Editor’s note: This story is the first in a series on trends impacting the food and beverage industry in 2023.
As the calendar turns to 2023, food and beverage companies have a new focus on consumers.
The sector has always tried to give consumers what they want, but this year, new technologies and new ideas bring that consumer focus to light in new ways. As a tight economy and high rates of inflation continue to challenge the business, food and drink companies are eyeing new ways to capture those hard-won consumer dollars.
The movement toward more RTD cocktails will continue, with beverage manufacturers of all kinds exploring ready-made drinks to provide consumers with more convenient and tasty options. Precision fermentation technology is ramping up to offer large amounts animal-free ingredients with the taste and function of dairy, eggs, collagen and gelatin. Cultivated meat, which is grown from cells without any animal slaughter, is likely to debut on the U.S. market in some form this year.
Consumers who are interested in sustainability will find more carbon-neutral and upcycled products on the market. Pending new labeling regulations and commitments will provide consumers more transparency about the products they are purchasing — and will spur reformulation.
And artificial intelligence and machine learning will help companies develop and manufacture products in more cost-effective ways, helping them control prices for consumers.
Here’s a look at the trends experts and analysts say will shape the industry in 2023.
Alcohol makers get buzzed on RTD cocktails
As alcohol consumers look for more ready-to-drink cocktails, beverage makers are poised to flood the market with more of the trendy products in 2023.
In the coming months, Brown-Forman and Coca‑Cola will introduce a ready-to-drink cocktail combining Jack Daniel’s Tennessee Whiskey and the iconic soda brand. Coca-Cola and Molson Coors also are gearing up for the debut of Topo Chico Spirited.
Diageo is partnering with The Vita Coco Company on a line of premium canned cocktails crafted with Captain Morgan rum and Vita Coco coconut water expected out early this year. And Truly from Boston Beer, which launched in October, will aim to gain momentum in the new year.
“I would not be surprised if RTD spirits were the largest single entity in beverage alcohol” a decade from now, said Nathan Greene, an analyst at Beverage Marketing Corporation.
Greene said hard seltzer, which has seen its popularity wane after years of triple-digit growth, laid the groundwork for RTD spirits. Consumers started paying closer attention to the flavor inside the can and gravitating toward the drink’s refreshing profile.
RTD cocktails can tap into the same attributes, but unlike hard seltzer, they have access to a wider variety of alcohol and the ability to combine with other beverages (such as soda, juice or coconut water.) With consumers eager for choice and variety, the belief is that a deeper portfolio of options could increase the longevity of the category.
Ready-to-drink cocktails — led by High Noon, which is made by winemaker E. & J. Gallo — were the fastest-growing spirits category in both revenue and volume in 2021, according to the most report issued by the Distilled Spirits Council of the United States (DISCUS).
Supplier revenue for these cocktails and spirits rose 42.3% to $1.6 billion during the period. Growth was forecast to continue into 2022, according to Beverage Marketing Corporation.
One roadblock that could potentially tamp down growth in RTD cocktails is widely varying state regulations. RTD cocktails are typically subjected to higher tax rates – giving a slight price advantage to beer – and some states don’t allow retailers to sell beer, wine and spirits together. If states, eager for additional sources of revenue, remove or ease these hurdles, it could build further momentum for the RTD cocktail category.
“If the regulatory environment continues to open more and more, it’s going to take, particularly from beer, especially if it's close in terms of economics and/or retail channel access over time,” Greene said.
Precision fermentation breaks out
A few years ago, the idea of using fermentation to recreate proteins that are found in animal-derived food or difficult to find in nature sounded like a futuristic science project.
In 2022, companies using precision fermentation — modifying organisms like yeasts so that they produce a certain protein when fermented — started to become big players in the ingredients market. Animal-free whey protein from Perfect Day, the largest and most developed precision fermentation company, started to be less of a novelty ingredient and something that is more common. Last year, products powered by Perfect Day became available from large and small manufacturers, including Mars and Nestlé.
But Perfect Day isn’t the only precision fermentation company that had a big year in 2022. Just before the end of the year, Oobli, which makes sweet proteins through precision fermentation, launched a chocolate bar containing 70% less sugar than other brands. And precision fermentation egg white protein maker The Every Company partnered with hard juice maker Pulp Culture to make a protein-boosted alcoholic beverage last fall.
Emma Ignaszewski, associate director for industry intelligence and initiatives at the Good Food Institute, said the organization supporting the alternative protein industry identified more than 60 companies leveraging precision fermentation. More than two-thirds of them, she said, have come out of stealth in the last three years.
Meanwhile, 2023 is shaping up to be an even bigger year for precision fermentation in food. CPG giant Unilever has said it is interested in launching ice cream made from animal-free dairy. New Culture, a company that makes cheese using casein made by precision fermentation, plans to launch in pizzerias this year. And companies including Remilk and Onego Bio are positioning themselves to enter the market.
Ignaszewski said it is apparent that the larger CPG space is seeing deep potential in precision fermentation-derived ingredients. In turn, that is helping the whole space gain momentum.
“Today's alternative protein products, including products made with precision fermentation, are taking this new approach that we've seen in the last decade of appealing to omnivores with products that not only mimic the taste and texture and sizzle of conventional animal products — but in this case, are those very same proteins,” she said.
As more and more CPG companies adopt precision fermentation-derived ingredients, they also can help the companies that make them scale manufacturing, Ignaszewski said. In turn, that creates wider availability, lower prices, and more places for manufacturing.
It’s also getting easier for new companies just starting in the precision fermentation space to begin their work. Last year, Perfect Day launched nth Bio, an enterprise biology business to help newer companies with tech and scale-up services. Liberation Labs, a new venture dedicated to building scale-up facilities for precision fermentation startups, recently closed a $20 million funding round to build a 600,000-liter commercial scale launch facility. And stalwarts including Archer Daniels Midland are making investments and providing assistance to companies in the space.
As more precision fermentation-derived products come on the market, Ignaszewski said she sees an easy ramp to consumer acceptance. After all, most of the rennet used to make cheese has been produced by precision fermentation for more than two decades, so consumers have firsthand experience with the ingredients.
But more importantly, taste and eating experience are key to consumer acceptance. Ignaszewski said precision fermentation can deliver both of them to the alternative protein world.
“As consumers become more familiar with not only the idea of these products, but familiar with the products themselves, … and as they use them in meals that they know and love, we expect that acceptance will continue to grow,” she said. “I see food innovation in alternative protein and consumer acceptance as a potentially virtuous cycle.”
CPGs look to lower carbon emissions through products
The food and beverage industry accounts for roughly a third of the world’s greenhouse gas emissions, according to the United Nations. In order to achieve goals for reducing the carbon footprint of their supply chains, companies are launching products that they claim compensate for the greenhouse gases they emit.
Various products on the market now make “carbon-neutral” and “regenerative” a key selling point. The companies claim that the emissions created to produce and ship the products are then offset, either through regenerative agriculture methods or nature restoration projects. These foods and beverages often also achieve certification from a third party organization or nonprofit in order to verify their claims. Alcohol giant AB InBev launched Bud Light Next beer, which it said offsets the carbon it takes to produce through forest management efforts. Conagra debuted carbon-neutral Evol frozen meals, which offsets carbon through wind and forest projects. And Fresh Del Monte will launch carbon-neutral pineapples this year.
Along with established CPGs, smaller brands are introducing themselves to consumers by touting their carbon neutrality. Neutral Foods, which can be found at Whole Foods stores nationwide, has introduced their dairy products to consumers by touting that it offsets the carbon produced by the cows by converting it to renewable energy.
Mai Ichihara, program manager for the Soil Carbon Initiative, told Food Dive achieving third party certification should be a priority for CPGs looking to because it assures consumers that the company is not greenwashing. The organization certifies products as regenerative — which includes a “Soil & Climate Health Initiative Verified” label — if they set commitments to track and increase biodiversity in their soil. She said the company thinks “regenerative” should not be misused by companies not actually putting in the work of implementing carbon offsetting practices into their supply chains.
“There's fidelity and integrity behind the meaning of regenerative,” Ichihara said. “The term ‘sustainability’ has already been used and abused, and we don't want that happening with regenerative agriculture.”
The meat industry, which has been roundly criticized by environmental groups, accounts for roughly 14.5% of worldwide greenhouse gas emissions, largely because of the methane resulting from beef production. Companies announced last November their intention to set goals to decrease their carbon footprint by 2030. Through product launches of carbon-neutral or low carbon meat — such as Applegate’s hot dog grown through regenerative farming methods — processors could signal to consumers its commitment to lowering the amount of carbon they produce. New Zealand beef company Silver Fern Farms debuted Net Carbon Zero Certified Beef in the U.S. last year.
Artificial intelligence and machine learning becoming the norm
Once the future, artificial intelligence and machine learning are poised to become an even bigger part of the present for more food and beverage makers in 2023.
The use of these tools is attractive to CPGs for several reasons, but ultimately it boils down to dollars and cents.
Companies can forgo some of the difficulties and costs that arise with attracting and retaining workers if they have machines. With artificial intelligence, businesses can increase the output, quality and reliability of what comes out of their factories.
Marcel Koks, industry and solution strategy director at Infor where he works with companies to incorporate AI and machine learning, said many firms are interested in using the technology but are unsure how to do it.
“Our customers know machine learning and artificial intelligence exist, but they are struggling to define the use cases,” Koks said. “We are doing a lot of work with our customers to explain what you can do.”
Koks said one fruit and vegetable company Infor worked with used AI to determine the best conditions to store produce, increasing the shelf life and lessening the chance of food waste, he said. Another dairy firm used machine learning to improve the reliability of milk production, including how much of the liquid is produced and its protein content. Even a 1% loss in milk production can mean hundreds of thousands in lost revenue, he said.
“In the past, they could do simplified analysis once a month, looking back at the output from the factory,” Koks said of the dairy company. “It was too late to do something about it, but with machine learning, it’s nearly in real-time.”
In other cases, food companies use artificial intelligence to expedite product development or plan for the future.
McCormick & Co. partnered with IBM three years ago to comb through data faster and more effectively by knowing which ingredients work together or which ones can be used as substitutes for each other. It has released several products so far.
Greg Longstreet, CEO of Del Monte Foods, said the CPG uses AI to plan and estimate future demand and ensure it has enough supply to meet it – factoring in volatility in weather, climate change and the introduction of new products.
AI also helps it determine where to purchase and install equipment. With machinery now taking as much as 19 months to get operating due to industry-wide supply chain headaches compared to six or nine months in the past, AI allows the fruit and vegetable giant to be more proactive.
“We really need to be farther up and more forward-thinking about how we run the business and how we plan,” he said.
Cultivated meat goes from the lab to the plate
Ever since there have been companies working on cultivated meat, many of them have been saying that their products would be available in the United States “soon.”
“Soon” could very well be this year, said Amaru Sánchez, an attorney at Wiley Rein who works with companies on FDA and USDA regulatory issues.
“I'm going to be ambitious and optimistic and say that we're gonna see the United States’ first commercially available cultivated poultry products by the end of 2023,” he said.
The process seems to be moving in that direction. The FDA issued its very first tacit approval of a cultivated meat product last November, granting a “no questions letter” to Upside Foods for its cultivated chicken. This means FDA believes Upside’s chicken product, which is grown from cells in a bioreactor, is as safe to consume as traditional slaughtered chicken.
Under a 2019 agreement, most cultivated meat, which is made of animal cells grown in bioreactors, needs to receive approvals from both the FDA and the USDA. The FDA is responsible for regulating the cells that are grown for meat, as well as the processes used for their cultivation.
Unless those cells are seafood, which is only regulated by FDA, they transfer to USDA jurisdiction when they are harvested from the bioreactor. USDA is responsible for inspecting the products and facilities, as well as for labeling.
Upside Foods’ chicken still needs to get USDA’s greenlight before it can go on the market. A statement from a spokesperson at the department’s Food Safety and Inspection Service said applying to them for a grant of inspection — an assurance that processes are safe and sanitary — is the next step. Cultivated meat and poultry will be inspected at the same standards as already exist for slaughtered meat.
It’s not known when that might happen — USDA didn’t answer questions about its regulatory timeline. It’s also not clear how far along FDA’s reviews of other cultivated meat companies are, and when decisions on their products may be released. Many cultivated meat companies have been working with FDA toward approval since 2018, and FDA has not commented on what comes next in its process.
At the very least, Emma Ignaszewski, associate director for industry intelligence and initiatives at the Good Food Institute said, the FDA greenlight for Upside’s chicken represents a “significant point of de-risking” for the sector. Until FDA’s regulatory action, cultivated meat in the United States was an industry of doing science, not one of making food.
“It's still a nascent industry, and we anticipate that this milestone will be able to usher in a new wave of investments, talent, innovation and the subsequent steps in the regulatory process,” she said. “And one of the things that could be possible here, then, is that people or companies who may have been on the sidelines, waiting to see if cultivated meat can become a commercial reality in the U.S. in the near term can now sort of roll up their sleeves and dive into the sector with greater confidence.”
Among those likely to dive in, she said, are large CPG companies. It’s already started to happen, with JBS purchasing a cultivated meat company in 2021, and Nestlé working with Believer Meats, formerly known as Future Meat Technologies, to explore the possibilities of the space. But now, the doors are opening wider.
This year is also likely to see the beginning of many construction projects for commercial scale cultivated meat facilities, Sánchez said. Only one is currently being built — Believer Meats broke ground on its commercial-scale facility in North Carolina last month — but several other companies have said they are in the site selection and design phases for their large facilities. While it’s not likely any of these facilities will be able to produce meat this year — Believer said its facility won’t be operational until the first quarter of 2024 — it’s likely that there will be more on the way before the year is done.
Better nutrition labeling spurs reformulation
This year, label changes in the works means consumers could be getting much more clear information about food and beverages by just looking at packages.
The long-awaited definition could certainly make a huge change in how products are labeled and marketed. Consumers would be likely to believe that a regulated “healthy” claim represents a product that is unequivocally good for them to eat.
The preliminary rule syncs up pretty closely with the Dietary Guidelines for Americans. In general, “healthy” items have the equivalent of a serving of fruits, vegetables, grains, proteins or dairy as indicated in the Dietary Guidelines. There are limits to the amount of less beneficial nutrients — including added sugars, sodium and saturated fats — that “healthy” items can have.
The rule is still preliminary, and FDA is accepting comments on it until Feb. 16. But manufacturers are likely to start working toward making products that can bear the “healthy” label, said Amaru Sánchez, an attorney at Wiley Rein who works with FDA and USDA regulatory issues. The preliminary rule says that raw, whole fruits and vegetables can automatically use the label, so Sánchez said that companies that make salads or raw vegetable products may start going ahead with the label claim.
“They have this pretty much green light that they can put ‘healthy’ on it, even though they've always known that,” he said.
Reformulating products to become “healthy” is also likely to start, though there is a lot of hashing out to do before getting to the final rule, Sánchez said. It’s still not known where fruit and vegetable powders fit into the picture in terms of determining a product’s intrinsic nutritional value. Concerns have also been raised about potential inherent exclusion of products including peanut butter and eggs from the “healthy” label. These are likely to be addressed as the rule becomes finalized.
FDA is also working on consumer research on a front-of-pack symbol to let consumers know when a product has met the “healthy” threshold. While this research may not be completed and a new label may not be implemented this year, manufacturers are likely to spend 2023 getting ready to have products that can bear the seal — which can more quickly communicate a product’s nutritional value to consumers.
More informative labels are also on the way to alcoholic beverages. Nearly 20 years after consumer groups first petitioned the Treasury Department’s Alcohol and Tobacco Tax and Trade Bureau for some nutritional labeling on beverages — and after a lawsuit was filed to force labeling to come — the department agreed to begin the process for a required “Alcohol Facts” label on beverages it regulates.
Alcoholic beverages have never had many nutritional labeling requirements before. A letter from the Treasury Department states it will work on creating a labeling rule for alcoholic beverages to disclose their nutrient contents, alcohol content, major food allergen presence and ingredients. The Treasury anticipates publishing notices on all of these labeling rules in 2023.
Sánchez said that while alcoholic beverage makers may have the same reasons to push back against labeling rules that they did in 2003, quite a lot has changed in two decades.
“One is the consumer demand for this,” he said.
Even without the requirement, the Distilled Spirits Council of the United States committed to having its members include “Serving Facts” labeling — including serving sizes and calories, carbohydrates, protein and fat per serving — on product labels or online by June 2024. Some of those labels are likely to make it to consumers this year, providing a new degree of transparency.
Upcycled products on the rise as industry aims to cut food waste
Consumers are increasingly aware of food waste and swayed by sustainability claims on products. The food industry is taking notice, as more companies are beginning to use product launches to signal a commitment to lowering the amount of food that does not get sold.
The USDA estimates that 30% to 40% of the country’s food supply goes to waste. At the United Nations’ COP27 conference last November, three U.S. government agencies USDA, EPA and FDA set targeted goals for tackling food waste by making supply chains more climate-friendly. Companies looking to lower the amount of food waste in their own supply chains are including ingredients that would have otherwise gone to waste into new or existing products.
The nonprofit Upcycled Food Association (UFA), which launched in 2019, is flexing its muscle in the food space, having declared over 250 consumer products and brands as Upcycled Certified. Smaller companies are using upcycling as a way to distinguish themselves from other players in the industry. Snack maker Barnana, which launched in 2017, makes plantain chips with bananas that would have gone to waste. And Atomo — whose coffee alternative is created using upcycled date pits — has received $51.6M in funding to date. It is pitching its product as a sustainable beverage for the future, as climate change impacts coffee production.
Launches of products containing upcycled ingredients increased 122% in the five years ending 2021, and there are signs that number is only increasing as larger CPGs aim to combat food waste. Del Monte launched products this year made with reused pineapple juice that received Upcycled certification. Ingredients makers are reusing the grain used to produce beer for new proteins for use in other foods. Kerry created a protein crisp, while EverGrain used AB InBev’s barley waste to craft a new plant-based protein ingredient.
A main point of focus for companies in the upcycled space is educating consumers about their goals and sustainability benefits. While roughly half of consumers said that they are looking to cut their food waste according to Innova Market Insights, only 10% surveyed by the UFA were aware of the upcycled foods movement.
There is untapped potential for products to create using upcycled ingredients from across the spectrum of foods, something that many producers can take advantage of as consumers become more aware of upcycling. Case Samuel, chief sales officer of Sunrise Fresh Dried Fruit Company which sells upcycled dried cherries, told Food Dive CPGs are taking notice of the trend and are signaling interest in the capabilities and potential for upcycled food.
“In that 40% of all food that goes to waste, there are just almost infinite possibilities,” Samuel said.
Correction: A previous version of this story incorrectly referred to Fresh Del Monte as Del Monte Foods. The companies are two separate entities.