What Does ‘Disruptive Innovation’ Mean in Today’s F&B Industry

Disruptive companies are commonly envisioned as innovators who gain immediate traction and impact with a new concept, taking the existing category leaders by storm. But disruptive innovation is one of the most widely misunderstood and misused terms, especially in F&B.

In this article, we’ll put a concrete meaning to ‘disruptive innovation’ and break down the current state of innovation in the F&B industry.

With the help of JPG Resources Managing Director Jeff Grogg, Strategy Lead Veronica Lehman, and innovation expert Donna Delayo, we'll explore how companies can identify a category ripe for disruption and the implications for today’s industry leaders.

What is disruptive innovation?

The disruptive innovation process leads to companies redefining markets by offering simpler, more affordable or accessible alternatives to existing products or services, eventually displacing established competitors.

Originating from Clayton Christensen's "The Innovator's Dilemma", the theory explains how market leaders can be blindsided by new entrants targeting overlooked segments of the existing market. These disruptors often start with a seemingly inferior product that, over time, improves to meet mainstream needs and can reshape the original category.

Christensen differentiates disruptive innovation from sustaining innovation, which involves improving existing products to serve established customers better. Disruptive innovations often start in niche markets or underperforming segments that incumbents neglect, offering convenience, affordability, and accessibility.

“It doesn't necessarily have to be a new offering,” Veronica explains, speaking to innovation in F&B products, “There are a lot of disruptive products that already exist and it's a matter of positioning, marketing and branding.”

Veronica gives the example of Olipop, which brands itself as a healthy prebiotic soda. The brand meets the known consumer need and desire for soda, she explains, but differentiates itself as a healthier alternative to established soda brands.

The state of innovation in today's market

Innovation in the CPG industry has hit an all-time low, according to Mintel, with only 35% of CPG launches in 2024 being genuinely new products. This lack of new poses a risk to the profitability of established brands.

“It's pretty low end right now on innovation, probably because the companies that are striving to be disruptive are not getting funded,” says Jeff.

He believes investors are cautious with their money, but that there are still opportunities to find innovation.

“Everybody wants a shorter path to profitability and all those things tend to be in some sense anti-innovation,” he advises, “But having companies better funded and more prepared to win is going to allow some to emerge faster.”

During an interview with IFT, Jeff predicts that smaller companies will continue to take risks that established brands won’t. This shortage of innovation paves the way for innovators, with the right backing and support, to focus their efforts on the categories ready for disruption.  

When is a category ripe for disruption?

When a category becomes stagnant and dominated by a few major players, it displays an opportunity for disruption. Disruptive innovation often involves introducing products that challenge the status quo and cater to unmet consumer needs within a category.

Veronica explained that the baking industry has been characterized by a lack of differentiation lately. Jeff also highlighted the frozen foods category as a hotbed for new products, especially those inspired by popular Asian foods.

He notes that frozen food trends often come from what restaurants are doing, but that’s not the case with nutrition-led products. “You need to know where innovation in your space is going to come from,” he advises, “And you need to understand the consumer trends and technology."

To build on consumer trends, we looked to Donna, an experienced brand builder and innovation expert. She explains that trends aren’t just about what’s selling, but are revealed from broader social changes.

"I love trends and I think you have to keep a pulse on what's going on, not just in a particular category, but human-wise,” she says, “How are people evolving and growing? What is going on in the culture and what's going on with different consumer cohorts? How are they behaving?" By keeping up with preferences, desires, and moods of your target culture, companies can stay ahead of emerging trends and find a golden opportunity to create an impactful product.

Implications for today’s industry leaders

Disruptive innovation can be seen as a threat for established companies. Or - it can be seen as an opportunity for those willing to embrace change and drive innovation.

Veronica describes the experience from both sides of the market: “As a smaller company, you look at the big companies and you think they've got it made. They've got all the money, all the data, and the teams, how can I possibly compete against that?”

For larger companies, she says, “The attitude is completely opposite. They're terrified of the startups and the younger companies because they can move quickly. They have the authenticity of a story and the flexibility creating something to fill a need.”

Established companies often focus on incremental improvements to existing products, targeting their most profitable customer segments. Although they typically have more resources on hand to drive innovation, larger companies are slower moving and less able to quickly capitalize on trends.

Veronica highlights, "The biggest disadvantage is that these big companies will often get in their own way and trip over their own two feet with all their own processes."

To navigate this challenge, industry leaders must stay in an agile mindset and be willing to take calculated risks, challenge the status quo and investigate a few unconventional ideas, while still staying in line with brand strategy.  

“It's across-functional effort and the whole team needs to be aligned with senior management,” Donna says.

Once your team is aligned, the following questions emerge. “If you have the foresight of what's going to come, and from a consumer perspective, the technology is there to make something new and disruptive happen, is the company willing to jump on that? And how quickly and with what kind of investment?”

If these questions are met with a resounding yes and a plan in place to quickly jump into motion, you may be on your journey to creating the next big product!

Ready to innovate? Tap into the right expertise for your next project with JPG Talent.