Ultra 3C
Proper Good, a shelf-stable meal company, has raised $3.5 million in seed funding, led by YETI Capital (yes, the cooler people). Investors include Doug Bouton, founder of Halo Top. Proper Good was founded with the insight that healthy, RTE meals aren’t always convenient. Proper Good offers an array of keto-friendly, gluten free, and plant-based oatmeals, soups, chilis and rice dishes that are ready in 90 seconds. The new funding will bolster the brand’s move into new channels. Currently products are available in 2,000 Walmart stores nationwide, as well as online.
Startup frozen food brand 8 Myles is launching an equity crowdfunding campaign through investment crowdfunding platform Honeycomb Credit. The brand, founded by Food Network ‘America’s Best Cook’ contestant Myles Powell, currently produces clean label frozen mac & cheese with breadcrumb crusts available at hundreds of retail locations (including Whole Foods Market, Sprouts Farmers Market, and Target stores). The brand is set to release an expanded line of family-size offerings as well as additional sides.
Harvest Hill Beverage Company has announced the acquisition of the kids’ beverage company Poppilu. Originally founded as a better-for-you adult lemonade company in 2017, Poppilu switched to being a kid-focused brand in 2020. The brand offers convenient pouches of lemonade with 7g of sugar per serving (66% less than leading juice brands) and no added refined sugar. For Harvest Hill, the purchase introduces a wellness brand to the company’s more traditional line of beverages (e.g., SUNNYD, Juicy Juice, Little Hug Fruit Barrels, etc.).
Colorado-based startup Lentiful is out with a line of instant meals based on lentils. The meals come in cups to which consumers add water, microwave and stir. The brand states that they are striving to “eliminate all of the meal prep” from a healthy meal. Each variety contains 8-12g protein, 6-7g fiber, 200-210 calories, and is both vegan and gluten-free. Varieties include three savory and one sweet offering: Mexican Green Chile, Thai Coconut, French Mirepoix and Cinnamon Apple.
Panera is continuing their digital AI push. The bakery/café brand has introduced a new store format in New York that is 40% smaller than its typical storefronts. The new format has digital ordering kiosks, an advanced order tracking system, and more space for the company’s Rapid Pick-Up experience. This format appears similar to the online-only sites the company launched in Chicago in June. This comes a few months after the company rolled out experiments (in New York) with OpenCity to develop automated voice-technology drive-thrus. Panera is also testing out AI-powered CookRight Coffee Systems by Miso Robotics that monitors temperature, frequency of purchase and time to guarantee customers the ‘perfect cup of fresh, hot coffee.’
So What? In the last 6 months, the ‘temperature’ of the food and beverage industry has changed. The consistent push for bigger, bolder bets has been tempered, as brands have returned to fundamentals. There isn’t one specific factor that caused this shift, instead it was likely a combination of inflation concerns, supply chain issues, and consumer post-COVID uncertainty. However, it’s clear that the time of magical category growth (e.g., alt-protein) and unlimited CPG startup investment has ended.
The way I see it, we’ve moved from an industry interested in the speculative ‘what’s going to change in the next 5 years,’ to the more conservative ‘what’s going to stay the same in the next 5 years.’ It’s the latter that will drive growth and investment in the near term.
One mega-trend I see on the horizon (part of a series of trends I’ll publish in the New Year) is Ultra 3C. This is the combination and enhancement of three existing trends into one. I predict we will be seeing major companies going ‘all in’ on products and technologies that provide maximized Comfort, Convenience, and Clean Label, all in one product/service.
Context Changes Consumption
10 Acre Snacking company is relaunching a rebranded range of products into the UK Market. 10 Acre Crisps is a carbon neutral, hand-cooked potato crisp that was formulated to meet the HFSS standards. The product varieties include: Cheese & Onion Flavour, Fried Chicken Flavour, BBQ Beef Flavour, Sea Salt and Cheesy Chilli Flavour.
Asahi, one of Japan’s largest beverage companies, is launching Oishi Mizu Tennensui Sayu, bottles of still water packaged to be served warm in convenience stores. The company is offering this product because of the rise of commuting consumers that want a hot beverage during the winter months but aren’t interested in coffee or tea. The orange cap on the bottle designates that these bottles have been specially designed to sit in a warmer in-store.
Trader Joes has released a limited-edition mini chocolate mousse dessert. These single-serve offerings are imported from Belgium and contain a buttery shortbread base, whipped chocolate mousse and a chocolate ganache topping. The desserts come frozen and can be defrosting in the fridge before serving.
So What? In 2012, David Byrne (founding member of The Talking Heads) wrote a fascinating book called How Music Works. In his book, he makes the argument that the music of an era is driven more by HOW and WHERE it is listened to rather than WHO is making it. For example, he shows that the characteristic simplicity of Medieval European music was due to the need to produce a sound that worked in the echoey cathedrals of the day. Similarly, horns became the favorite of jazz musicians because they broke through the clamor of tightly packed bars and cafes.
In the more recent book, Switched on Pop, the authors continue this line of thinking by showing that headphone use has changed pop music. Because artists are now directly in our ears, versus coming through big speakers, we’ve seen a rise in a more intimate style of ‘whisperpop’ (e.g., Billie Eilish, Selena Gomez or Lana Del Rey). Additionally, because most headphones aren’t good at transmitting low frequencies, music producers have strategically pumped up the bass at high frequencies (something tiny earbuds are good at), leading to a rise in more chest-thumping genres (e.g., EDM).
So, if how and where we listen to music directly impacts the type of music that gets made, I’m of the belief that the same can be said of food and beverage. In other words, the context of our consumption changes what gets consumed.
This isn’t a radical concept. Just think of how much commuting changed what we eat and drink. Everything from Starbucks to snack bars were created to fit into our on-the-go lifestyle. The question is, what’s the next big context change that the industry must be prepared for? Here are a few potential candidates:
Screens are changing snacking
Dozens of studies have been published in the last few years (e.g., here, here, here, and here) looking at how our ever-growing use of screens is impacting our eating behaviors. The general finding is that the more screens we watch, the more likely we are to abandon breakfast, eat less fruit, and choose one-handed foods that don’t interrupt the flow of our media consumption. The ideal snack for screen watching is hand-to-mouth, mess-free, and consistent from bite to bite (to avoid the need to look at it).
Self-checkout changing our shopping habits
While not a favorite for most shoppers, self-checkout systems continue to gain ground in supermarkets. Recent reports (including this one published last week from data and analytics company Catalina) show that the emergence of these systems may be having a profound effect not only HOW consumers shop, but WHAT they shop for. Self-checkout users are choosing to buy smaller items and to shop more frequently. This, coupled with the rise in single-person households, could greatly reshape the food industry.
Climate Change is Changing Our Appetites
As the world gets warmer, and weather in general becomes more severe, there will be an impact on food. While the primary focus has been on the effects climate change will have on crops (i.e., less nutritious), there will inevitably be an effect on how food is eaten. High temperatures change how and what we eat, with people often eating smaller, less dense meals later in the day.
Government Regulations Altering Our Purchases
The UK recently instated HFSS legislation, which alters how food/bev products can be advertised and merchandised based on their fat, sugar and salt contents. This change is one of several government interventions we are seeing throughout the globe. These dramatic interventions are already having an impact on the types of products companies bring to market. As the US rolls out both product and packaging regulations at the state level, and perhaps the federal, it could have a significant effect on the types of foods/beverages people consume.
Data Paralysis
Chess can teach us a lot about business, but probably not the way you think.
Chess is over a thousand years old, with tournaments stretching back to ancient India and Persia. However, unlike a lot of other games, chess has a history of being obsessively recorded. If you want to know all the moves of a game played at a Moscow tournament in 1910, it’s in a database. In fact, if you watch enough chess with chess fans, you realize that games are often played (and every move analyzed) with direct reference to the database, or ‘the book’ as it is called.
So, two players will open, and someone might whisper “Italian Game” (referring to an opening sequence made popular in the 16th century) or ‘Kalashnikov Variation.’ This goes on and on, with each move being methodically traced back to ‘the book.’
The problem is, for many players, ‘the book’ can be paralyzing. With centuries of games to consult, and the fate of a match on the line, players often get stuck when choosing the right move to make.
A similar paralysis happens in business teams. Having access to more data was supposed to make decision speed faster but, my observation has been, it is having the opposite effect. Yes, using the right data and analysis for a project can significantly lower the risk of failure, but adding increasingly more data doesn’t necessarily make success certain. Nevertheless, as companies gain access to nearly endless data sources, more teams continuously delay their decisions until another round of analysis is done. Inevitably, when that round doesn’t deliver definitive answers, decisions get delayed again as the search continues.
The most successful organizations I’ve seen empower their teams to think like chess masters, not novices. Chess masters are celebrated for going ‘off book’ (aka The Novelty). They recognize the limits of continuously searching for more data and the power of taking an educated leap into the unknown. Companies must prioritize teaching their leaders when to go ‘off book’ (and rewarding it), or suffer from increasingly delayed timelines and decision paralysis.
The Rise of Functional Sweets
The Functional Chocolate Company is introducing Painfree Chocolate, a new Chai-flavored chocolate bar with natural botanicals shown to reduce inflammation. The brand’s pain-free blend includes turmeric, magnesium, boswellia serrata, white willow, arnica and hops. Available on the company’s website.
Functional food company You Again is introducing a new range of wildflower honeys with added botanicals meant to help support immune and gut health. The company, which also offers Ayurvedic baking mixes, will offer three superfood honey pouches (Wild Spiced, Chocolate, Turmeric). The Wild Spiced pouches (currently shipping) contain papaya (for digestive enzymes), amla berries (for vitamin C) and ginger (for no bloating). Available on the company’s website.
California-based startup Alice Chocolates is introducing a range of premium chocolate infused with mushrooms. The company currently offers two varieties, Nightcap and Brainstorm. Both contain mushrooms that the company claims will help the user be calm and restful or energetic and productive, respectively. The brand packages their premium chocolate in a convenient tin.
Wellness brand Beekeeper’s Naturals has partnered with Stephanie Shepherd, former COO for Kardashian West Brands, to produce a line of energy lozenges. The functional product contains all-natural honey, caffeine, matcha and propolis (a bee-created resin-like substance that is the hero for the brand).
Speaking of the Kardashians, Kourtney Kardashian Barker is adding an additional product to her recently introduced line of gummy supplements, Lemme. Lemme Sleep is a melatonin and chamomile-infused gummy that, the brand claims, helps users fall asleep. Kourtney’s sister, Khloé, is starring in the new ad campaign for the brand. Lemme also offers gummies for Focus, Energy, Debloating and Chill.
So What? Functional food products are nothing new. Every year, hundreds of new products (e.g., yogurts, teas, and bars) are introduced that contain added vitamins, minerals or other supplemental nutrition. However, putting functional ingredients in sweets (e.g., candy and chocolate) feels different. Nevertheless, ‘functional confectionary’ is a growing sector, valued at $12.9 billion globally in 2015, with Euromonitor reporting steady double-digit growth in the coming years, especially in China.
Whereas most supplemented products are ‘healthy’ themselves (i.e., yogurt is seen as inherently good-for-you), modern perceptions view candy and other sweetened treats as something to limit or even avoid. Why are we seeing growth here?
· Justification for Sweetness: The most obvious reason for the rise of ‘functional confectionary’ is that sweets and sugar are becoming more stigmatized in our society. As popular nutrition intensifies the campaign against sweets, more consumers are looking for ways to meet their sweet cravings guilt free.
· Emotional Wellbeing: An additional possibility is that modern media is incorporating emotional, not just physical, wellness into the definition of well-being. Whereas functional health in the 1990’s dealt more with the physical body (e.g., bones, heart, etc.), wellness today frequently includes mention of happiness and mental calm. Functional sweets provide a wellness bridge across this mind-body gap.
· Carrot not Stick: Taking a vitamin is a necessary chore, akin to shaving or flossing. You know you need to do it, but its not necessarily enjoyable. However, putting vitamins into a sweet treat makes consumption something you’re less likely to avoid.
· Taste Masking: The first candy making machine was invented by a pharmacist. Since the Middle Ages, sugar has been a common ingredient in medicines because it masks the bitter, metallic, or astringent tastes of herbs and minerals.
· Evolution of Snack Bars: Sweet nutrition bars have been a common functional food for decades now. In addition to providing protein, snack bars often contain vitamins, probiotics, and botanicals. However, the issue I’ve heard from consumers is that snack bars, while an enjoyable, permissible treat, are often too high in calories. While they want the functional benefits, 190-300 calories can be excessive. Therefore, I’m wondering if smaller, less calorie dense candies and chocolates are starting to serve a similar purpose.
Tech Implosion: What does it mean for CPG?
If you are a person in tech, or just someone with a stock portfolio, you’ve likely noticed that technology companies have been taking a beating the last several months. Meta (Facebook’s parent) is off 70%, Amazon is the first company in history to lose $1 trillion in market cap, and every one of the tech giants is either laying off employees (Amazon, Meta, Facebook, and Twitter) or pausing new hiring (Apple).
While the tech world may seem only tangentially related to CPG, it would be a mistake to think that we are somehow isolated. Beyond tech’s oversized impact on the broader economy, I can see multiple ways that the troubles in Silicon Valley are extremely relevant to CPG.
· Return to Profit, Not Growth: One of the defining characteristics of tech in the last few decades was the ability of these companies to post negative profit as long as they continued to grow. This allowed companies like Amazon to burn through cash entering categories like grocery, while traditional retailers like Walmart were still held to more traditional metrics. That time has ended. This may mean that we will see a retreat by tech companies in specific categories (e.g., GoPuff, Amazon, UberEats) if they can’t deliver on profit expectations.
· End of the Cult of Personality: The amazing growth of tech was partially due to a specific model of investment in companies built around a charismatic, storytelling leader (a ’la Steve Jobs). However, a series of very public falls from grace (e.g., Elizabeth Holmes and Theranos, Sam Bankman Fried with FTX, and Elon Musk and Twitter) has tarnished this narrative. In CPG, this tech model was frequently mimicked, with visionary founders leading (and potentially overreaching) with vision-based vigor. However, as the recent troubles at companies like Beyond Meat showcase, this model is in question.
· Technical Gains for CPG: With layoffs rolling through the tech world, highly talented programmers, engineers and human-factor designers are suddenly looking for work. Previously, these folks were nearly impossible to woo away from the perk-driven world of tech, but that might be changing. The salaries of tech workers is almost certainly going to go down (see this extremely in-depth breakdown from Dan Luu) and many would probably welcome the stability of a different sector. CPG desperately needs a tech update, and we might just see a great talent migration of tech people to CPG and retail.
· TikTok Outlier: While much of tech is reeling from increased inflation and overzealous pandemic hiring, it’s important to recognize the company that is thriving—TikTok. The social media company is THE future force for today’s consumers.
Brands I’m Watching
Mike Tyson and Evander Holyfield have apparently made up after Tyson famously bit the tip off Holyfield’s ear back in 1997. Now the two are releasing the Holy Ears collection of edibles, THC-infused gummies in the shape of a mangled ear called Mike Bites. The gummies are part of a larger cannabis line by the pair. Available in four flavors: Cherry Pie Punch, Watermelon, Sour Apple Punch, and Black Eye Berry.
Old Pal, makers of shareable cannabis, is launching a Baked at Home brownie mix. The mix bypasses the difficult decarbing process and uses powdered, water-soluble cannabis extract in the mix. Consumers simply add eggs and butter to produce brownies with 5mg of THC per treat. Available at dispensaries in California and Massachusetts.
So What? The FDA’s crackdown on CBD inclusion in food and beverage last week will likely have a significant impact on the industry, with companies like Molson already unwinding their interests in CBD beverages. However, just like with alt-meat, I see this as a setback to the category not an full stop.
But CBD is not THC and the market for the latter continues to grow. With news a few weeks ago that Florida Circle K gas stations would start dispensing cannabis and edibles (via Green Thumb Industries), the potential expansion of more convenient dispensaries became clear. To the point that CPG companies must soon begin strategizing on how their products may compete or compliment THC-containing products.
Tortilla maker Mama Lupe’s has launched a line of Flavor Pack tortillas exclusively at Walmart. The new products offer flavor-infused soft, flour tortillas in bold flavors. Varieties include: chocolate, churro, ranch, barbecue, pumpkin spice and Buffalo spice.
So What? Flavored tortillas aren’t new, but the move into sweet varieties is intriguing. Primarily because it speaks to a greater consumer empathy in how tortillas are used in households. Previous work that I’ve overseen has shown that, unlike traditional bread slices, tortillas are given wider latitude of use in home. So, beyond serving as the traditional accompaniment to meals, tortillas are used for snacks, mini-meals and even quick desserts (as this viral TikTok Wrap hack attests).