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Innovation Investment Trends in the Food and Beverage Industry

In the face of ongoing economic challenges, the food and beverage (F&B) sector is observing a significant shift towards innovation investment. TraceGains, a leader in providing compliance and quality solutions for the F&B industry, recently shared insights from their 2025 survey, which highlights a growing trend where approximately 83% of brands are set to enhance their spending on new product development (NPD). However, a striking 2% of these brands report having fully digitized their development processes, presenting a paradox in this evolving industry landscape.

The Growing Demand for Innovation

The findings of this year’s survey reveal a marked increase in planned investment for innovation compared to previous years. In 2024, 76% of brands intended to increase their innovation spending, while this year, that figure has risen to 83%. Over half of the respondents indicated they would raise their NPD budgets by more than 10%, signaling an enthusiastic commitment to developing new products. According to Paul Bradley, Senior Director of Product Marketing at TraceGains, this increase in investment demonstrates a genuine excitement surrounding AI and digital transformation within the industry. However, this enthusiasm faces a significant hurdle.

Manual Processes Hold Back Progress

Despite a clear willingness to invest in innovation, many F&B brands remain tethered to outdated, manual processes. 82% of brands still heavily depend on tools such as spreadsheets and emails for managing product development, which significantly slows down the innovation process. Alarmingly, over half of the surveyed brands (53%) do not utilize a Product Lifecycle Management (PLM) system, which could otherwise enhance collaboration and streamline workflows. Only 2% of the brands have achieved full automation in their NPD workflows, indicating a substantial digital maturity gap.

AI Adoption and Hesitancy in the Industry

While there is a growing interest in integrating AI into product innovation, the majority of brands are still at the initial stages of this journey. The report indicates that 17% of brands claim they are fully committed to utilizing AI for NPD, an increase from 10% in the previous year. Meanwhile, 45% are in the experimentation phase, leaving approximately 32% who are still skeptical of the technology’s potential benefits. These figures illustrate a slow but steady shift towards embracing AI solutions, particularly among mid-sized firms with 1,000 to 5,000 employees, while smaller and larger companies appear more hesitant.

External Pressures on Innovation Efforts

Despite the prioritization of innovation, cost pressures and supply chain instability are reflecting heavy burdens on brand strategies. Nearly 70% of respondents identified challenging macroeconomic conditions as a primary barrier to innovation, an increase of 15 points from the previous year. Simultaneously, over half (53%) flagged production costs, including labor, as major concerns, while many of them struggle to secure essential ingredients and materials for product development. For those reducing their innovation pipeline, around 41% attributed this decision to ongoing financial uncertainty and margin pressures.

A Focus on Health and Sustainability

In spite of these obstacles, brands remain committed to fostering healthier and more sustainable product innovations. Notably, 67% of respondents ranked healthier food as their top priority for product development, an increase from 60% in 2024. Sustainable packaging (41%) and personalized nutrition (28%) also hold significant interest among brands, although enthusiasm for plant-based products is waning, with only 19% of brands identifying it as a central focus, down from 33% in the previous year.

Furthermore, brands are taking actionable steps towards sustainability, with 48% striving to improve supply chain traceability and 38% increasingly sourcing sustainable ingredients. 41% of brands also revealed that their environmental goals are now influencing their packaging decisions.

Conclusion

While the food and beverage industry is poised for increased innovation spending in 2025, the reliance on outdated processes and the challenges posed by economic conditions present a critical junction. The desire for modernization is evident, but achieving substantial digital transformation remains a significant hurdle for many brands. As companies consider their paths forward, the dual emphasis on healthier offerings and sustainability will likely shape their innovation strategies for the foreseeable future.

To explore the full findings of this survey and gain insights on digitizing product development efforts, visit TraceGains.