The Decline of Innovation in the Food and Drink Industry
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A recent report by Mintel has revealed that innovation in the food and drink industry has significantly decreased since 2007. Only 26% of new products launched between January and May 2024 were truly innovative, compared to 50% in 2007.
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Mintel’s director of food and drink, Jonny Forsyth, highlighted that most of the innovation in the past two decades has been focused on e-commerce. However, he pointed out the challenges faced by food and drink manufacturers, such as complex supply chains, low margins, and the need for temperature control when delivering fresh products. These factors create higher barriers to entry for new businesses compared to other industries like beauty and personal care.
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Consumer spending has also decreased across various sectors, including food and beverages, due to ongoing inflation.
Innovation Struggles in the Consumer Packaged Goods (CPG) Sector
Mintel’s report indicates a general struggle with innovation in the CPG space. Only 35% of global CPG launches in the first five months of 2024 were genuinely new products. This marks the lowest percentage recorded since Mintel began tracking new products in 1996, with the majority of launches being renovations or line extensions.
The lack of significant innovation poses long-term challenges for the CPG industry, potentially impacting the profitability and sustainability of established players. The slowdown in innovation also makes it easier for consumers to shift towards private label options, especially as big brands implement price hikes.
Food and beverage companies have emphasized the importance of innovation for their businesses, with industry leaders like McCormick & Co. and Conagra Brands focusing on product development to attract consumers back to their offerings.
The innovation slowdown could lead consumers to explore alternative options, creating opportunities for new, agile brands to enter the market. Retailers may also push for more innovation to drive traffic and increase sales in their stores.
Despite the challenges and risks associated with innovation, companies recognize its importance for long-term success. Striking a balance between investing in innovation and maintaining revenue from existing brands remains a key priority for industry players.