The second annual customer survey of nearly 300 food and beverage professionals conducted by the networked ingredients marketplace published last week found 86% of food production and supply chain management professionals feel overworked and overwhelmed by current market challenges.
But rather than continue to back-burner innovation and slog through mountains of paperwork, many CPG companies are taking a “work smarter, not harder” approach to new product development and R&D, Gary Iles, senior vice president of marketing and business development at TraceGains explains in this episode of FoodNavigator-USA’s Soup-To-Nuts podcast. He shares how companies increasingly are leaning on co-manufacturers and tech-enabled solutions, including automation, to renovate and innovate new products that they are bringing to market faster and for less.
'Aprevailing sense of changing for the better'
According to Iles, now is the time to innovate because the dust has settled after the pandemic and new shopping habits are starting to solidify and separate out the fads from the lasting trends.
In particular, he said he sees potential to innovate products that are healthier for people and the planet.
“I would describe the scene as a prevailing sense of changing for the better,” with people looking for healthier options, whether that means nutrition, convenience or sustainability, he said.
As such, he added, “innovation is certainly really hot at this point in time and top of mind for all companies.”
Indeed, TraceGains survey found nearly two-thirds of respondents plan on investing in new product development in the next 12 months and one-third plan to modify anywhere from six to 20 recipes – which is up 6% from a survey TraceGains conducted last June.
As Iles explains, this is an about face from the last three years, during which innovation took a backseat to supply chain and inflation-related challenges, resulting in fewer launches and new products debuting at Expo West this year than pre-pandemic.
“Last year, we ran a survey and it showed that roughly three-quarters of the respondents’ primary concerns were around supply chain disruption and cost of ingredients,” and nearly half of those companies expected innovation to decrease as a result, he said.
“I think we’re seeing kind of a fall out of that this year at the Expo shows,” with fewer innovative ideas on display and new products launching, but “I would expect to see products launched pretty prolifically next year when we get to the Expo shows.”
Reformulation rises as a top priority
But as Iles notes, companies aren’t innovating for innovation’s sake – they are carefully considering shifts in consumer preferences. These include a desire for ingredients that are healthier for them and the planet, which Iles notes can be addressed in part through reformulation.
“One of the stats that we found is 50% of the companies would be changing 11 or more of their product formulas – and this was a response from a broad swath of the industry – from small companies to larger players,” he said.
He explained that companies trying to streamline how they manage specifications to make production more efficient. Others are doing so in response to external pressure, such as higher costs, or demand for more environmentally friendly ingredients and practices, he added.
Co-manufacturers help ease innovation burden
As manufacturers scramble to catch-up on time lost during the pandemic for innovating, TraceGains found many are outsourcing production, rather than maintain a more traditional vertically integrated approach. Indeed, the survey reveals 55% of companies are outsourcing more today than three years ago, and 47% are working with up to 10 partners.
Iles explains that during the pandemic many companies that hadn’t used co-packers did so to alleviate skyrocketing demand and are now more familiar with the benefits the partnerships can offer. Smaller companies also are drawn to co-packers because they can get products to market faster without having to building out a facility first.
How companies approach co-manufacturing arrangements has also evolved with brands looking more for partners who be help not just with production but other aspects of the business as well, noted Iles, who provided tips on how to negotiate a beneficial arrangement.
Tech-enabled solutions lighten work loads
In addition to tapping co-manufacturers for more help, TraceGains found CPG companies also increasingly are leaning on tech-enabled solutions to ease their workloads. This includes dealing with “never-ending paperwork,” complicated compliance regulations and sourcing complications – which TraceGains found were the top three stressors among its clients.
“The dirty little secret in our industry is that paper documents… exist in abundance,” and can slow down operations and decision-making, including around safety issues, Illes said.
“One thing we learned during the pandemic that really stood out is that the … constant disruptions that occurred over the course of three years were so disruptive,” and most companies didn’t have a way to react quickly, he said.
He explained that platforms like TraceGains can help with automation because it offers a network of connected individuals and data across the value chain on which companies can lean when they need to move quickly.
TraceGains also offers resources on its website that range from blogs to white papers to a recently launched a portal called TraceGains Gather, which includes half a million ingredients and suppliers and which his free for anyone to search. It also helps users manage key documents, establish a single source of truth and align stakeholders with a shared goal.
Iles added that this July TraceGains will unveil another product that will help with innovation and which he says will be particularly helpful for new brands or small to medium sized businesses coming to market and scaling up.