In the fast-changing landscape of the food and beverage industry, the year 2024 is expected to be a pivotal one. Facing inflation, consumer fatigue over price hikes, and various market pressures, companies are finding the need for innovation more apparent than ever. On a recent article at FoodDive.com, Christopher Doering asks if more CPG companies will embrace innovation and show why it’s not just a trend but a necessity for the survival and success of large food and beverage manufacturers.
The message is pretty clear: sticking to the status quo won’t cut it anymore. Mikael Bengtsson, the industry and solution strategy director of food and beverage at Infor, bluntly states that companies clinging to century-old practices are, in essence, setting themselves up for failure. The world is changing, consumer preferences are evolving, and companies must adapt or face the consequences.
Innovation versus Performance
One major hurdle hindering innovation is the increasing pressure on companies to deliver short-term results. Wall Street demands revenue growth, and executives find themselves torn between green-lighting potentially risky, long-term innovation projects and maintaining sales for their popular brands. Brian Choi, CEO of The Food Institute, highlights this challenge, noting that companies are judged based on their immediate performance rather than their ability to innovate.
Despite the current difficulties, industry experts argue that neglecting innovation may lead to stagnation and a loss of competitiveness. Neil Saunders, managing director with Global Data, doesn’t mince words, stating that many CPG companies in the U.S. are “lazy” when it comes to innovation, according to his opinion. This sentiment is echoed by the article, suggesting that companies unwilling to adapt risk falling behind their nimbler counterparts.
Private label offerings from retailers like Target, Safeway, Kroger, and Amazon further compound the pressure on traditional food and beverage companies. These offerings, often comparable in quality and available at a fraction of the price, pose a direct threat to established brands. Companies need to step up their innovation game to stay relevant and competitive.
Neil Saunders identifies health and wellness, limited-time offerings, sustainable packaging, and on-the-go snacking as ripe areas for innovation. However, he acknowledges that larger companies face challenges in innovating in an interesting way. Despite these hurdles, some industry giants are making strides in innovation.
Nestlé, for instance, scaled back innovation during the pandemic but is now intensifying its efforts. The Lean Cuisine and Nescafe manufacturer increased its innovation projects by nearly 45% last year, focusing on coffee, creamers, convenience, and prepared meals. Hershey and Mars Wrigley are also among the companies stepping up their innovation game for 2024.
Mars Wrigley’s approach involves fewer but more impactful innovations, with a focus on bringing unique products to market. Tim LeBel, the company’s president of U.S. sales, emphasizes the importance of introducing products that not only differentiate themselves but also contribute to incremental growth in the category. Mars Wrigley’s upcoming releases, including Dove Milk Chocolate Tiramisu Caramel Promises and Ranch Dip flavored Combos, showcase the company’s commitment to thoughtful innovation.
To sum up, it’s clear the challenges faced by the food and beverage industry in 2024 demand a paradigm shift and it’s urgent for companies to break free from conservative cultures, embrace innovation, and adapt to changing consumer trends. The examples of Nestlé, Hershey, and Mars Wrigley demonstrate that, despite the obstacles, innovation is not only achievable but essential for sustained growth and competitiveness in the CPG sector. As the industry crosses these tides of change, those who dare to innovate may find themselves not only surviving but thriving in the dynamic landscape of the food and beverage market.
B2B collaboration plays a critical role in fostering innovation within the CPG industry. By establishing strategic partnerships and collaborations between businesses, organizations in the CPG sector can leverage complementary strengths and resources to drive innovation throughout the supply chain. Shared insights, technologies, and expertise between B2B partners can lead to the development of cutting-edge products, improved manufacturing processes, and more efficient distribution channels. Also, collaborative efforts enable quicker adaptation to emerging market trends and consumer preferences. Additionally, technology providers teaming up with CPG manufacturers can introduce advancements in data analytics and automation, optimizing production and enhancing overall efficiency. Ultimately, B2B collaboration in the CPG industry not only stimulates innovation but also positions businesses to navigate the rapidly evolving market landscape effectively.
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To read the Food Dive article, click here.