Companies focused on the next generation of products should address five “macro forces” that are pushing the food and beverage industry towards a greater focus on growth through innovation, said the report from the corporate advisory group TSG, called The Innovation Agenda for Food and Beverage Companies.
They are health and wellness; the rise of non-Western economies; seeking alternatives to M&A; targeted foods; and new formats, packaging and bundling.
The report said: “We suspect that there will be massive and systemic change in food and beverage companies’ portfolios as they react to these key forces.”
However, capturing growth requires a more holistic approach to corporate innovation and companies should look beyond product lines alone.
It added: “Institutionalizing innovation can help optimize the company’s innovation engine, driving operational efficiencies as the company streamlines its innovation process.
This means appointing an executive who is accountable for innovation and a dedicated budget, without which “the executive has limited ability to accelerate and prioritize execution of ideas”.
Other suggestions include improving the use of partnerships and alliances, particularly those outside traditional food and beverage boundaries.
An example of this is Nestlé, which formed a partnership with GE in 2008 to leverage the Nestlé Research Center’s nutrition research expertise and General Electric Global Research’s diagnostic technology to perform new metabolic studies that will examine how nutrition and lifestyle choices affect body composition and metabolic health.
Nestlé, as well as Unilever, Kraft, and Pepsi, has also included innovation in the reorganization of their corporations, with positions such as chief scientific or technology officers, tasked with organizing innovation.
Health trend
TSG also predicts that over the next five years, health and wellness will remain a key innovation driver. Similarly companies will need to continuously invest in nutrition-focused research and development.
It added: “As general health and wellness becomes less of a product differentiator, food and beverage companies will look to packaging technological innovations, and targeted functional foods as a means of differentiating their products.”
The report highlighted a growing market for foods targeted toward, for examples, certain health conditions, sexes or ages.
Similarly, it said acquisitions have harmful effects on the balance sheet and there is aggressive competition for limited quality deals, so alternatives must be sought.
Open Innovation
A separate review said recently that the food industry should embrace the possibilities offered by open innovation if they are to succeed in an increasingly competitive market place.
It found that it is becoming increasingly difficult to manage all the factors involved in food production, from the initial concept to the requirements of intermediate customers, end-users and legislators, according to the journal Trends in Food Science & Technology.
Open innovation has traditionally been linked with fast-growing, technology-intensive industries, such as the information and communication technology sector. However, it has been argued that the food industry has traditionally not engaged in open innovation.