Why Innovation is an Essential Ingredient for the Food and Beverage Industry
Innovation is one of the biggest challenges for food and beverage businesses. There is constant pressure to keep up with changing consumer demands, remain competitive, get new, seasonal products out on time all while ensuring products meet compliance regulations. It can be difficult to ensure that the risk of investing in new product development, expanding to a new market or testing new technology will create the best possible assortments for each target market, appeal to consumers and maximize return on investment.
Take 5 minutes to read this blog to understand the benefits of innovation for the food and beverage industry and discover the game-changing technology that supercharges ideation, collaboration and go-to-market execution.
What is the Current State of Innovation in the Food and Beverage Industry?
It may come as no surprise to those working in the food and beverage industry that investing in innovation has taken a backseat. It’s no wonder considering the last five years have seen labor shortages and supply chain challenges, the rising cost of raw materials often caused by crop damage from droughts and floods and also global inflation hitting consumer wallets and businesses’ bottom lines. Keeping up with the overwhelming daily challenges of developing products and bringing them to market steals focus away from invention.
According to market research firm Mintel’s Global New Product Database (GNPD), in the first five months of 2024, just 35% of global CPG launches (i.e. across food, drink, household, health, beauty, personal care and pet care) are genuinely new products. This is the lowest proportion of innovation Mintel has recorded since it began tracking new products in 1996. It means that so far in 2024, 65% of launches are ‘renovation’ i.e. line extensions, reformulations, new packaging or relaunches.
The same study shows the food and beverage industry has fallen well behind the curve of innovation.
When comparing different CPG industries, innovation has declined the most in food and drink, which launched just 26% of new products between January and May 2024 compared to 50% in 2007. Food and drink companies have preferred to launch new varieties/range extensions or new packaging, because food and drink manufacturers have to cope with complex supply chains, low margins and the need for temperature control when delivering fresh food and drink. The barriers to entry are therefore much greater than if you are starting a business in categories like beauty and personal care, household goods or vitamins and supplements.
These stats don’t mean that food and beverage innovation is impossible. It’s the exact opposite, actually. The declining number of companies investing in innovation means there is great opportunity awaiting those companies that do.
Brands that are innovating are rewarded
Nestlé continues to hold the title of the world’s most valuable food brand, according to a new report by Brand Finance. Despite a 7% decline in brand value, the Swiss firm’s strong brand equity and resilience helped it maintain its top position in the global food industry. Brand Finance noted that Nestlé’s ability to adapt to changing consumer preferences and maintain a diverse product portfolio has been instrumental in its continued success.
Snack brand Lay’s (brand value up 9%) climbed to the second position globally, surpassing China’s Yili (brand value down 6%), which holds the third spot. Lay’s strong financial performance and innovative product offerings, such as its Flavor Swap and MAX lineups, are said to have contributed to its brand value growth.
The current state of innovation in the food and beverage industry shows both challenges and untapped potential. While pressures like supply chain issues, rising costs and inflation have caused many companies to deprioritize innovation, the industry leaders who do invest are seeing measurable rewards. Now, let’s explore how embracing innovation offers benefits from meeting consumer demands to driving growth, improving operations and boosting employee engagement.
Discover the Freedom to Innovate with Next Generation Technology
To free teams to ideate, collaborate and innovate, many food and beverage companies turn to technology like Product Lifecycle Management (PLM) solutions. PLM is a product development platform that centralizes the actionable data of every phase of development from planning and recipe creation to sourcing, costing, packaging, labeling and compliance.
A modern PLM is at its core a platform for cross-departmental collaboration, improving communication and reducing silos – all with the aim of super powering innovation. PLM connects internal and external teams so they can take advantage of unique inputs, knowledge and skillsets, bringing them together to make actionable product-related decisions. By empowering teams with technology that gives them the edge, food and beverage businesses set the foundation for innovation, optimized product development and stay one step ahead of the competition.
The benefits of investing in an innovative PLM solution are vast and include:
Increased sales by up to 10%
Products to market up to 60% faster
Reduced COGS by up to 15%
Improved team productivity by up to 50%
In today’s competitive market, innovation isn’t a choice but a necessity for food and beverage companies aiming to stay ahead of the game, satisfy consumer expectations and boost market share. From meeting consumer trends and expanding markets to improving operations and employee satisfaction, innovation creates opportunities for growth at every level.
