10 Macro Trends Driving Food Innovation

JAN 16, 2018 The Little Black Book of Billionaire Secrets

10 Macro Trends Driving Food Innovation

Barb Stuckey , CONTRIBUTORI write about food: innovation, business, trends, and all things delicious.  Opinions expressed by Forbes Contributors are their own.

Each year Mattson identifies a number of macro trends. Our goal is to think beyond “the next kale.” We choose lifestyle trends that have the power to influence food and beverage purchases, behavior, beliefs and, of course, innovation — the business we’re in. The reason to track trends is, ultimately, to translate them into viable business opportunities. Here are our 2018 picks.

1. Cannabis Craze

For most of my life marijuana was an illegal drug. Smoking it was risky and looked upon with suspicion. And smoking was — if not the only — the most common way it was consumed.

Increasingly, marijuana is seen as a functional food, with purported health benefits far outnumbering what consumers can get from kale, turmeric or kombucha. With a new generation growing up in states where cannabis is legal (currently about 20% of the U.S. population), new products are rapidly entering the market. Yet, the biggest challenges in launching cannabis edibles remain monumental because cannabis is still illegal at the federal level. This makes scaling a cannabis-based food or beverage difficult, if not cost-prohibitive.

Most dispensaries in San Francisco or Denver (or coming soon: your state?) carry a wide range of edible or drinkable options, many of them formulated, packaged, and marketed with savvy, like the excellent, beautiful products from Kiva Confections, Franklin Bioscience’s Lucky Edibles, and the super-fun woman-owned Kikoko Tea.

Despite the challenges, there is no question cannabis will influence the food and beverage industry, because it already has.

Cannabis 'edibles' are for sale where about 20% of the US population lives. (ROBYN BECK/AFP/Getty Images)

2. Losing Booze

The increase in cannabis consumption and acceptance leads us to our second trend: flat to declining per-capita alcohol consumption. Many correlate this decline with consumers choosing cannabis over alcohol for the same occasions they might drink booze: relaxing at home, partying with friends, managing anxiety – you name it.

Millennials are also driving this trend given their desire to be more present and mindful in their lives, both of which are difficult when you’re drunk. Also, drinking is expensive. With uncertainty about their future, Millennials are less willing and able to spend hard-earned dollars on alcohol.

Goldman Sachs downgraded Constellation, owner of the Corona, Robert Mondavi, and other alcohol brands, and Boston Beer company, citing these consumption trends. To make sure they’re prepared for a world where consumers legally swap back and forth between alcohol and cannabis, some alcoholic beverage companies are hedging their bets.

Constellation Brands recently announced a $200 million investment in a marijuana grower, with plans to develop cannabis drinks. In Sonoma County, Rebel Coast Winery has launched its premium Sauvignon Blanc, calling it the "world's first legal cannabis-infused, alcohol-removed wine."

And the former CMO of Anheuser-Busch InBev just anointed weed the new craft beer. He also co-founded a company that sells ready-to-smoke joints, which San Franciscans can order online for delivery in about an hour. This gives new meaning to the budding space we call keyboard convenience.

Some analysts think younger consumers will swap alcohol for cannabis. The owners of Corona are investing in growing their own. (Scott Olson/Getty Images)

3. Keyboard Convenience

For years, we’ve been hearing predictions around the ultimate demise of the center-store, where staples like mac-and-cheese, cereal, and bars are on their way to extinction. While consumers are excited about the fresh perimeter, we think center-store has staying power. With the convenience of shelf-stability, these categories have the benefit of being easy to buy in bulk, ship, and store indefinitely. Why wouldn’t a time-strapped household with two working parents and multiple kids trade an inconvenient trip to the store for keyboard convenience?

From the manufacturer/marketer perspective, we have seen a shift in what our entrepreneurial clients are looking for. No longer are they coming to us with dreams of selling their product line at traditional retail. They want to launch and learn online. And some of them don’t even have a long-term desire to end up at the Safeways and Krogers of the world. These Millennial entrepreneurs are changing the food industry as much as Millennial consumers.

There are unique challenges that come with e-commerce. We develop product lines specifically for this channel of distribution. I can tell you (from learning the hard way!), not every product works in e-comm in the traditional ways it used to work: from formulation to packaging to branding to marketing. Some things are obvious, like glass being less desirable for packaging than plastic. But some things are not. You simply have to box your product up and ship it via common carrier.

Amazon's Whole Foods products are now available with same-day or 2-day shipping: the ultimate in keyboard convenience. (SAUL LOEB/AFP/Getty Images)

That’s where the old tried and true has come around to being relevant again. Our home use testing (HUT) methodology is perfect for working out product, packaging, and online ordering bugs before launch. But the ultimate benefit of e-comm is that you don’t have to test your product ad nauseam. It’s easy and cheap to launch into the channel, even through behemoth Amazon. No slotting, no huge inventory investment, no buyer meetings. It’s the best way to get consumer insights: from real consumers paying real money for real products.

4. Taking Food Personally

Over the past decade, we’ve come to embrace the fact that the food we eat profoundly impacts our health, but this wasn’t always the case. Western medicine healthcare was reactive. Eastern medicine was holistic: taking into consideration the mind, body and spirit. Taking cues from the East, today's personalized food and beverages allow consumers to follow unique diets more targeted than gluten-free, paleo, and vegan, each chosen for a consumer's one-of-a-kind physiology.

We expect this to continue, and evolve into a belief that mental health can be impacted by diet, as well. With a burgeoning understanding of the microbiome, there’s indication that the companions we have in our gut can influence not just our physical issues (such as obesity), but our mental well-being.

This is where probiotic foods, beverages, and supplements will take the leap from gastrointestinal relief, regularity and immunity benefits, to our brain. Soon we’ll be eating to stave off depression, aid in sleep, and enhance overall mood.

In fact, almost half of people surveyed by Mintel said they believe that “What I eat impacts my emotional well-being.” (Source: Better-for-you Eating Trends Spotlight on Real, September 2017). It's coming: food for mood.

5. Fast Fresh Farming (Indoors!)

Consumers increasingly desire to eat fresh and local food. But it’s challenging to grow fresh produce during the frigid winter months. One solution is to move farming indoors, and that’s now happening in great numbers at both the residential and industrial level.

With technology that meters out water and nutrients, success rates are better. Imagine growing produce inside your home, harvested just seconds before use. It’s the ultimate way to assure you’re eating fresh and clean. And it doesn’t get any more local.

Startup AVA is an indoor garden system that operates like Keurig. Consumers insert seed and nutrient pods into the AVA Byte appliance, add water, and software does the rest. Check in on your fresh herbs from the app while on vacation. It’s a way for skill-free gardeners to grow pesticide-free tomatoes and herbs.

On a commercial scale, Urban Organics uses aquaponics, which is hydroponics with a twist. Fish. The water in which the vegetables grow is also home to fish, like arctic char, who naturally fertilize the produce, making for a closed loop inside an urban warehouse in Minnesota.

Cubic Farms sells a complete hydroponic farming “system” housed in a 40-foot shipping container. Inside is an automated conveyor rotation system with lights that make it easy to grow leafy greens and herbs year-round, without pesticide.

AeroFarms grows and markets Dream Greens lettuces in vertical farms and can be installed just about anywhere. They tout flavor as one of the big advantages to having complete control over the growing process “Our kale is sweeter. Our arugula is spicier. Our herbs are brighter,” they claim.

We love the idea of shipping containers and abandoned urban buildings as the ecologically sound commercial farms of the future: located wherever they’re needed.

6. Meal Kit Migration

We know that consumers fundamentally want meal kits, but the original direct-to-consumer subscription model is not how they want to buy them. Too much commitment, too costly, too much solid waste and carbon footprint. Blue Apron and competitors Hello Fresh, Sun Basket, etc. need to find a way to sell their awesome offerings where consumers already shop for food. Chef’d is already selling meal kits at retail. When Albertson’s bought Plated, it was obvious that’s what they had in mind. Sure enough, they’ve launched Plated kits into grocery. We suspect others will soon show up there.

We also think there’s a huge opportunity for chain restaurants to reinvigorate mature brands (TGIFridays, Applebee’s, Olive Garden, etc) by creating their own meal kits, sold to lunch patrons for making later that night. Why casual dining brands haven’t done this has baffled me for years. And it’s not for lack of trying! I’ve been pitching this idea for almost a decade since The Slanted Door started selling meal kits from their takeaway shop in San Francisco’s Ferry Building.

Meal kits are here to stay, but how and who wins will be different than how and who built the segment.

7. Intrinsic Nutrition

Fat is back. Protein is hot. Sugar is out. Yes, consumers want to eat healthy, but their definition of what this means continues to change. Mostly, consumers want to eat foods that contain what we call intrinsic nutrition: nutrients that are inherent in the ingredients. Intrinsic fiber comes from beans or whole grains, not supplementation.

The next wave of innovation will be intrinsic healthy fats, protein, fiber, and other essentials from nutrient-dense foods like soy, meat, cheese, eggs, fruits, vegetables, and dairy. We know this, because we’re working on these new products now, for launch in the near future.

Another way to arrive at intrinsic nutrient benefits is fermentation. This is why we’re bullish on kombucha and other probiotic beverages, fermented vegetables such as pickles and kimchee, and fermented dairy like yogurt and kefir. The fermentation process creates healthy microbes that (someday) we’ll want to eat for mental health!

8. The Fabulous Flexitarian

What if you could tap into a growing group of consumers that make up about a third of the population? Have I got your attention? Meet the Flexitarian.

From a proprietary online consumer study we conducted in July, 2017 we’ve learned a lot about these people. There is no official definition of Flexitarian, but we consider them to self-define in two ways. First, there are those actively trying to eat less beef, chicken, pork, and dairy. And second, there’s a group that already eats a “mostly vegetarian” diet, with the occasional consumption of beef, chicken, pork, and dairy. Together, these consumers make up about one-third of the population.

It gets even more interesting when you ask all consumers—no matter what their current diet—what they plan to eat in the year ahead. A full 50% of the population claims they’ll be actively trying to eat more plant-based foods next year. The combination of these two stats indicates a growing opportunity to make plant-based eating easier for both the Flexitarian and the beef-eating carnivore.

Ripple’s new plant-based creamers address consumers’ desires for alternatives to dairy.

While many assume that vegetarians and vegans are the ones driving the growth in plant-based foods such as plant-based milks and meat, it’s simply not true. They only make up about 5 to 7% of the population and that number has remained fairly flat. It’s the Flexitarians that are driving growth, and will continue to do so in 2018 and beyond.

9. Produce Power!

Today's burgeoning ready-to-cook and ready-to-eat fruit and vegetable products go way beyond baby carrots with ranch. Consumers want to eat more fresh produce, but they’re not confident in their ability to cook with it.

Today’s produce snacking goes way beyond baby carrots and ranch. ReadyPac’s Ready Snax are pre-packed trios such as tortilla chips, natural cheese, and salsa, or fruit, cheddar, and flatbread. Mucci Farms sells snack-size Cutecumbers®, and SunDrops® grape tomatoes, packaged and marketed for kids.

Consumers want to eat more fresh produce, but they’re not confident in their ability to cook with it. Solving this conundrum are products like ReadyPac’s line of single-serve Fresh Prep’d Soup Kits, which pair fresh produce, protein like chicken breast, and concentrated soup broth. Just add water, stir, and heat. And Sunset Grown’s You Make Me pasta kits pair fresh tomatoes with dry pasta, spices, and oil. We predict many more of these meal and snack kits coming in the near future.

10. Non-Food Brands Branch Out

Licensing is one way to solve the dilemma of building new food brands because it lets companies gain access to a new brand without having to build it from scratch. Big Food has shown they're unwilling to take on this daunting challenge, preferring instead to buy brands at ridiculous multiples. Why not lean on licensing to enjoy the best of both worlds?

When Oprah enters a new industry, watch out. Now that she’s launched a line of refrigerated foods, we can expect a lot more products to launch under her partnership with Kraft Heinz.

Oprah is not the only non-food brand entering the industry. Eating Well has partnered with Bellisio to launch a line of frozen foods, 20 years after the start of Eating Well magazine. Patagonia used to sell only clothing. Today they offer brand loyalists a line of mission-driven Provisions that range from buffalo jerky to soup to smoked salmon. The question is, “What non-food brand will appear next in your cart?!”

Happy eating in 2018!

See more at www.MattsonCo.com and www.barbstuckey.com.

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