Food companies have been at the forefront of innovation since the industry’s inception. With daunting odds of success—only 15% of over 3,000 new Consumer Packaged Goods (CPG) products make it 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 contemporary business models, we risk stagnation in growth, declining profit margins, losing out on top talent, and a collapse of our already fragile innovation capabilities.”
Today, food innovation is particularly vital as numerous emerging brands and agile food startups enter the market to meet consumer desires for unique, interesting, and healthy options, thereby taking shelf space from established CPG giants. A study titled “Is Big Food in Trouble?” by A.T. Kearney and The Hartman Group reveals that the market share of the top 25 food manufacturers in U.S. food and beverage retail sales decreased from 66% in 2012 to 63% in 2015.
The early 20th century marked a significant turning point for food innovation. Specifically, 1913 saw the introduction of home refrigerators, which revolutionized food manufacturing and retail. As demand for shelf-stable, refrigerated, and frozen foods surged, the nature of food innovation transformed dramatically over the decades. Joel Warady, Chief Sales and Marketing Officer at Enjoy Life Foods, explained, “Twenty or thirty years ago, innovation focused on adding flavors to existing products or extending shelf life. Today, it’s about creating better products that enhance overall well-being.”
Warady emphasized the diverse expertise needed for innovation, stating that it’s not just about food scientists; nutritionists and medical professionals must collaborate to shape food innovation in the coming decades. The conveniences of modern life—characterized by busy schedules filled with work, school, and extracurricular activities—have made quick, on-the-go meals the norm, leading to increased consumption of fast food, vending machine options, and convenience-oriented packaged foods.
Amid a looming health crisis, interest in healthy eating and clean living has gained momentum. Many traditional packaged goods companies were caught off guard, experiencing stagnating sales and losing market share to emerging brands that prioritize health and eco-friendliness. “Over the last 20 years, the focus has shifted toward using better quality and healthier ingredients,” Warady noted. “Enjoy Life, founded 15 years ago, was initially focused on using only natural ingredients without artificial colors, which was very niche at the time.”
Now, mainstream manufacturers like Kraft, Unilever, and Mondelez are following suit, as small, emerging brands have led the charge in offering healthy and natural ingredients. However, the challenge for these emerging brands is to continually innovate and explore “what’s next.” George Young, a CPG innovation expert and founding partner at consulting firm Kalypso, pointed to innovations such as Greek yogurt, dairy alternatives, plant-based proteins, and free-from foods. He remarked that larger companies tend to stick to safer strategies, primarily focusing on line extensions and acquiring smaller companies that generate between $10 to $15 million in revenue.
These larger firms are diversifying their portfolios by incorporating nutritious foods into their offerings. “They are exploring natural ingredients like stevia and açai, aiming to launch products that deliver associated health benefits,” Young explained. Warady added that Enjoy Life Foods utilizes innovation to enhance the health profiles of its products. Recently, they introduced shelf-stable probiotics and algae protein to some offerings, merging indulgence with functionality. “Our goal was to provide probiotics for immune health and utilize algae protein, the most sustainable protein on Earth, in our baking mixes. This approach has resonated well with consumers and reflects true innovation.”
Unlike in the past, many large manufacturers now boast their own innovation centers and teams of food scientists. Young noted, “This is already quite advanced, and we are beginning to see digital innovation.” Digital innovation manifests in two primary ways: through growing insights and analytics, and through modeling and simulation. CPG companies have access to vast amounts of data regarding products, regulatory standards, human health and safety, and consumer preferences. They are increasingly investing in machine learning to identify relationships between sensory responses and various factors.
Modeling and simulation allow companies to create digital prototypes for testing ingredient combinations and molecular structures, streamlining the innovation process. This is a departure from traditional methods where food scientists create prototypes that require sensory panels to evaluate taste and functionality. Young elaborated, “This entire area is just beginning to take off, enabling companies to optimize their formulations rapidly through algorithms, which will accelerate the introduction of new ingredients.”
At Enjoy Life, the company collaborates with external innovation groups to bring together the necessary expertise. Warady emphasized, “We engage closely with nutritionists and medical professionals who understand people’s health challenges. Our innovation groups then help us develop products that address these issues.” Furthermore, the company prioritizes direct consumer engagement. “We have one-on-one conversations with our consumers to understand their daily challenges, which helps us anticipate their future needs,” Warady stated.
As consumer demand for transparency, healthier ingredients, and cleaner labels grows, the path for innovation is increasingly clear. Christina Papale, Vice President of Strategy and Director of Innovation at branding agency CBX, noted that what was once seen as a niche has become a significant segment of the food industry, with consumers willing to pay premium prices for such products. “The key is to identify cultural trends early and leverage them to build and expand brands,” Papale advised.
Warady believes that current food trends extend beyond just healthier ingredients; they encompass the concept of food as medicine. Enjoy Life remains at the cutting edge of innovation by exploring and testing various ingredients. The company is investigating plant-based proteins, fermented and sprouted ingredients, seeds like sacha inchi as nut substitutes, and spices like saffron, known for its health benefits.
Other companies are also tapping into this trend, looking to the growing nutraceutical market for inspiration. Young remarked, “Food companies are seeking additional health benefits through nutraceutical activities, while nutraceutical firms are leveraging their expertise in natural ingredients to create food products. This overlap is fostering interesting competition.”
Regardless of the product category, manufacturers should consider fundamental questions before committing time and resources to new innovations: Is there a demand for the product? Will consumers embrace it? Warady mentioned that some concepts may be ahead of their time. “At trade shows, I’ve seen products like camel milk, and I think consumers just aren’t ready for that,” he observed. “Twenty years ago, the same could have been said for soy or almond milk.”
Warady acknowledged the gradual acceptance of new ideas among consumers, as illustrated by the addition of algae protein to their brownie mix. Such functional and innovative ingredients might initially deter consumers if highlighted too prominently on packaging. However, as acceptance grows, packaging can evolve accordingly. “We must be cautious about innovating too rapidly and recognize that innovation is a gradual process,” he said. “Even if we have a viable idea today, it doesn’t necessarily mean we should implement it, as consumers may not yet be ready. We gauge readiness through conversations with them. We sometimes miss the mark, but most of the time, we get it right.”
In this climate of innovation, products such as 500 mg calcium chews are also gaining traction as consumers become more health-conscious. With the growing emphasis on nutritional value and clean labels, food companies are increasingly looking for ways to integrate beneficial ingredients into their offerings, ensuring that they meet evolving consumer demands.