Keith Nunes 2019

KANSAS CITY — Cost reduction is the No. 1 trend that will influence food and beverage product development in the next 12 to 18 months, according to exclusive research conducted by Food Business News and that will be released later this year. Addressing the sharp rise in ingredient costs over the past few years ranked higher than such longstanding trends as clean label, convenience and health and wellness.

The research was conducted in March and April of this year and included survey responses from 224 industry participants, including many working in product development (45%), marketing and sales (19%) or company management (16%). The goal of the project was to identify the trends and issues that are expected to influence food and beverage product development over the next 12 to 18 months.

The top five trends identified by participants were cost reduction (59%), clean label (53%), convenience (50%), ingredient reduction (e.g., sugar, sodium, fat, gluten) (43%) and health and wellness (42%). Many of the trends have been significant for years, but cost reduction as the clear No. 1 trend underscores how curbing costs is viewed as key to financial success following an extended period of escalating input costs for ingredients and services.

As one survey participant commented, cost reduction also means it may take longer for innovation to reach the market because it may take longer to achieve the targeted price of a final product that will be accepted by the buying public. At a time when speed-to-market is important this scenario is less than ideal.

The resilience of the clean label trend also emerged in the survey responses. While many consumers are focusing on value in the wake of higher prices at retail and foodservice, they also appear uninterested in trading down to products they may perceive as less clean.

This insight became clear when the respondents were asked for their ingredient priorities for the next 12 to 18 months. Fifty-eight percent chose those ingredients that offer “clean label improvements,” followed by flavors (42%), sodium reduction/replacement (35%), sugar reduction (34%) and gluten-free (30%).

Shortly after the pandemic, as supply chains were stretched due to significant pent-up demand from around the world, companies were forced to initiate stock-keeping unit rationalization programs to keep those products most in demand by consumers on store shelves and restaurant menus. The survey shows that as supply chain pressures have eased SKUs are proliferating.

Eighty-one percent of respondents said innovation around new products within existing brands, like new flavors or attributes, are very important or extremely important. The responses show that the traditional product development playbook — where line extensions are used to create news around a brand to attract new consumers or reengage lapsed consumers — remains a clear priority for companies.

That cost reduction has emerged as the clear No. 1 trend in product development should not come as a surprise. The rapid rise in costs for inputs and services has pushed companies to raise prices at retail and foodservice. Consumers have been pushing back, and product developers must now find the balance needed to deliver the products consumers want at a price point they find palatable.