Consumers want it all: healthy, tasty, and ethically produced food delivered on demand with environmentally friendly packaging. And for no extra cost.

Food companies are under unprecedented amounts of pressure. As they continue to lose market share to smaller firms, they’re doing everything they can to cut costs.

Yet, adapting to changing consumer demands is tricky and expensive.

Take the example of removing artificial colors, which dozens of companies from Taco Bell, to General Mills, to Chipotle have committed to do.

It seems easy: just substitute in the natural color. But what if the new version looks a bit different? The customers probably won’t care…right? What if it also tastes a bit different (a key attribute of artificial colors is that they add color without changing taste)? And won’t all of this cost more? The food manufacturing industry is set up to realize whatever advantage they can to cut costs and make their products attractive (read: salty, fatty, and sweet). Supply chains and product formulations are not (yet) robust to the shifts that consumers are demanding, especially as consumers are not likely to accept price increases.

Consumers now have the ear of the regulatory system, creating another source of pressure for food companies. In the last few weeks alone, we’ve seen

• the FDA come down on added sugar, calories, and serving sizes (thanks, Michelle)
• legislation introduced to revamp date labeling
• guidance that “evaporated cane juice” should be labeled as “sugar”
• targets for sodium reduction
• and of course the Vermont GMO labeling law that will come into effect on July 1

THE VOICE OF THE CONSUMER IS GETTING LOUDER. AND BIG COMPANIES ARE LISTENING.

Big food companies are struggling to find strategies that will satisfy their bottom line and their customers. This is far from easy.

Imagine you’re the head of R&D, a brand manager, or even a C suite executive at one of these companies. Marketing has made public promises and you have no idea how you’ll fulfill them. Q2 performance is not looking great. Your suppliers are terrified of what you’ll ask them to do next. And the startup you just bought to help you reach a new market segment and relieve some of the pressure is asking for you to leave them, and their margins, alone. This doesn’t exactly feel like the ideal environment to be innovative.

But innovation is exactly what these companies need.

Innovation can help break tradeoffs between seeming tensions, such as “low cost” and “good for you.” With this mindset, constraints like those described above can actually become guidelines that fuel innovation.

Innovation will come in many forms, such as

• innovative supply chain partnerships that distribute value and align incentives
• organizational innovations that help companies become resilient in the face of future changes, like embedding sustainability and health requirements early on in the design process
• technological innovations, like tools to monitor freshness, e-commerce solutions, and digital marketing platforms
• open innovation and corporate venturing strategies that give firms access to cutting edge solutions cheaper and faster

Innovation will separate the leaders from those who continue to lose market share and ultimately disappear. The classic example of this type of innovation is the Tesla, which delivers performance and impact. We need the Tesla of tastebuds. Is Big Food up to the challenge?