The food and beverage industry is one of Europe’s most innovative industries with tens of thousands of new products launched every year – more than 97,000 in the past year alone, according to Mintel figures. What trends provide the momentum for all this new product development?

Despite the vast number of new products that come to market each year, food and drink companies invest a relatively tiny amount of their revenue in R&D – about 0.8% among food companies, according to AgFunder, and just 0.3% for beverage companies – compared to about 10% for tech companies, for instance. Over the past decade or so, large companies also have leveraged tools like open innovation and acquisitions to help boost their reactivity to new trends – but this does not necessarily mean that successful innovation is solely the domain of smaller firms.

Big players still rule in NPD

In a recent report on innovation failure, market research organisation Nielsen aimed to set the record straight, saying that the success of a handful of startups has led many large manufacturers to question whether entrepreneurial energy may have more value than their resources, scale, and processes.

“In doing so, it is easy to forget that the most prominent new players represent a very small sample, and there are many others who failed to gain traction along the way,” it said.

Meanwhile, more than 94% of the largest food and drink companies say investment in innovation is embedded in their business, according to advisory firm Green Hasson Janks.

Soft drinks lead in industry innovation

According to FoodDrinkEurope’s latest Data & Trends 2021 report, soft drinks are the most innovative category, accounting for 8.2% of all new food and beverage products launched in 2020. UNESDA, a trade association that represents the European soft drinks industry, claims that 40% of all soft drinks on the market today were introduced in the past five years. Salted frozen products came in second, representing 6.2% of new launches, followed by dairy products, at 6.1%.

Despite growing interest in ethical production – particularly for eco-friendly foods and drinks – FDE found that pleasure was the biggest driver of innovation overall and the major factor in 46.5% of all new product development. This is in line with previous research from the International Food Information Council, among others, which consistently has found taste to be consumers’ primary reason for buying a product. By contrast, the FDE report said ethics drove innovation for just 8.9% of new foods and beverages, although this was up from 5.2% a year earlier.

Consumer demand as an innovation driver

About half of all innovation in food and drink is consumer-led, according to Green Hasson Janks, leading to particularly large numbers of new products that follow specific trends. Demand for organic foods and drinks, for example, is especially strong in Europe. According to Mintel, the region is the world leader in organic food and drink innovation, where almost a fifth of all new food and drink products carry an organic claim. In the 10 years to July 2019, it found the proportion of new European foods and drinks with an organic label rose from 9% to 17% – but interest in organics is not uniform across Europe. France leads the way, accounting for 22% of all organic launches in the region in the year to July 2019, followed by Germany at 20% and Spain at 9%.

“Organic produce has seen growing support among European consumers at a time of increasing concerns for wellbeing, health and the environment,” said Katya Witham, Global Food & Drink Analyst at Mintel. “…Although organic products have fully entered mainstream channels and continue to gain traction with shoppers, the organic segment still offers innovation opportunities across numerous food and drink categories. This is especially true in categories where organic claims have previously played a minor role, such as wine.”

Combining claims: free-from, ethics and organics

Free-from claims are also on the rise, featuring on 43% of new products in mid-2019, up from just 20% ten years earlier, while combinations of organic and ethical claims have become more common. At the same time, 41% of new European organic food and drink products carried an ethical or environmental claim, according to Mintel research, up from 23% ten years earlier.

“Organic claims are increasingly becoming part of wider health and ethical product positioning, hence the popularity of launches with free-from and ethical claims,” said Witham. “…Plant-based organic brands are taking their lack of animal-derived ingredients to the next level, highlighting a more holistic approach.”

EIT Food, an EU-funded food innovation initiative, also has highlighted environmental and ethical aspects of food as crucial to consumers – particularly younger demographics – in the coming year. It predicts that environmental labelling and food activism will help drive more eco-friendly food and beverage innovation in 2022 and beyond.