Food companies have been engaged in innovation since the inception of the industry. With a daunting failure rate—where only 15% of over 3,000 new consumer packaged goods (CPG) products achieve market success, 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 21st-century business models, we risk stunted growth, declining margins, losing out on top talent, and the collapse of our already fragile innovation capabilities.”
Today, food innovation is particularly important due to the rise of new brands and agile startups that cater to consumer demands for interesting, unique, and healthy options while also vying for shelf space against established CPG giants. According to the A.T. Kearney and Hartman Group study titled “Is Big Food in Trouble?”, the market share of the top 25 food manufacturers in U.S. food and beverage retail sales 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 home refrigerators became available to the public, revolutionizing food manufacturing and retailing. As demand surged for shelf-stable, refrigerated, and frozen foods, food innovation in previous decades was markedly different. “Innovation 20 or 30 years ago revolved around adding flavors to line extensions or processing foods for longer shelf life,” said Joel Warady, Chief Sales and Marketing Officer for Enjoy Life Foods. “Today, innovation extends far beyond that; it’s about creating better products that enhance individual well-being.”
Warady emphasizes that the composition of innovation teams has evolved; today, they include not just food scientists, but also nutritionists and medical professionals. “These experts must collaborate to address food innovation challenges over the next few decades,” he stated.
The modern American lifestyle, characterized by busy schedules filled with work, school, and extracurricular activities, has normalized the consumption of on-the-go meals from fast food outlets, vending machines, convenience stores, and aisles of pre-packaged foods in grocery stores. However, as the nation faces a health crisis, interest in healthy eating and clean living has surged. Many major packaged goods companies were caught off guard by stagnant sales and a loss of market share to emerging health-conscious and eco-friendly brands.
“Over the last 20 years, companies have increasingly focused on higher-quality and healthier ingredients,” Warady noted. “Enjoy Life, founded 15 years ago, was committed to using only natural ingredients with no artificial colors, which was quite niche at the time.” Today, mainstream brands like Kraft, Unilever, and Mondelez are following suit, moving towards healthier, natural ingredients, while emerging brands are exploring the next frontier.
George Young, a CPG innovation expert and founding partner of consulting firm Kalypso, highlighted several examples of successful innovations, including Greek yogurt, dairy alternatives like nut milks, plant-based proteins, and free-from foods. However, he observed that most large publicly traded CPG manufacturers tend to play it safe with incremental innovations rather than bold breakthroughs. “They prefer acquiring smaller companies that are nearing $10 to $15 million in revenue,” he explained.
These larger firms aim to diversify their portfolios by adding more nutritious foods, driving their innovation efforts. “They are exploring natural ingredients like stevia and açai, aiming to introduce products that incorporate these and deliver associated health benefits,” Young added.
Warady mentioned that Enjoy Life Foods leverages innovation to enhance the health profiles of its products. Recently, the company introduced shelf-stable probiotics and algae protein into its offerings. “We wanted the probiotics to support immune health, and algae protein is not only vital for protein intake but is also the most sustainable protein source available,” he explained. “We integrated these into a line of baking mixes, allowing us to provide indulgent desserts while also adding functionality. The response from consumers has been overwhelmingly positive, which we consider true innovation.”
Unlike the practices of the past, many large manufacturers now operate their own innovation centers staffed with teams of food scientists. “This is already quite advanced,” Young said, “and we are beginning to see the emergence of digital innovation.”
Digital innovation occurs in two primary forms: empirical insights and analytics, and modeling and simulation. “CPG companies possess vast amounts of data related to their products, including regulatory, health, safety, and sensory performance information,” Young noted. “They are now employing machine learning to develop algorithms that identify relationships between sensory responses and various factors.”
Companies can utilize modeling and simulation to create digital prototypes of their products, allowing them to test molecular structures of ingredients to predict potential responses before investing in physical production. “This marks a departure from traditional food science, where prototypes are created in labs and subsequently tested,” Young explained. “This emerging area will enable companies to optimize formulas more rapidly using algorithms, leading to an acceleration of new ingredient trends.”
Enjoy Life collaborates with external innovation groups, as Warady believes this approach brings together the necessary expertise. “We work closely with nutritionists and medical professionals who understand the health challenges faced by consumers and then engage our innovation teams to develop solutions,” he said.
However, the company’s innovation efforts extend beyond scientific collaboration. “We engage with consumers on an individual level,” Warady emphasized. “Understanding their daily challenges helps us grasp not only their current needs but also what they will seek in the future.”
As consumer demand for transparency, healthier ingredients, and cleaner labels continues to rise, the path forward for innovation becomes clearer. Christina Papale, Vice President of Strategy and Director of Innovation for branding agency CBX, noted that what was once regarded as niche is now a significant component of the food industry, with consumers willing to pay premium prices for such products. “The key is to proactively identify cultural trends and capitalize on them early to build and expand brands,” Papale advised.
Warady sees current food trends evolving beyond healthier ingredients to embrace the concept of food as medicine. Enjoy Life remains at the forefront of innovation by exploring, experimenting with, and testing various ingredients. The company is investigating plant-based proteins, fermented and sprouted components, seed alternatives like sacha inchi, and spices like saffron, which is recognized for its health benefits.
Other companies are also tapping into this trend, looking to the growing nutraceutical market for inspiration. “Food companies are seeking ways to derive additional health benefits through nutraceutical activities,” Young mentioned. “Conversely, nutraceutical firms are leveraging their expertise in natural ingredients to create food products. This crossover is generating interesting competition as the lines begin to blur.”
Regardless of the category, manufacturers should ask fundamental questions before investing significantly in new product innovation: Is there a market for this product? Will consumers accept it? Warady has observed some new ideas pushing these boundaries. “When I attend new product trade shows and see something like camel milk, I think consumers may not be ready for that yet,” he said. “Twenty years ago, the same was likely said about soy or almond milk.”
Enjoy Life is mindful of the gradual acceptance rates among consumers. For instance, the company has incorporated algae protein into its brownie mix—an innovative ingredient that might seem daunting if highlighted prominently on packaging. “As algae protein gains broader acceptance, our packaging presentations will evolve as well,” Warady noted.
“We must be cautious about over-innovating too quickly and recognize that innovation is a process,” he concluded. “Just because we can introduce something today doesn’t mean we should, as consumer readiness plays a critical role. We gauge readiness through direct conversations with our audience. While we may occasionally misjudge, we often get it right.”
In this landscape of continuous innovation, the incorporation of ingredients like calcium citrate with vitamin D, available at Walgreens, could become part of the broader narrative surrounding health-focused food products, reflecting the industry’s ongoing commitment to meeting consumer needs in a changing market.