Innovation key to growth in 2013

Innovation key to growth in 2013

If innovation is the lifeblood of a healthy brand, then getting that innovation right is key to growth. Over the coming year, we are likely to see a swathe of development across the food sector. However, success will hinge on a good understanding of consumer trends. It will identify a growing demand or niche that is yet to be filled. Katy Askew takes a look at some of the key consumer trends that are likely to drive innovation during 2013.

There is little doubt 2013 will remain a challenging year for food manufacturers the world over. A downbeat consumer and weak volumes in developed markets are likely to result in continued pressure on pricing. Manufacturers will have to compete ever more fiercely to persuade consumers to part with their hard-earned bucks.

Innovation is one of the most effective tools available to food manufacturers as they work to win consumers over and convince them of the value of brands and products. Here, it must be emphasised, the meaning of value is about much more than price. In order to succeed, a product must be appropriately priced in the market. But, if a product delivers something extra, consumers are likely to respond in kind.

According to Matthew Knight, strategic technologies director for media planners Carat UK, manufacturers that turn away from investing in innovation do so at their peril.

"Innovation isn't something to be done in the summer, ready for winter-time - it needs to be invested in constantly, to always be exploring what is possible and what can improve an experience for consumers," Knight tells just-food.

"A struggling economy either drives innovation - to make products work harder, better, faster - or kills it, depending on the culture of a business. But it should never be seen as a nice-to-have, or a thing to drive efficiency; innovation is absolute core and critical to the ongoing sustainability of any business."

A sluggish economy does, however, have an impact on the NPD that will find traction with consumers. Indeed, Knight says he expects a number of product developments to stem from poor economic sentiment in 2013.

While much is being done to deliver products at lower price points - through the introduction of smaller pack sizes, for example - Knight points to the opportunity at the upper end of the market as consumers shirk restaurants in favour of eating at home.

"I also think that the recession has to be thanked for bringing a little more of the experience of going out into the home - and we'll start to see more products which aim to deliver a little bit of the theatre of going to a restaurant or bar to our own homes," he predicts.

Indeed, this trend has already been leveraged to great effect by some UK retailers, notably Marks and Spencer. While this bastion of the UK high street has seen much of its business squeezed, the group has booked quarter after quarter of food sales growth, with promotions like its Dine In deal offering consumers a restaurant-like culinary experience at a fraction of the cost.

Another significant trend informing innovation is the emergence of flexible eating patterns as consumers increasingly shift from a "three meals a day" model to slot eating into busy schedules.

Breakfast is the meal time most impacted by this tendency, as consumers have left the category - opting to pick up a coffee on the way to work instead of sitting down to a more traditional bowl of cereal.

In response, cereal makers are looking to highlight the importance of breakfast on the one hand, while developing ways to deliver it in a convenient accessible fashion on the other. Packaging is frequently key to new product development in this area - but there are manufacturers who are thinking further outside the box with the launch of products like "breakfast drinks". Kellogg, for one, is trialling a breakfast drink in US test markets.

According to SymphonyIRI's Susan Viamari, growth in flexible eating has resulted in higher demand for snack products.

"Eating rituals have been undergoing an evolutionary change for quite some time. Snacking has become quite pervasive," Viamari observes. "Indeed, it appears that snacking is replacing traditional sit-down meals for many."

SymphonyIRI's State of the Snack Industry report reveals 51% of consumers snack three or more times daily today, versus 27% in 2009. The research firm also noted an increase in snacking "on the go", with 54% of consumers snacking "on the go" compared to 37% in 2009.

While consumers are increasingly turning to snacks to sustain them through the day, it is important to note one of the fastest growing segment of the category is healthy snacks. In particular, healthy snack products that have witnessed strong growth over the last year - and look well placed to continue to expand in the next 11 months - are popcorn, pretzels and snack nuts.

Health and wellness will remain a significant part of the food industry's research and development agenda. As Nestle CEO Paul Bulcke told a round table at the World Economic Forum in Davos last weekend, reformulation and innovation are the primary ways the food industry is able to drive the health and wellness agenda.

Over the last 30 years, the proportion of the global population that is obese has doubled. And this figure is continuing to rise. With awareness of weight-related issues reaching new highs, food manufacturers have come into the firing line for not doing enough to improve the nutritional profile of products.

"We are attacked and that is because we live in a society that wants to blame," Bulcke told attendees at Davos. However, Bulcke argued, assigning blame and placing responsibility squarely at the door of the industry fails to recognise the complex nature of the obesity crisis, which encompasses myriad issues from poverty to our now prevalent sedentary lifestyles.

"It doesn't help to blame only one part [of the chain]... There is not one solution, there are many solutions that have to converge," he insisted. Bulcke called for a multi-stakeholder approach that - unsurprisingly - relied on voluntary action rather than regulation.

However, if the food industry is to stave off the threat of regulation, it is a necessity that companies invest in developing healthier products. But it is also something consumers are increasingly coming to demand, trendwatching.com lead strategist David Mattin suggests.

Mattin argues consumer awareness of health and wellness is growing, a trend that is being enhanced by the development of mobile technologies.

"The movement towards self-tracking and quantification of health and wellness metrics is now well established, and in 2013 we expect to see more mainstream consumers taking notice, and joining in. Smartphone apps and online platforms will help those consumers monitor metrics such as calorie and nutrition intake, calorie burn, and alcohol consumption," he predicts.

According to Mattin, awareness of dietary issues - and the increased penetration of mobile technologies to address them - are likely to converge with the integration of digital technologies in the retail sector. This, he predicts, will in turn demand an innovative response from food manufacturers.

"Put those two trends together, and there are clear implications and opportunities for the food industry. How about physical retail spaces and shopping experiences that integrate with and enhance consumers' self-tracking of health and wellness? Scannable food labels, interactive displays, personalised health advice delivered to smartphones: the possibilities for innovation are endless," he suggests.

As our awareness of issues surrounding obesity and weight management sharpens, it is likely there will be a continued shift away from niche "diet food". Mainstream consumers who are targeting a balanced diet - rather than products specifically designed to shed the pounds - require healthier versions of the products that they already use.

For this reason, there is also a growing demand for recipe simplification. Ever more educated consumers want an ingredients list that they can easily understand.

They also want ingredients that are traceable and trustworthy. Indeed, as the current horse-meat-in-beef-burger scandal unfolds in the UK - and now Spain - it is becoming more apparent manufacturers and retailers do not have the control over their supply chain that was once assumed. Questions around provenance and traceability are clearly rising concern for consumers.

Knight sees an opportunity for the food industry to strengthen its credentials in this area. Digital technology, he argues, could be one solution to the current dilemma facing the sector. "Around packaging alone, consumers will be able to understand not only the content and recommended uses of the food, but also its provenance - which after a handful of recently prominent PR disasters, will only continue to grow in popularity."

Divergent consumer desires driving innovation in the food industry provide plenty of scope for food companies to innovate in the year ahead. However, in order to move this innovation to the next level, food companies will also look to evolve solutions that are multi-functional. Success or failure in this endeavour will rest with a manufacturer's ability to interpret and appeal to a complex collection of benefits to the consumer.

What do you think the main drivers of innovation will be in 2013? Do you plan to spend more or less of R&D over this year? Share your thoughts with is in just-food's 2013 Confidence Survey for the chance to win a year's free membership to the site. Click here to access the survey.