Rice Krispies, mac-and-cheese, lasagna and other nostalgic ‘comfort foods’ have never been more popular, while a mix of pandemic-related factors has made it tougher for startups to innovate.
During the lockdowns in the early days of Covid-19, Ibraheem Basir spent weekend time in the kitchen with his children, whipping up biscuits, pancakes and cornbread stuffing.
“I’ve always been a big believer in the power of food to connect with their culture and family,” Basir says. “This pandemic has just accelerated that.”
Everyone has a slightly different take on what constitutes comfort food, but it usually involves carbohydrates, a dash of nostalgia and what people prefer to eat when they feel stressed. There’s been plenty of stress in the last two years, and likely more to come. Americans have flocked to comfort food in what advertisers used to say over and over, “these uncertain times,” and it’s benefited some of the biggest companies in the $1 trillion U.S. food market – Mondelez (Oreos), JBS (meatloaf), Nestle (Hot Pockets), Unilever (Ben & Jerry’s) and General Mills (Cheerios). The list goes on.
“Americans are eating like kids again”
At the same time, food startups offering innovation – the thrill of the new – have experienced some historic flameouts. At least 13 food companies went public in 2021, and almost all of them have tanked.
When Basir professes such love for pancakes and biscuits, it shows the universality of people’s deep affection for comfort food. Basir founded a food startup, A Dozen Cousins – not part of the flameout – that’s trying to break Big Food’s lock on nostalgia with a line of multicultural beans, rices and sauces. It’s trying to become a big business by appealing to the need for people to feel better by eating. One thing we’ve learned from the Covid era, however, is how difficult it is for new brands, like Beyond Meat, many of them healthier versions of comfort items, to break through when the eating public is so focused on Velveeta.
“Food can be a source of well-being,” says Sanjiv Gajiwala, North American chief growth officer for Kraft Heinz, maker of the iconic cheese product. “Just like mindfulness, what you put in your body has an emotional resonance, as well as a physical resonance.” He notes that his company last summer launched Kraft Mac n Cheese ice cream. “The brand itself is one that connects with people in a clear, authentic and emotional way,” Gajiwala says. “It makes them think about the tastes and flavors of comfort that matter to them, regardless of the format.”
Everyone has a different take on what constitutes comfort food, but it usually involves carbohydrates, nostalgia and what people eat when they’re stressed
Nearly 70% of the respondents in a September 2020 survey said they’re consuming more comfort food and envision themselves continuing to consume more. “Americans are eating like kids again,” Farm Rich, the sponsor of the survey, announced in its press release. NielsenIQ sales data bear out Americans’ professed devotion to kiddie treats like French fries, dumplings, pizza and tater tots. Sales of comfort food in the first two months of 2022 were higher than in the same period in 2019. Searches for “comfort food” on Google, with the implication of at least some recipe hunting, spiked in 2020 and generally have remained slightly higher than they were pre-pandemic. Mondelez, the maker of Oreo cookies, reports that last year, 80% of consumers said they were looking to improve their physical and emotional health by snacking.
Mondelez realizes that even the mood enhancements offered by its popular product can seem dreary after two years of heightened anxiety. That’s why the company doesn’t just call it an Oreo. It’s an Oreo Chocolate Cream, says Nick Graham, the company’s global head of insights and analytics.
“It’s the familiar with a slight twist on it which we’ve seen is a really powerful driver,” Graham says. “We saw this during Covid. The search for something that feels very familiar and comforting, something that you know and trust, but the little twist on it gives it the surprise and delight.”
There’s been more surprise than delight in the recent performance of food startups that have gone public in the Covid era. Growth has been stunted by a combination of factors. Among them: packaging shortages and rising transportation costs that Big Food can absorb better, expensive battles over limited space on supermarket shelves, and investors that have grown progressively more unwilling to fund innovation.
“Back in the day, you could take risks,” said GT Dave, the CEO of GT’s Living Foods, who began brewing and selling kombucha nearly three decades ago when he was 17 years old. “We’ve experienced remarkable and never-seen-before conditions and circumstances. We thought that 2020 presented the worst of things and then, of course, we were wrong. 2021 through 2022 has made 2020 look like a cakewalk.”
Shares of Beyond Meat, a company that’s betting Americans will want to be environmentally conscious by eating more plant-based meat, has lost $6 billion since March 2020, bogged down by weak sales growth. At Vita Coco, a healthier soft-drink company, stock is down one-quarter from its October debut. AppHarvest, a tech-enabled greenhouse grower of tomatoes and berries, has dropped 86% after the company reported its first-year results of $9 million in revenue on a loss of more than $160 million. The stock prices of Stryve, which manufactures air-dried jerkies, and Zevia, which makes a Stevia-sweetened energy drink, have also fallen since going public last year. For Oatly, a milk-like beverage made from, well, oats, revenue has risen 50%, but investors aren’t convinced. Its market cap is down to $3 billion from the $10 billion valuation of its July IPO.
In the heady days before the pandemic, many new-product launches were driven by a desire to cash-out in a flashy and lucrative acquisition. Dave points to 2019, when the food industry unveiled nearly 20,000 new products. Covid-19, however, led to a retrenchment that changed the calculus. “The bigger buyers have gone away,” Dave says. The reversal halted a decade-long boom in food entrepreneurship. “It’s undermining innovation,” he says.
We thought 2020 was the worst, but we were wrong. The next two years made 2020 look like a cakewalk
One barrier for new brands are the fees they need to pay supermarkets. Big Food has padded the grocery industry’s profits for years. Annually, brands collectively pay about $225 billion for promotions and samples of new items. For newbies, the fees can be the difference between breaking even or not. This system gives large conglomerates like General Mills, Mondelez and Kellogg’s the upper hand because they can share the cost across a wide array of product lines.
There’s always hope, however, for new tastes and culinary experiences. Sometimes trends originate from the strangest places. Take, for example, how so many young people returned home to live with their parents during the pandemic. The kids stocked home fridges with brands they liked, and Mom and Dad were exposed to new things they might have missed if it hadn’t been for the pandemic.
The results have been mixed, but some startups are leveraging success from that exposure to land deals with big food companies to create products that are a hybrid of comfort and new. NotCo, which has raised more than $360 million at a $1.5 billion valuation from Tiger Global Management, Bezos Expeditions and L Catterton, started a joint venture with Kraft Heinz in February to create vegan alternatives of classic items like Oscar Mayer hot dogs, Cheez-Whiz and Philadelphia cream cheese.
“There’s a cross-generational effect,” NotCo founder and CEO Matias Muchnick says. Parents “started trying their kids’ NotBurgers, NotMilk and NotMayo.”
Reformulating already iconic products – some might call the products a variation on comfort food – could be as advantageous for Big Food stalwart Kraft Heinz as it is for NotCo. While the tie-up could boost a startup like NotCo in a tough environment for new companies, Kraft Heinz, even with $26 billion in annual revenue from 40 countries, could use some help attracting younger consumers who might be receptive to making vegan not-dogs a new comfort food and topping them with Heinz ketchup.
“Now we have a base of consumers that’s larger in range of demographics, because of the pandemic,” Muchnick says. “That’s an effect that’s long-lasting.”
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Source: https://www.forbes.com/sites/chloesorvino/2022/03/11/covid-19-has-pushed-americans-back-to-grandmas-kitchen-where-meatloaf-not-beyond-meat-is-on-the-menu/