Gerry’s Insights: Does Isolation Dilute Innovation?

There are lots of reasons to lament the cancellation of key exhibitions like Expo West and NACS, the c-store extravaganza, but one of them is the convenient window they offer into the extent and quality of innovation in the beverage business. In a good year, you may only need to stroll the show floor a couple of hours before concluding it’s going to be a vintage year for well-thought-out new concepts. With those windows shut for now, what’s the innovation scene looking like?

From my perch at my innovation-focused newsletter Beverage Business Insights, it seems to be a mixed bag on the surface. On the one hand, the early stages of the Covid-19 pandemic brought a flight to staples by pantry-loading consumers and the retailers who serve them. With retail highly constrained, shoppers weren’t browsing the stores and raiding the coolers for impulse purchases of new stuff, and there certainly wasn’t any in-store sampling or other activation going on. Some of the people I speak to feared a yearlong innovation drought as retailers rethought their priorities until a vaccine emerged and we were well clear of this terrible affliction. Meanwhile, the major food and beverage companies were streamlining their offerings to simplify their supply-chain challenges, cutting lower-velocity SKUs and, as the year wore on, terminating entire brand platforms, including some very familiar ones. Coca-Cola’s cuts were the most conspicuous, including Odwalla refrigerated juice, Zico Coconut Water and Tab soda. But most other major companies have embarked on a similar brand purge, selling or shuttering brands viewed as marginal in this new normal we’re enduring. So Hain Celestial quietly shut down the cleanse brand BluePrint, along with several food brands. Unilever is moving to divest much of its tea business, while Nestle has put all but its highest-end water brands in North America on the sales block, along with the massive infrastructure that supports them. These moves would seem to presage a long winter of diminished innovation hopes.

But the situation actually is more complicated than that. There’s another dynamic unfolding, too. To my initial astonishment, the pace of new products, capital raises and signings of new distribution and retail partners has by no means moved into hibernation. True, category reviews and investor meetings have been delayed but I, for one, have found myself busier than ever tracking these various milestones of new-product developments. It turns out that few in our beverage ecosystem believe that the health-and-wellness and sustainability trends that have been driving so much of the business have reversed, even if the pandemic and related recession have created some bumps in the road. So most are looking ahead to when things stabilize. Earlier this fall I looked at how this has played out on the capital side, where activity had remained surprisingly robust. A few months later, looking at the valuations being accorded newly public plays like Laird Superfood and clean-energy player Guru and the bounteous raises being harvested by others, it’s clear that investors’ thirst to ride the next wave hasn’t at all been slaked.