Looking Beyond Foodservice Hype

NASHVILLE, Tenn. — The last decade or so has seen an explosion in disruption, applying to everything from technology to energy to foodservice — but a range of factors may have resulted in the end of the disruptive hype cycle as it pertains to food, which should affect how retailers and suppliers respond to new innovations, according to Tom Bailey, senior consumer foods analyst at Rabobank.

Investment in disruptive food offerings rose significantly between 2014 and 2022, Bailey shared during his presentation, "Don't Believe the Hype — The End of the Hype Cycle for Disruptive Innovation in Food," at the 2023 Convenience Store News Convenience Foodservice Exchange (CFX) event, recently held in Nashville.

However, the foodservice market is different than other markets because consumer acceptance and heavy regulation play strong roles. Bailey pointed to a resistance to insect-based protein and Italy banning lab-grown meat to protect its food heritage as examples. Additionally, the market has recently changed due to labor shortages, supply chain changes, interest rates and inflation, and other factors.

"There have been very few success stories of these disruptive food products really catching on with the consumer," Bailey said. "It appears that the investor underestimated consumers' willingness to revolutionize their diets. People's relationship with food is much more intimate than a lot of people realize."

He described two types of innovation that occur in the food industry and elsewhere: disruptive and incremental. Disruptive innovation is typically more attention-getting and exciting, but that doesn't mean it ultimately makes the biggest difference, especially considering that consumers want the most value for their money when they make food purchases.

"Incremental innovation has historically been the true driving force of innovation and food," Bailey said. "It's what moves the needle, what gets us to where we are today. It's small improvements on existing products in your existing infrastructure."

The advantages of incremental innovation include being less risky, less costly and fitting within a company's supply chain. Bailey cited the launch of Doritos Locos Tacos at Taco Bell as an example of a successful incremental innovation.

To be successful, suppliers must ensure that the food product or solution they are providing is needed, consistently executed well and wanted by consumers. Yet even then, the first item to hit the market may not do as well as the ones that come later.

For example, in the oat milk segment, Oatly gained significant popularity through baristas and served as the disruptor to the milk category. However, fairlife came later and offered lactose-free milk that was ultra-filtered milk with reduced sugar and increased protein. It proved to be the higher performer over the course of years.

"It's a clear lesson of how incremental innovation can outperform hyped-up disruptors that are going to come in and change the world," Bailey said.

With investments in foodservice disruptors down by a significant amount, the hype cycle appears to be over within the category, but that doesn't mean an end to foodservice innovation. Bailey pointed to Amara's Law, which describes how people "tend to overestimate the effect of a technology in the short run, and we tend to underestimate the effect in the long run."

He predicted that companies will shift back to incremental changes, and future disruptive products will be smaller in number and much more scrutinized.

"Eventually, the second and third generations of these products are going to come back. For things like plant-based beans, they're going to taste better, the texture's going to be worked out and it's going to be more accepted by consumers. If this disruption continues to fall along Amara's Law, then the future of disruption of innovation will be underestimated by us," he said. "In other words, disruptive products that failed this time around are going to come back and exceed our expectations in the future."

More incremental innovations will mean range rotations and new menu items for retailers and restaurants to add into their systems. This means purposeful overlap in products, requiring consumer insights and continued partnership in terms of innovation alignment for c-stores, foodservice and grocery. During this time, retailers and restaurants can optimize and update store layouts, improve margins and gain alignment with suppliers.

"Use this opportunity to optimize your product score layouts and get ready for the next round of disruptions," Bailey advised. "Because if Amara's Law plays out, we will all be surprised by the disruptions that are coming down the pipe in the future."

The eighth annual CFX event was an exclusive networking and experience-focused conference that gave attendees actionable knowledge and research to strengthen their foodservice business. Multiple executives from leading food-focused convenience store chains spoke at the event.

Sponsors of the 2023 Convenience Foodservice Exchange included gold sponsors Autofry/MTI Inc., BOHA! by TransAct Technologies Inc., Chain Link Services, Everest Ice and Water Systems, Finlays Americas, Hunt Brothers Pizza LLC, Southern Visions LLP, The J.M. Smucker Co. and Wasserstrom; silver sponsors Supplyit By Jera Concepts and Tyson Foods; and innovation zone sponsors 33 Degrees Convenience Connect, Kitchen Technology Innovations Integrated Control and Smoodi.