CHICAGO — Entrepreneurs focused on disrupting the food and beverage space should consider developing concepts that solve problems. Specific categories ripe for such innovation include sustainable packaging and functional foods, according to a panel of food industry executives and entrepreneurs at the inaugural Trends and Innovations Seminar, held March 27-28, sponsored by Sosland Publishing Company and presented by Food Business News.

Dan Kurzrock, co-founder and chief executive officer of ReGrained, San Francisco, said his company, which manufactures bars and chips from upcycled ingredients sourced from the beer brewing industry, has been searching for a viable form of sustainable packaging with little success.

“Our business is all about designing a food system in line with the planet we love,” he said March 27, during the opening session of the Trends and Innovations Seminar. “And we felt the packaging we used was an important reflection of that. We tried to take a stand, but what we learned is our packaging decision was actually creating food waste.”

ReGrained initially launched using compostable packaging, and management did so knowing it would complicate the supply chain by creating longer lead times, compromised shelf-life and additional cost.

“We went to a nine-month shelf-life from 12 to 18 months,” Mr. Kurzrock said. “Then, as our distribution became more complicated, we learned our material was causing our product to prematurely stale, in some cases, before it reached the grocery store.”

Regrained bars

The company eventually was forced to switch to conventional film.

“There is a ‘P’ in C.P.G. and that is packaging,” Mr. Kurzrock said. “I think it has been horrifically overlooked by major companies. We are in the future trash business, and no one likes to talk about that. We tried to do something about it but weren’t able.”

Peter Rahal, founder of RXBAR and head of innovation and strategy for Insurgent Brands, Chicago, said he sees consumer interest in sustainable products accelerating.

“In 2007, 2008, there was a lot of momentum (for sustainability),” he said. “But then the economic crisis hit, and it became less of a priority.

“But when you look at what people are searching (for on the internet) you can see the demand is there again. Once the technology catches up and inefficiencies are removed, the delta between a better-for-you product that is good for the environment and one that isn’t as good for the environment will get closer, and that will be a game changer.”

Mr. Rahal added that the consumer trends he sees emerging show promise for the future of functional foods.

“People younger than us are very intentional with what they eat,” he said. “Everything needs to have a purpose.”

New RXBar flavorsBut he emphasized innovation in the functional food category must solve a real problem.

“You see a lot of (nutrition) bars that have caffeine,” he said. “It’s a cup of coffee in a bar. I think that solves a problem that doesn’t exist, because who doesn’t enjoy a cup of coffee? No one is looking to replace it.”

Natalie Shmulik, c.e.o. of The Hatchery, Chicago, said she sees ingredients such as adaptogens and mushrooms trending in functional food formulation.

“There is definitely an intersection of industries, and we are seeing more medicinal foods,” she said. “The other thing is there was this focus on energy, everything was caffeinated, and now we are seeing a focus on sleep. I don’t know how much of it is effective, but we are seeing more products focused on sleep and being able to relax during the day.”

Yet to be an entrepreneur in the food and beverage industry requires more than an idea, Ms. Shmulik said. Through her work with The Hatchery she works with a lot of entrepreneurs and offered her insights into what it takes to succeed in food and beverage.

“Alongside all of the trends that seem to be emerging in the industry, being an entrepreneur is a trend in and of itself,” she said. “Yes, the food industry is very interesting, important, sexy and trendy, but it’s also a business. We look at what problem are you really solving or are you just creating a problem to solve? We think that is a first indication of whether something is truly a trend or a fad.

The Hatchery Chicago“We also look at the founders, because, nowadays, consumers are looking just as much at the founder’s story and how a brand emerged just as much as the product itself. So, having a good story and reason for your brand to exist is essential.”

The number of start-ups trying to break into the food and beverage category has grown significantly during the past decade. The panelists offered their thoughts on how long the trend may last and what the next five years may look like.

“I think as long as big food company portfolios don’t match where demand is they (entrepreneurs) are going to keep doing it,” Mr. Rahal said.

Ms. Shmulik added, “It’s going to continue. For every 10 that may drop out there are going to be another 10 that will come into the business. Everyday someone wakes up with a new idea.

“I think something that may reshape the industry a little bit is regulation. We are going to see a lot of C.B.D. companies fall by the way side. We are going to see other companies leave the food business as regulations are tightened. I think that is where we are going to see a lot of change. With e-commerce, a lot of people enter the business, but they don’t understand the ramifications when they cross state lines.”