Food and beverage companies have been in an innovation slump for decades. The investment has been low and the development of new products is lower than normal.
When discussing this issue, Jonny Forsyth senior director for food and beverage at Mintel said: “Declining Innovation has Happened across All CPG Industries, But Food and Drink Has Been One of The Worst Offenders.”
The industry is starting to see a change in behavior.
Richard Peake is the managing director at Merchant Gourmet. He says, “There’s definitely signs of recovery.”
Mintel data shows that 38% of consumers regularly try new foods and beverages. Gen Z customers are almost twice as likely to try new products.
Forsyth, Mintel’s Forsyth: “Consumers are demanding exciting innovations.”
Some sectors have a faster turnaround than others.
The snacking industry is growing at a faster rate than the rest of the food and beverage sector. (Image: Getty/Jelena Danilovic)
What is driving innovation in the food and beverages industry?
Risk-averse leaders of the market and start-ups who take risks are clearly divided in terms of innovation.
Peake, from Merchant Gourmet says that challenger brands are the ones leading this charge. Disruptors appear everywhere, and they are innovating.
While the bigger players in industry struggle to introduce new ideas on to the market, smaller companies are also battling to do so. Launching a truly new product is too risky, due to the high costs, low success rate and other risks.
This risk is greater in mature markets such as Europe and North America where the competition level is higher.
Peake explains that the danger of being an iconic, big brand within a predictable market is to stop innovating. You stop making big bets on trends, and you see your pipeline as an extension of a concept that already exists. It’s not an innovation. This is renovation at best.
While some industries are slower in embracing innovation, others have stepped up and done their part.
Nestle, a Swiss multinational company, has announced that its Singapore R&D Department will focus on affordable nutrition.
In a similar way, the giant snack company Mondelez International created SnackFutures Venture – an independent hub for innovation and venture capital – to “disrupt’ the snacking market.
While food and beverage innovation has decreased, certain segments, like snacking or functional drinks, are bucking the trend.
Even this has its differences. Europeans who produce functional drinks fall behind other countries due to more stringent legislation. While the US, China, and Japan continue to forge ahead without any restrictions.
Innovation in the food and beverage industry is the future
With the introduction of AI, the rate of innovation is predicted to increase in the food and beverage industry. Forsyth, a Mintel analyst, predicts that AI will lead to accelerated innovation and a rapid increase in the speed of product launches. It’s also helping manufacturers such as NotCo create new categories of food and beverages. In just five months, the Chilean company launched NotMilk Chocolate – a plant-based chocolate.
Forsyth says that the rapid advancements in artificial intelligence give brands of food and drinks a tool for creating more disruptive innovations, and at a fractional cost and time.
The industry continues to face challenges in terms of innovation, and some are more difficult to overcome.
Forsyth, of Mintel, says that food and beverage manufacturers must deal with complicated supply chains and low margins. They also need to maintain temperature when they deliver fresh foods and drinks. The barriers to entry for food and drink manufacturers are much higher than they are for other categories such as household products, vitamins and supplements, or beauty and personal-care.
It remains to be determined whether the innovation trend continues, but experts in industry are encouraging manufacturers to adopt this new approach.
Jack A Bobo is the director of the Food Systems Institute, University of Nottingham. He says that encouraging a culture of risk-taking and creativity within businesses, along with supportive policies, will help to sustain innovation.
