the industry. Facing daunting challenges, where only 15% of over 3,000 new consumer packaged goods (CPG) products succeed in the market, innovation has become increasingly critical, as highlighted by Nielsen’s U.S. Breakthrough Innovation Report. The report emphasizes, “If we fail to adapt to emerging consumer preferences, technological advancements, and 21st-century business models, we risk stagnating growth, diminishing profit margins, losing top talent, and witnessing the collapse of our already fragile innovation capabilities.”
Today, food innovation is more vital than ever, especially with a growing number of emerging brands and agile food startups entering the market to meet consumer demands for interesting, unique, and healthy options, thereby capturing shelf space from established CPG giants. A study by management consultancy A.T. Kearney and research firm The Hartman Group reveals that the share of U.S. food and beverage retail sales held by the top 25 food manufacturers fell from 66% in 2012 to 63% in 2015.
The early 20th century marked a significant turning point for food innovation, particularly in 1913 when refrigerators became available for home use, revolutionizing food manufacturing and retailing. Increased demand for shelf-stable, refrigerated, and frozen foods led to a radically different landscape of food innovation compared to the past. “Innovation 20 or 30 years ago revolved around adding flavors to product lines or extending shelf life,” stated Joel Warady, chief sales and marketing officer for Enjoy Life Foods. “Today, innovation encompasses creating better products that enhance overall well-being.”
Warady believes that a diverse range of expertise is necessary for food innovation, including not just food scientists, but also nutritionists and medical professionals. As modern lifestyles become busier, with work, school, and technology dominating daily life, convenience foods from fast food outlets and packaged goods have become the norm. However, as the nation faces a health crisis, interest in healthy eating and clean living has surged. Many established packaged goods companies were unprepared for this shift, resulting in stagnating sales and market share losses to emerging health-conscious brands and startups.
“Over the last two decades, companies have increasingly focused on higher-quality and healthier ingredients,” Warady noted. “Enjoy Life has always emphasized natural ingredients with no artificial colors. This was once a niche market.” Now, major manufacturers like Kraft, Unilever, and Mondelez are following suit, with smaller brands leading the way in healthy and natural ingredients.
George Young, a CPG innovation expert, highlighted some examples of successful innovations, such as Greek yogurt, dairy alternatives like nut milks, and plant-based proteins, but expressed difficulty in finding groundbreaking innovations among large publicly traded CPG companies. “They tend to play it safe with line extensions, often acquiring companies nearing $10 million to $15 million in revenue,” he explained. These larger firms are increasingly diversifying their portfolios to include more nutritious foods, driving their innovation efforts.
Enjoy Life Foods is leveraging innovation to enhance its products’ health profiles. Recently, the company incorporated shelf-stable probiotics and algae protein into its offerings, aiming to promote immune health and sustainability. “We’ve integrated these elements into our baking mixes, maintaining indulgence while adding functionality. The consumer response has been positive, which we view as true innovation,” Warady said.
Unlike previous decades, many large manufacturers now boast their own innovation centers and teams of food scientists. Young noted, “What we’re beginning to witness now is digital innovation.” This innovation manifests in two primary ways: empirical insights and analytics, and modeling and simulation. CPG companies are utilizing vast stores of data to develop sophisticated algorithms that identify relationships between sensory responses and various factors.
Companies are also employing modeling and simulation techniques to create digital prototypes of their products, allowing them to test molecular structures before moving to physical production. This marks a departure from traditional methods where food scientists create prototypes in labs that require sensory panels for evaluation.
Warady emphasized the importance of collaboration with external innovation groups to ensure a comprehensive approach. “We engage with nutritionists and medical professionals to address consumer challenges, and we also communicate directly with consumers to understand their needs and expectations,” he stated.
As consumer demand for transparency, healthier ingredients, and cleaner labels continues to rise, the path forward for innovation is becoming clearer. Christina Papale, vice president of strategy and director of innovation at branding agency CBX, noted that what was once considered niche is now a significant segment of the food industry, with consumers willing to pay premium prices for such products.
Warady observes that food trends are evolving beyond healthier ingredients to encompass the idea of food as medicine. Enjoy Life is committed to staying at the forefront of innovation by exploring various ingredients, including plant-based proteins, fermented and sprouted components, and nutraceuticals. “We are actively investigating ingredients that offer health benefits, such as calcium citrate 200 mg tablets, and other natural elements that enhance our product offerings,” he stated.
As the industry continues to evolve, manufacturers must ask fundamental questions before investing heavily in product innovation: Is there a market for the product? Will consumers accept it? Warady acknowledges the challenges of introducing new concepts, citing examples like camel milk, which may not yet resonate with consumers.
Enjoy Life remains mindful of the gradual acceptance of innovative ingredients. For instance, while algae protein has been added to its brownie mix, the company is cautious about overtly promoting it on packaging until consumer acceptance grows. “We must be careful not to rush innovation and recognize that it is a gradual process. We strive to gauge consumer readiness through ongoing conversations, and while we may misjudge at times, we often get it right,” Warady concluded.