Dive overview:
- Disruptive foods and brands used to attract interest from food companies and various investor funds, but appetite for this kind of innovation appears to be waning, says a new Rabobank Research report. says.
- Between 2010 and 2022, the number of consumer food innovation deals increased by 288%, according to researchers. However, many of the investors who participated in these funding rounds have paused similar investments in the space in 2023. Transactions through May 2023 are down 22% compared to a year ago.
- Current and near-term innovations are likely to be minor changes or improvements made to existing products, the report said.
Dive Insight:
Before 2020, “disruptive” seemed synonymous with “innovative” in the food and beverage industry.
Investors and Big Food alike favored brands that used new technologies, relied on non-traditional ingredients, or achieved mission-oriented goals. These brands brought something completely new to food, and their creators and investors relied on consumers to be drawn to the brands. Some traditional food companies have created new divisions to focus on fundraising, development and acquisition of new products and technologies.
While there has been some growth in these areas, many of the investments have not yielded significant returns, the Rabobank report said. Real investment capital has been tight in recent years as interest rates, commodity costs and inflation have risen. Changes in supply chains have made it difficult to obtain some raw materials, and labor shortages are making it difficult for manufacturers to operate, the report said.
Consumer behavior is also different from what was expected a few years ago. Inflation has made consumers pay more attention to price when purchasing goods. That means, according to the report, they’re making buying decisions “value-based rather than value-based.”
But another part has to do with actual consumer behavior. Products that are plant-based, made with new ingredients, or carbon neutral sound appealing, but consumers don’t always buy them instead of standard favorites. According to the report, what consumers really want is back to basics, minimalist and less processed products.
Most of Big Food’s recent innovations involve smaller, incremental ideas. That includes incorporating existing flavors into other products, such as PepsiCo expanding its Doritos brand into dips and jerky categories. Other innovations include creating new shapes and sizes for already popular products such as General Mills launching mini versions of Trix, Cinnamon Toast Crunch and Reese’s Puff. Others, like Heinz Spicy Ketchup, try to add new twists to existing products.
The consumer’s relationship with food is personal and deeply emotional. Over the last few years, we’ve found that while most people may not be ready to make drastic changes in what they eat or drink right away, they’re often more willing to make more gradual changes. . While most investments in the new and disruptive food sector have not yielded significant immediate returns, items such as plant-based and more value-driven products are gaining consumer acceptance.
In the future, investors and big food may be a little slower in chasing the “next big thing,” but more modest investment, support and partnerships will drive true disruption at a more moderate pace. may help.