Running an innovation and strategy consulting business for the food/bev industry, my days are spent pouring over market data, listening to consumers, and synthesizing everything into opportunities for clients. So, you’d think a New Year trend newsletter would be right up my alley. The truth is, I despise trend lists.
OK, maybe despise is too strong and sweeping. Some lists are harmless fun, while others are put out by folks that are truly insightful. However, the overwhelming majority are clickbait listicles generated to prey on the industry’s anxiety of not being prepared for the coming 12 months.
The core of my dislike is that these slapdash trend lists represent a major problem plaguing business innovation today: mistaking ‘cool’ for ‘insightful.’ No laundry list of exotic-sounding flavors and ingredients gathered from a San Fran farmers’ market or Tik Tok search is going to drive long-term profitability for your business. However, time and again, I’ve seen people become enamored with these trends, substituting their personal lack of consumer insight for a blanket belief that “X will be the flavor of the year.”
Here's the truth: Trends are like flowers. They are fun to look at and easily draw your attention, but they are ephemeral, dying as quickly as they’ve bloomed (Do you remember two years ago when these lists said that butterfly pea and tiger nuts would be everywhere? I do, and I’m still waiting). Building your innovation on flowers is foolhardy. By the time your company’s systems pivot to react, the market has moved on and you are stuck with a passé portfolio.
Real innovation is found in the soil, not the flowers. Soil, often messy and difficult to turn over, is where you come to understand the underlying consumer drivers, market forces, and the cultural reasons why the flowers grew in the first place. You build solid PLATFORMS on soil, via insights that have depth, data and direction. In fact, it is soil’s long-lasting stability that allows teams to construct innovation pipelines versus changing with ‘cool.’
So, for this week’s newsletter, let’s dig through some of the interesting soil for the coming year.
Grab some coffee, this is a long one.
P.S.—looking for a keynote speaker to engage and inspire your team this year? Do you want to turn insights into opportunities for your business? Send me a note (kevin@malachite-strategy.com).
What I’m Expecting to See in 2023
Food & Bev Industry 2023
Crop Collapse, Ingredient Shortages and Agro-Terrorism: 2023 will be the beginning of a ‘new normal’ of rotating crop failures and ingredient shortages. The lettuce, crab, and egg issues we saw in 2022 will likely repeat in 2023, with market volatility across numerous categories predicted to continue . Climate change will lead the charge with an El Niño predicted for this year, ushering in potentially cataclysmic weather events. With warmer weather comes more disease, leading to a continuation of issues like avian influenza. Finally, the most terrifying potential is around agro-terrorism (i.e., an attack on the food supply). While there have been no reported issues to date, the recent rise in attacks on the US power grid and other signs of civil unrest raise concern regarding the stability of our food infrastructure. A major attack would be devastating and agricultural strategists have recently raised warnings.
Packaged Food/Bev Companies Move Upstream: Seeing the potential for significant disruption in ingredient availability, 2023 will see more CPG companies invest further upstream in the foodchain. Companies strategically see the long-term stabilizing benefits of placing major stakes in agricultural and ingredient security. Look for actions that:
Protect agricultural stability (like General Mills’ recent investment in BeeHero, a data-driven Precision Pollination Platform, Cargill’s investment in carbon software company Regrow, or John Deer’s satellite-driven advancement on their See & Spray tech)
Invest in early-stage farming automation (see Constellation Brands partnership with autonomous, smart tractor maker Monarch)
Seek alternative methods of traditional farming (like McCain Foods leadership to fund vertical farm startup GoldLeaf Farms and Nestle and Fonterra’s regenerative efforts to make a net zero dairy farm)
Bypass traditional farming with investments in alternative ingredient production to lower future costs, provide more sustainable output, and protect against future supply chain disruption (see the Kraft Heinz Joint Venture with NotCo or the rise in companies like Minus beanless coffee or Voyager Foods)
Help create chemical components more sustainably (see P&G’s partnership with green electrochemical company Twelve)
Lean into molecular farming, the buzzworthy tech that creates plants that produce animal proteins (e.g., Moolec becomes first molecular farming company on Nasdaq)
Embrace the controversial technology of genetic engineering to reduce biological or environmental issues that could devastate production (e.g., Israeli company Huminn producing female-only chicken flocks to reduce male culling)
Corporate Green-hushing: Meeting long-term environmental goals is difficult, and companies are feeling the pressure. While some have missed their projections due to COVID, others have been accused of embellishing their claims (i.e., greenwashing). For that reason, as well as continued uncertainty, we’ll likely see a trend toward less bold corporate environmental public pledges in 2023 (i.e., green-hushing). California has already moved to make companies be more open with their environment disclosures (SB 260, SB449). That’s not to say that internal ESG plans or environmental marketing on a brand basis will be curtailed—most likely the opposite (see below)—instead corporations will likely meter their consumer-facing statements.
Sustainability as an Ingredient Differentiator: The conversation around sustainability and food products has focused mainly on proteins, and for good reason. The production of meat, poultry, dairy and eggs makes up 57% of carbon emissions in the food system. However, many of the consumers that are environmentally concerned have already reduced or eliminated meat and dairy from their diet and moved to a more plant-forward lifestyle. So, in 2023, we will see sustainability messaging expand to staple goods and ingredients, especially those like cacao and coffee that generate a considerable amount of greenhouse gas. Coffee companies like Blue Bottle aim to make their coffee carbon neutral in the next year, while others are first focusing on making their packaging neutral (e.g., Chamberlain’s new coffee pods). While greener vertical farming companies have proven to be more difficult and expensive to start up than previously thought, their environmental branding was a wake-up call to the produce industry. Expect to see an avalanche of sustainability claims on produce in stores (and big corporations footing the bill to get vertical farms to profitability). Products like Del Monte’s Zero pineapple, Port International’s ClimatePartner fruits, and ZeroCarbon Farms use carbon footprint as a brand benefit. Similarly, we will see greener ingredient differentiation like carbon-neutral flour and low-carbon emissions corn syrup.
Prime Time for Artificial Intelligence: According to Datassentials 2023 Food Trends report, 77% of consumers are open to trying a dish or a product designed by AI. Well, in 2023, I think they will get their wish. This year we will see a few bold companies launch AI created food/bev with great fanfare, using the novelty as a trial driver. Of course, that novelty will fade quickly, especially if the first few launches aren’t well received. Internally, I see 2023 as the year CPG companies invest heavily in AI across their organizations (of course, it will also be the year that companies learn the limits of AI and how much they can trust it). From formulating the best tasting product (via AI platforms like NotCo’s Giuseppe, or Climax cheese ‘Deep Plant Intelligence’), optimizing shelf facings (see Penza), creating package design that pops (e.g., Mars use of Vizit), building micro-targeted ads (like Instagram Promotions), warehouse orchestration (e.g., AutoScheduler), grocery inventory management (e.g., SpartNash’s use of predictive ordering AI from Afresh), and hiring and maintaining the best employees.
Increasing Data Efficiency and Scale: The potential merger between Albertson’s and Kroger was one of the biggest announcements in the food industry this year. While it is easy to think of this matchup in terms of geographic synergy for the two retailers, the truth is that data efficiency and scale are likely the most compelling reason for the union. Combining their retailer media, health services, micro-fulfillment data, and digital talent, the two retailers will be better prepared to combat Walmart from a data perspective (it is also a big reason why we’ve seen a rash of independent grocers merge in the last few years). With Walmart acquiring micro-fulfillment company Alert Innovation, 2023 will see data come to the forefront for ecomm growth, maintaining customer relationships, and driving down costs.
Renegotiating Time and Purpose for Employees: The pandemic changed our perception of time (it’s not just you). The isolation, the lack of social interaction, the repetition, all of it made people reevaluate how they allocated time. While the push for remote work has dominated headlines, the real issue isn’t about Zoom or no Zoom, it’s about wasted time versus precious time. If people are going to allocate their time to something, they want it to be purposeful. The COVID epiphany for many was realizing that so much of the workday (from commuting to ‘forced fun’) was time taken from their family and the personal realm. Smart businesses will spend 2023 trying to recalibrate employee time with purpose, showing people that their time has meaning, value and impact.
Foodservice 2023
C-Stores Become the 3rd Place: 2023 will be an inflection point for c-stores. Long stereotyped as the land of roller grills and diesel fumes, c-stores are rapidly changing. More consumers are thinking of C-stores as a meal destination than ever before. According to info from retail analytics company BlueDot, 59% of consumers consider stopping at a c-store when they are in the mood for a fast-food meal. Recent data from NPD Group shows that foodservice menu visits to c-stores are up 8% in the last few months of 2022 (now accounting for 23% of c-store sales). C-stores are adding drive-thrus, partnering with chain restaurants (e.g., TA’s partnership with IHOP), and opening food-focused, fuel-less locations. As EV sales are predicted to skyrocket in 2023, the race is on for who will own the charging infrastructure, with C-stores being well positioned. Unlike gas fueling, which takes minutes, EV charging can take over an hour, plenty of time for customers to grab a coffee, a meal and be entertained (i.e., spend money). Food/beverage companies will need to rethink their approach to c-store product development and sales.
Profit Innovation Reimagines the Restaurant Experience: Restaurants have had to survive significant setbacks in the last three years: a pandemic, inflation, supply chain, and labor challenges. For many establishments, this has resulted in dire economics (i.e., over 40% of independent restaurants are behind on rent). For those that have survived, finding profit has been a struggle. In 2023, I believe we will see restaurants taking unorthodox steps to increase their profit margins:
Tech-Enabled Efficiency: Restaurants aren’t known to be specifically tech-forward. It’s not that they shun technology, but more that they can’t afford to adopt gimmicks that fail to operate in their high-stress environments. However, 2023 will be the year where we see a significant number of chain restaurants begin to invest in major technology upgrades that lower operating costs. These technology upgrades will begin to help turn the financial tide and become a competitive advantage.
Labor Automation: We will finally see large fast-food restaurants incorporate robotic automation back-of-house (see Krispy Kreme’s massive investment in doughnut making, frosting and packaging robots), create nearly autonomous stand-alone restaurants (see McDonald’s new conveyor belt restaurant in Texas or Subway’s AI-enabled smart fridges), automate drive-thrus (see Panera’s AI drive-thru), and more restaurants will adopt AI answering services (see Jet’s Pizza automated voice system).
AI & ML Inventory Management: Most restaurants have digital inventory systems, but they still must rely on human counting and operating skill to maintain the right amount of ingredients and organize service. However, in 2023 we will begin to see big chains incorporate AI & ML tools that monitor ingredients in real-time, spotting inefficiencies and calling the shots when it comes to prep and order timing. This will greatly affect how companies sell ingredients into foodservice (see Chipotle’s pilot with Precitaste).
Pricing model innovation: Surprisingly, one of the things holding restaurants back from being profitable are the assumptions customers have about what a restaurant fundamentally is. 2023 will see restaurants purposely push to change expectations to increase profit.
Dynamic Pricing: You expect to pay more for a hotel or plane ticket on busy days, but why not a weekend meal at 7PM (versus 5PM)? That may change in 2023. As more menus and consumers go digital, restaurants are testing the possibility of dynamic pricing (and reaping the rewards). Restaurants will begin to maximize their slow hours and make eating at popular times (and popular items) a premium.
Subscriptions and Enhanced Loyalty Programs: Guaranteed recurring revenue is the dream for restaurants, and subscriptions may be the answer. In 2023, we will see even more restaurants jump on the bandwagon and institute subscription-type models to reward customers, enhance sales, and spur engagement with their digital platforms (e.g., PF Chang’s, Taco Bell’s Taco Lovers Pass, DoorDash DashPass)
Eatertainment Expansion: Customers spend more money when they linger longer and feel they are getting more out of the visit. Plus, for the increasingly sober younger generations, social activities that involve a mix of food and entertainment, the eatertainment trend replaces the bar scene. Yelp says they saw searches for underwater restaurants increase 263% last year, and dinner theater increase 109%. The popularity of establishments like TopGolf, Puttshack, Chicken N Pickle, SmashPark, and Toca Social (as well as upscale roaming gastronomic adventures like We are Ona) signal a rethinking of the combination of higher-end food and adult fun.
Consumer 2023
Consumers Embrace Q: Compared to many other parts of the world, consumers in Western countries are traditionally quite conservative when it comes to acceptable textures. Crispy, crunchy, smooth, and creamy have always been the target textures for Western CPG. However, as social media expands consumers’ knowledge of other cuisines, and consumers look for sensorial excitement that fits with their new dietary needs (e.g., gluten free, no sugar, etc.), we have seen consumers explore products that push the boundaries of extreme chewiness (a texture that the Taiwanese refer to as ‘Q’). See products like Issei’s mochi-inspired gummies, this Holiday’s popularity of Mooks (mochi cookies) (not to be confused with Mookies), Del Taco boba beverages, Tastelli’s Drinkable Jelly , Peet’s Jelly drinks, NadaMoo’s frozen snacks, and Trader Joe’s pao de queijo or frozen Korean rice cakes. Look for 2023 to be the year of chew (both extreme chew, like Q, or the introduction of chewy lines, like Kind’s new Chewy Granola Clusters)
Kidults and the Rise of Whimsy: Adults are now the leading driver of sales growth in the toy category. According to a pre-holiday NPD study, a whopping 25% of all toy sales in the US were bought by adults for themselves (about $9B). Today’s adults are becoming more comfortable maintaining a playful and less serious side in their brand loyalties. The success of irreverent brands like Liquid Death with 30 and 40-somethings will likely influence other brands in being more bold and cheeky in their messaging. The success of romps like Glass Onion or fantastical movies like Everything, Everywhere, All at Once (and the disappointing box office of serious films like The Fabelmans and She Said) potentially speaks to adults looking for a break from serious adulting. In 2023, we will see more CPG brands fully embrace the “kidult” consumer, not just with nostalgia, but with quirky, playful products and brands for an adult audience (see Danone’s Grinch Coffee Creamers, Disneyland’s $185 Waffle Cone Shot, the branding of Sunday’s Zero Sugar Crème Cookies) .
Technology-Enabled Permissibility: Consumers want to eat their cake and have it too. While whole grains, vegetables and no sugar are great sometimes, consumers consistently show that they want a way to still enjoy more decadent offerings without the guilt. In 2023, we’ll see more technology solves reach the market that provide the taste and the textures that we crave with less of the regret (thanks to science) (e.g., Israeli company Torr uses their iWeld technology to bind foods together —like granola and bars-- using ultrasonic sound waves instead of sugar; Kraft is sponsoring tech that allows consumers to eat sugar and an enzyme and have that sugar turn into fiber in your gut; Oobli’s protein-sweetened chocolate bars; sustainable, fermentation-derived umami from Nordic Umami)
Plant-Based becomes Plant-Positive: News that fast-growing (but struggling) plant-based CPG company The Tattooed Chef was considering adding animal meat to some of its product lines to raise profit caused considerable consternation in the food world. This not only signals the pressures plant-based brands are facing in the New Year, but the strategic rethinking now taking place. Do plant-based products require ‘purity’ for mainstream success. While obviously necessary for vegetarian/ vegan purchase, the bulk of the sales for these products is coming from flexitarians, who are driven first by taste, then by health. In 2023, I think we will see the tide shift from products that are strictly plant-based (i.e., all ingredients are derived from plants) to products that simply highlight the presence of a prominent plant ingredient (e.g., oatmilk, Impossible meat, Just egg, etc.) and a plant-positive ingredient deck without being 100% vegan (e.g., Oayeah pancakes made with oatmilk and free-range eggs; the Impossible Breakfast Sandwich at Starbucks with an Impossible Sausage patty, cage free egg, and sharp cheddar cheese).
Personalized Value: It’s no surprise that the cost of food is top of mind for consumers in these inflationary times. However, the difference between today’s shopper and one in the 1970’s, is that today manufacturers, retailers, and restaurants have access to personalizing technology and data. Whereas, in the past, ‘value’ was broadly defined for a large group of consumers, today ‘value’ can be more narrowly specified and acted on. In 2023, we will see this technology actively used to maintain brand loyalty and pull frugal consumers toward deals. Examples of this already in practice include: AdAdapted (CPG shopper data provider and app shopping list brand promoter) partnership with Flipp (digital aggregator of grocery circulars/coupons) that helps manufacturer’s track and influence consumer product choices; California restaurant chain Urban Plates is rolling out an app-based subscription plan that awards 20% off a whole check for $5 a month; InstaCart is offering its Instacart+ service to EBT/SNAP participants at a discounted price. The service unlocks free delivery for orders over $35 plus additional discounts; retail grocery platform Yellow Banana’s (owners of 30+ Save-A-Lots in TX and FL) partnership with Flashfood, a digital platform that allows consumers access to deeply discounted products at or near their expiration date.
From ‘Celebrity’ Chef to Celebrity ‘Chef’: The 2000’s and 2010’s was a time when Emeril, Gordon Ramsey and Bobby Flay became household names. Chefs were rockstars, opening restaurant chains, minting multi-million-dollar book/TV deals and starting their own food lines. But that fame has been fading for a while. 2023 isn’t about chefs that are celebrities, but celebrities that fancy themselves as chefs (or at least food moguls). In 2022, we saw social media mega-influencer Mr. Beast start a packaged snack food brand (Feastables), already valued at $50 million, and turn his virtual burger brand into a brick and mortar store (where 10,000 people waited in line opening day). We saw pop star and non-chef Selena Gomez continue to host her popular Selena+ Chef HBO show, launch her own cookware line, and push Serendipity ice cream (which she co-owns). Lastly, we saw Dwayne Johnson’s Zoa Energy drink become the fastest growing energy drink in the US. While the past few years have seen celebrity alcohols take-off, 2023 will be the year celebrity food/bev brands explode. Brands must realign themselves with how celebrity impacts their business (also see Leonardo DiCaprio on the advisory council at Perfect Day, or Israeli cultured meat startup MeaTec 3D partnership with Ashton Kutcher).
Invisible Specters (Plastic Edition): A 2020 poll of US, UK and Canadian consumers found that 86% were concerned about plastic pollution. However, concern doesn’t always translate to action. McKinsey has found that environmental concern runs a distant 6th when it comes to overall buying decisions, behind price, brand and quality. Not surprisingly though, the same McKinsey report shows that food safety is paramount when it comes food packaging. For that reason, the growing media buzz around potential health concerns about microplastic in food/bev may supercharge the push away from plastic (in fact, Samsung just debuted a washer at CES that removes microplastics from your clothes). Current concern and lawsuits about heavy metals in chocolate (Hershey lawsuit, Trader Joe’s lawsuit), show that post-COVID, consumers are highly anxious about unseen forces that could affect their health. In the US, EU and Asia, we are already seeing products calling out ‘microplastic-free’ on the label as a benefit (see Good Catch, Hooked, and Mountain Spring Salt), like the growing trend in cosmetics. In 2023, I see ‘microplastic-free’ becoming a growing differentiator within the wellness food/bev categories with the highest concern (e.g., salt/seasoning, beverages, vegetables, meat and seafood), with messaging about ‘forever chemicals’ also on the horizon.