In today’s newsletter:
So Hot Right Now: Deciphering the Spicy Craze
Save the Meat: Helping cooks when money gets tight
Inflationary Start-up Funding: What’s Next?
Things I’m Watching: Heinz bets on color, Cereal Goes Adult and Walmart Automates
Tidbits: Quick links to fun food news
Did you miss last week’s newsletter? Find it here
What We’ve Been Missing About the Popularity of Spicy Food
Heinz is debuting four new hot sauces to their US portfolio. Three spicy ketchups, Chipotle (medium), Jalapeño (hot), and Habanero (hotter), as well as a Hot 57 Sauce. The Heinz Hot Varieties are available across the country in major retailers.
Popular hot sauce maker TRUFF is rolling out a limited-edition Super Mario Bros. Movie Collectible Pack of sauces in time for the much anticipated, upcoming Super Mario movie. Each of the three six-ounce bottles of truffle-infused hot sauce in the Mushroom Kingdom VIP gift box is customized to a character and heat level (Toad, Mario, and Princess Peach). Available exclusively at the company’s website.
SpaghettiOs (a Campbell’s brand) is partnering with Frank’s Red Hot to produce a new product that puts a, “…more mature twist on a classic offering that our adult consumers grew up enjoying,” according to Mieka Burns, Vice President of Meals & Sauces, Campbell Soup Company.
Dutch Bros, the popular coffee chain, has launched a new beverage called Mangonada Rebel, a sweet and spicy drink topped with Tajín. The drink is a combination of the chain’s Rebel energy drink and their mangonada flavor (a Mexican dessert traditionally made with mango and spicy chamoy sauce).
Jack Links has partnered with Frito-Lay to develop new spicy products based on consumer favorites. The team-up has resulted in beef jerky and meat stick versions of Jack Link’s Doritos Spicy Sweet Chili-flavored and Flamin’ Hot-flavored Original. Products are available online and in-store.
Premium crisps brand Tyrrell’s is introducing a new flavor to the UK market. Tyrrell’s Tomato & Chilli Chutney are English crisps covered in a spicy tomato and chili chutney flavor. This new non-HFSS flavor is available at select UK retailers.
So What? It’s no secret that the popularity of hot and spicy foods has skyrocketed in recent years. In fact, we’ve seen a 20% CAGR in the launch of such products in the last decade compared to the previous, with 80% of US adults saying they now enjoy some heat in their food.
If you oversee innovation at a food/bev company, your first thought here shouldn’t be “great, let’s just make a hot version of X.” Instead, you should be questioning WHY the sensation of ‘hot’ is popular in the first place and how the answer to that question could help you create a stronger portfolio.
I’ve been intrigued by this topic for a few years and I’ve heard several rationale for the ‘spicy boom’ in product development. Some people say that our society’s increased interest in diverse cuisines has added more heat to the Western palate. Others see the rising interest in heat as a reflection of our culture’s increased push for risk-taking or hyper-masculinity. However, I don’t find any of these to be 100% satisfactory explanations. Much of the hot food we are seeing isn’t necessarily tied to an ethnic cuisine known for spiciness (e.g., ketchup, canned spaghetti), nor are many of the consumers of hot foods doing it as dare or to prove their manliness.
Instead, I have a potentially controversial hypothesis for why we’ve seen a rise in spicy food: hot food is the original adaptogen. Many of today’s most popular start-ups focus on mushrooms, ashwagandha, and CBD--ingredients that help people deal with and adapt to stress (i.e., adaptogens). My take is that consumers have been ‘self-medicating’ with peppers and chilis for years now.
Research is quite clear that there are some foods that we eat despite the fact that they are strangely ‘painful’—the capsaicin from chilis, the extreme sour of citric acid, the tingling effect of horseradish or Sichuan peppercorns, and even the intense carbonation of soft drinks. What unites them all is the feedback loop they give our brains in terms of endorphins (i.e., the joy chemicals in our brain). There is a masochistic pleasure in painful food that boosts our mood.
What if the rise in popularity of spicy food is at least partially connected to the increase in stress and anxiety in our society? I don’t say this to in anyway diminish the seriousness of mental health, but instead give us new ways of thinking about product development and marketing.
If you approached spiciness as a ‘mood boosting’ benefit, would it change the types of products you developed? How would it impact your marketing and messaging? For example, if consumers are reaching for spicy ketchup to feel a rush of endorphins after a stress-filled day, I’d suggest pivoting the marketing message appropriately to reflect the tension release.
Hot and spicy food feels like a mainstream adaptogen that even big brands could leverage.
The Inflationary Opportunity of Saving Dinner
Perdue has launched a new line of flavor-infused chicken. The sous vide product consists of refrigerated chicken pieces that are ready to heat and serve. The brand promises “ultra-tender, extra juicy, flavor-infused” results. Varieties include: Sesame Ginger, Green Chili, and Greek.
North Carolina startup Meat Sweats has debuted their inaugural product line of BBQ Spritzers. Building off the traditional use of ‘mop sauces’ in barbecue prep, the spritzers can be used on grilled or smoked meats and veggies to add additional flavor and moisture. Varieties include Bull Spritz BBQ Spritz, the Bird Bath BBQ Spritz, and the Hog Wash BBQ Spritz. Available at the company’s website.
Spice and seasoning brand Simply Organic has launched new lines of Dry Rubs, Marinade Mixes, and Finishing Salts. The “chef-inspired” products are meant to help “reinvigorate at-home grilling and cooking.” Chimichurri Marinade Mix, Teriyaki Marinade Mix, Buffalo Dry Rub and Cajun Dry Rub are all designed to work with grilled meats but also dips, sauces and snacks. The organic finishing salts are meant to elevate flavors on the plate and are available in Black Garlic, Hatch Chile, and Citrus Rosemary.
So What? Despite higher costs, current data show that consumers aren’t moving away from eating meat, but instead are getting creative in the amount, the cut, the type and the brand of meat they are choosing. However, because most meals center on meat, the home cook needs greater assurances that the money and time they spend will result in guaranteed results.
For at least the rest of the year, meat and poultry prices are predicted to increase. Yes, that could speak to a rise in plant-based products or vegetarian meals, but to me, the biggest opportunity is in helping consumers make the most of the meat and poultry they buy. Whether its sauces, seasonings, or special cooking processes, I think consumers will pay for solutions that guarantee that the meat they pay for gets eaten and enjoyed.
If you have a product that can protect a cook’s investment in meat/poultry, you have a great message to convey to consumers.
The Future of Food Startup Funding
Startup cat food company Smalls got a $19 million infusion of cash in their latest investment round. Part of that money came from General Mills’ investment arm 301 Inc. as well as the Mars-affiliated Companion Fund. This brings Smalls total to $34 million. The company, which was founded in 2017 and focuses on fresh cat food, said sales in 2022 were “in the eight figures.”
Speaking of pet food and Mars, startup Bundle + Joy has closed a $1 million seed round with Leap Venture Studio pet-care start-up accelerator, which is a partnership between Mars, R/GA Ventures and Michelson Found Animals Foundation. Bundle + Joy sells their dry pet food via their website and Amazon as well as retailers like Sprouts and Whole Foods.
Nestle has acquired 49.95% of shares in Munich-based meal replacement beverage company YFood. Nestle reportedly values YFood at €430 million ($469 million), making their share buy a €215 million investment. This deal has YFood’s other investors (Felix Capital, dairy company Fonterra, and ag-startup VC Five Seasons) selling their shares to Nestle, with the remaining shares staying with the company’s founders.
So What? According to the latest report by Pitchbook/JP Morgan, this year is on track to be the worst for VC fundraising activity since 2017.
As interest rates have risen and the world has confronted new, post-pandemic market forces, we are seeing a move back to fundamentals and away from a radical growth mindset. For the last ~15 years, money was essentially ‘free,’ which gave startup companies long runways to build a market before they became profitable. However, as the collapse of SVB tangibly showed, those days are effectively over. The name of the game today is stability and ‘sure bets.’
Prior to 2022, my conversations with VCs and private equity firms typically centered on helping them build growth strategies for their existing companies, e.g., how to move into new adjacencies or new channels. Now, however, the conversations I’m having are radically different. Today, these same groups are asking me for guidance on business opportunity assessments and consumer trend analysis. In other words, they are spending an increased amount of time researching the front-end before placing their bets.
For that reason, at least in the short term, I think we’ll see the investment arms of large CPG companies making the boldest moves. With a treasure trove of focused data on market dynamics and consumer movement, they are well-positioned to know where to invest and the funds spend. In the meantime, I see VCs and private-equity investing heavily in the early discovery phase to enable a better ROI on the bets they do make. In 18 months (assuming market stability—a big ‘if’), I predict a renewed surge in food/bev startup investments from VCs. However, these will be much more cautious and made possible through more studious analysis.
Innovation is Not a Set of Tools
Years and years ago, I used to teach cooking classes. I’d stand in front of a group of amateur home cooks and walk them through the basics of chopping, the process of deboning a chicken, or the intricacies of making a mole sauce. Occasionally, I also did private instruction at someone’s home.
I remember one occasion when I got a request for a week of intensive training. When I arrived at a stunningly large home, I was greeted by a very nice young couple who informed me that the classes were a wedding gift from his parents (along with the house, I found out later). However, they both took pains to tell me that they likely would not need the whole week as they were already “very skilled chefs.”
Their kitchen was just as impressive as their home—gleaming pots and restaurant-grade appliances. Although, quite quickly, I realized that their overconfidence in the kitchen was made possible by the cost of their tools. Neither of them could fry an egg, boil pasta, or cook a chicken breast, but they kept telling me that their knives, pans and ingredients were the “best money could buy.”
I’ve seen the same pride at companies when I come in to talk about innovation. Instead of showing me how their people are practicing the skills of innovation, they pontificate on how much money they’ve spent setting up an innovation center, installing a state-of-the-art computer system, or the number of innovation process templates their teams complete.
What these companies fail to see is that innovation tools don’t make for successful innovation any more than an expensive knife makes for a great chef. Of course, tools can help enable innovation, but they can’t be at the core. Real innovation is a way of thinking, a skill that requires hours of dedicated work and often difficult behavior changes up and down the hierarchy. Just as with my young “skilled chefs,” I find companies feel that they can buy their way into the skill. Of course, that never works.
Things I’m Watching
Kraft-Heinz has kicked off a multi-market campaign aimed at stopping ‘ketchup fraud’ when consumers are eating out (i.e., restaurants refilling Heinz bottles with cheaper alternatives). In the US and Canada, Heinz is rolling out print and social campaigns created by ReThink that ‘expose’ the fraud and reminds consumers, “Even when it isn’t Heinz, it has to Heinz.” Relatedly, in Turkey, Wunderman Thompson has released a Pantone color checker that allows consumers to use the iconic color of Heinz ketchup to spot deception.
So What? Foodservice is the obvious startng place for this type of campaign, and I can only imagine the loss (monetarily as well as in consumer goodwill) Heinz endures every year due to ‘ketchup fraud.’ However, I’m surprised we haven’t seen this type of campaign attempted in retail. As private label gains ground, some CPG brands are falling victim to copycat products that mimic the look, feel, color, and aesthetic of the original. I’ve always assumed backlash was limited because CPG needed to remain ‘frenemies’ with retailers, but as more consumers turn to private label, and grocery retailers push back on manufacturers looking to raise costs, I can see the tension leading to a similar in-store battle.
Speaking of brand color—do you really know the color of brands? Take this quiz and find out.
Kellogg is introducing new Miraculous Cereal. Based on the global hit ZAG Heroez Miraculous- Tales of Ladybug and Cat Noir, the cereal showcases the adventures of two Parisian teens who magically transform into secret superheroes Ladybug and Cat Noir. In a first, the cereal’s purple and pink pieces and white marshmallows are macaron-flavored. The cereal is available in stores in April.
General Mills’ Cereal Toast Crunch is launching a Tres Leches Cinnamon Toast Crunch. The new cereal, in a design similar to that of their current Dulce de Leche version, celebrates the three milk Latin American cake.
Kellogg’s UK is launching a new line to their Crunchy Nut Granola with a Barista Edition. The Chocolate Mocha Flavored cereal (“for coffee lovers”) is infused with sliced almonds and milk chocolate curls. The high-fiber cereal has no artificial colors or flavors. Available in retailers across the UK.
Nissin Foods brand Cup Noodles, the company that brought the concept of instant ramen to the West, is out with Breakfast Cup Noodles. The new product combines classic instant ramen with a sauce to produce "classic breakfast flavors including fluffy pancakes, sweet maple syrup, and hearty sausage and eggs to create a delicious and satisfying meal." Cup Noodle suggests adding a drizzle of maple syrup or dash of hot sauce. Available now at major retailers.
So What? While cereal sales were down coming into 2020, the pandemic saw a cereal renaissance as people sought both quick comfort food as well as relief from constant cooking. While kids’ consumption likely added to the sales spike, adults undoubtedly played an oversized role.
As the world returns to ‘normal,’ cereal companies are trying to maintain this adult audience in order to keep sales at pandemic highs. While traditional adult BFY cereals (e.g., Grape Nuts), saw a bump during the pandemic, I doubt they alone will keep people in the aisle. Instead, we are seeing the growing popularity of BFY nostalgic cereals (e.g., HighKey and Magic Spoon) attempting to take their place. However, I’m wondering whether a new breed of adult cereals is coming, one that has all of the indulgence of traditional cereals but with much more adult flavors.
The cereals above are not completely there yet, but the move to macaron, tres leches, and coffee feels like an inflection point in flavor sophistication. To entice adults to stay in the category, I predict we aren’t that far from tiramisu cereal, walnut baklava cereal, or a Black Forest cereal with bittersweet chocolate and sour cherries. Flavors that are unapologetically sweet but not for kids.
At Walmart’s 2023 Investment Community Meeting last week, CFO John David Rainey said the company expects, by the end of its fiscal year 2026, about 65% of its stores will have automation capabilities, 55% of its fulfillment center volume will move through automated facilities, and unit cost averages could fall by some 20%. To make that happen, Rainey said that nearly 90% of Walmart’s capital expenditures will be in “high return areas like e-commerce, supply chain and store investments.”
So What? These are bold statements coming out of Bentonville, but I don’t think they are hyperbole. Even with Amazon falling behind in grocery (see Jassy’s cagey remarks about delaying new store openings), Walmart needs to stay competitive in the quickly consolidating grocery business.
For manufacturers, this equates to several things. On the positive side, more automation and efficiency likely means better sales volumes. However, I’m skeptical that it will come without costs rolling down to producers. Automation often abhors variation (see farming robots), and while in theory cereal boxes and soup cans seem quite consistent, in practice products and packages are wildly variable. Therefore, I can see a push coming from retailers (already seen with Amazon) to overhaul shippers and packages to facilitate this automated future. When you put this on top of the environmental targets manufacturers have pledged to meet, I can see a large looming packaging price tag.
TIDBITS
Australian cultivated meat company Vow has made a wholly mammoth meatball to show the power of their technology (but no one’s eaten it)
Italy had quite the week in the news: punishing synthetic food makers, banning ChatGPT, imposing fines on Italian officials for using English words instead of Italian or saying Italian words incorrectly (e.g., it’s “bru-sketta” NOT “bru-shetta”), and getting upset when an Italian scholar said carbonara was a US dish and that the most authentic Parmesan in the world can be found in… Wisconsin!?
Looking to be envious or enjoy some schadenfreude to start your week? Here are the most loved and hated brands in every country (as measured by positive or negative tweets, so there’s that bias)
While egg prices have come down, that hasn’t stopped Potatoes USA, the marketing and promotion board for growers and producers, from (partially tongue in cheek?) suggesting people dye potatoes instead of eggs for Easter.
Fast-food companies are having a hard time meeting chicken sandwich demand due to a shortage of small chickens
Finally, you’ve heard of treadmill desks and you may have experienced a walking meeting, but have you ever seen a walking room? Well, a new Dutch company called the Walking Room wants to change that. To “help empower movement in the workplace” the company installs a carpeted treadmill in a 10’ or 12’ room (enough for 8-10 people to walk). The tread moves at variable speeds (1.5, 2, or 3 mph) and early adopters have reported feeling more productive and energized.
Something to Think About