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The Food Company of 2050

Sara Olson, Ph.D.Director, Research

Thomas HayesAnalyst

Lead Analyst:

Contributor:

E X E C U T I V E S U M M A R Y

Client confidential. Not for redistribution.Client confidential. Not for redistribution.

The task of being a successful food company is getting more difficult.

Our analysis of corporate concerns, startup trends, and social norms reveals these six themes as critical to success in the coming decades.

This analysis establishes must-dos for companies to survive and thrive between now and 2050.

Successful companies will work hard across all six themes to align with the future of the industry.

Executive Summary

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What is so difficult about being a food company in 2020?

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Despite industrywide revenue growth, major players are experiencing shrinking sales, intensifying competition from small brands, and rising costs of production.

The global pandemic of 2020 has amplified existing challenges, adding urgency to the need for solutions in some cases and exacerbating the impacts of shifting consumption trends in others.

While it was once beneficial to be big, to have an integrated supply chain and costly capital equipment as a defensive barrier against smaller competitors, those small competitors are using digital tools, novel routes to market, and other innovations to reduce the value of those defensive barriers.

• By capitalizing on the agility that comes with smaller size, these newer entrants are better able to respond to consumer demands, taking market share from established incumbents.

• Any single small competitor is easily managed, but the rapid proliferation of these smaller companies has proven an almost insurmountable challenge for the food company’s status quo operations.

Any food company seeking to survive and even thrive in the coming decades will need to adjust its fundamental approaches to be better able to meet these challenges and come out on top.

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How do you select innovation areas to prioritize?

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Startup themes Shifting social normsCorporate innovation concerns

Startup innovation efforts closely follow technology needs in a space, and in the world of food innovation, these efforts most closely mirror consumer demands. Funding and partnership success on the part of startups serves as a strong barometer of the current status of innovation in response to the industry’s unmet needs.

Press coverage of global social phenomena provides a backdrop of information about shifting social norms that are most likely to impact consumption patterns and demands on the food system. Analyzing this data set provides an indirect indication of where consumption norms within food are headed.

Using these data sets, we identified six major areas of priority for innovation teams at food companies

Our interactions with our clients and other industry leaders have revealed areas of angst and concern for food companies. Many of these are hard problems with no straightforward solution today, exacerbating the difficulty in addressing those challenges. Taken together, these are urgent, unmet needs that should be priorities.

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At a minimum, food companies must focus on these six areas of innovation if they are to survive and thrive to 2050 and beyond

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Developing food for healthBeyond satiety and nutrition, foods need to satisfy an expanding list of expectations

Mastering the role of the microbiomeFrom production methods to diagnostics, mastering this realm will be make-or-break for food companies

Incorporating ubiquitous sensingAs sensors get smaller, cheaper, and more powerful, their inclusion in all processes becomes imperative

Increasing sustainabilityCorporate statements will not suffice; truly doing more with less must be the aim from packaging to production and distribution

Adapting to new industry structuresGrowth will come from uncomfortable places like new channels and markets; meanwhile, competitive landscapes get more complex

Understanding future consumptionCOVID-19 has accelerated some changes, but others were already underway to fundamentally alter consumption patterns

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Developing food for health

Client confidential. Not for redistribution.Client confidential. Not for redistribution.

Whether helping a consumer’s athletic intentions, cognitive performance, or another aspect of health maintenance, foods and beverages are more frequently pushing beyond just claiming convenience, enjoyment, and satiety. The beginnings of this concept come from initial efforts to reduce the prevalence of “bad” ingredients in foods and beverages, and as the bar has been raised on the relative healthfulness of all products, developers seeking to stand out from the crowd have turned to not just less “bad” but more “good” in their products. Many are looking to foods as part of their health in an active way, creating an opportunity for food companies to evolve into health companies and vice versa.

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Brightseed and Danone formally announce discovery partnership

Nestlé develops all-cocoa chocolate with no added sugar

Novo Nordisk and Noom partner to reduce obesity

Arcadia commercializes high-fiber wheat variety

DEVELOPING FOOD FOR HEALTHMore than ever, foods need to do more than satisfy appetites; they need to offer legitimate health benefits

Companies today are already embracing this theme:

Long before 2050, all food and beverage products sold will make multiple health-related claims. Companies seeking to survive the coming decades will need to focus product development efforts on “better-for-you” products and specific performance-related ingredients. Those seeking to truly thrive must look beyond, to the opportunities lying in the expanding gray area between food and health.

MycoTechnology raises $39 million for functional ingredients

LUX TAKE

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DEVELOPING FOOD FOR HEALTH

What are your peers working on?

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Lux clients have expressed a wide range of concerns in the realm of developing food for health, grappling with questions like:

• Has there been any meaningful progress in stevia rebaudioside production in the past year?

• How can food ingredients serve a functional purpose in healthy aging?

• How, as a food company, can we become more involved in consumer health concerns like fitness and exercise monitoring?

• What strategies are most promising for using dietary advice to manage diabetes for consumers?

• Who is developing tech to improve health through better sleep?

Client confidential. Not for redistribution.Client confidential. Not for redistribution.

What you need to survive

“Better-for-you” foods and beverages

Formulations that rely less on sugars and fats for organoleptic and structural functions will dominate. The emphasis will be on protein and fiber contents to promote satiety and net reduced glycemic impacts.

Cognitive health ingredients

As more developers look to make performance-related claims on labels, cognitive health is taking center stage. Ingredients like nootropics and other phytonutrients generally suffer from intangible claims and significant hype, so companies will have to work hard to separate fact from fiction.

Food as medicine

Consumers will seek more ways to use their lifestyle choices to reduce dependence on medical interventions. Beyond just products promoting general health, work to develop foods that can address specific, medically relevant health outcomes like blood pressure reduction and reduced postprandial blood glucose.

An ability to redefine “healthy”

Over time, fewer foods and food groups are considered objectively “healthy,” with advice getting more stringent as options proliferate. Work to reduce dependence on individual ingredients to move with an evolving definition of “healthy.”

What you need to thrive

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Client confidential. Not for redistribution.Client confidential. Not for redistribution.

Nootropics, complementary and alternative medicine (CAM), ayurvedic medicine, and other phytonutrients are top of mind for most ingredient research groups.

Most ingredients suffer from weak or intangible claims, and much-needed clinical trials are trending downward (see graph, data as of mid-2019).

Separating true promise from pure hype is a real challenge.

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DEVELOPING FOOD FOR HEALTH

Innovation example: Cognitive health ingredients

Work hard to avoid chasing pseudoscience; focus on data-backed benefits to cognitive health only. Clinical trials to verify an ingredient’s effectiveness will be critical to long-term success and are worth the cost, time, and effort to execute.

LUX TAKE

For more information, please see our insight on cognitive health ingredients.

Client confidential. Not for redistribution.Client confidential. Not for redistribution.

Outlook

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1Survival requires a defensive mindset; thriving requires you to go on the offensive.Your immediate call to action is to ensure your organization is following these six themes to a minimal extent, then establish areas where you can push further to emerge a leader.

2The overarching attribute of the future of food is a wider role for food companies.Pushing into agricultural production, establishing new channels, and developing consumer health-related businesses are all actions future leaders will go to work on now.

3Never lead with tech; lead with the problem to be solved and work backward.Adopting tech for its own sake is a slippery slope toward wasted pilot budgets and an organizational resistance to experimentation; find problems and solve them with tech instead.

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