Key Takeaways:
- TraceGains’ 2025 NPD Report indicates that 83% of companies are increasing their innovation spending, yet only 2% have fully digitized their product development processes.
- Manual workflows remain a significant bottleneck; 82% of companies still depend on spreadsheets, emails, or paper, resulting in costly compliance risks and slower time-to-market.
- AI adoption is on the rise, especially among mid-sized firms, but without foundational digital infrastructure, businesses may struggle to meet their innovation goals.
Despite increased investment in innovation within the food industry, many companies continue to use outdated tools for product development. According to TraceGains’ 2025 NPD Report, 83% of food and beverage brands are expected to boost their new product development (NPD) budgets this year, a rise from 76% in 2024 and 64% in 2023. Alarmingly, only 2% report having fully digitized and automated NPD workflows.
The report, based on responses from 190 professionals across the food and beverage sector, offers insights from leaders in quality, R&D, and regulatory functions within companies ranging from startups to large multinationals.
Where Is the Innovation Investment Going?
With most companies planning to spend on innovation but only 2% fully digitizing their workflows, where are those funds being directed?
Expenses related to innovation cover a spectrum of activities from specialized development and ingredient sourcing to lab testing and scaling production. “Technology can enhance efficiencies in these areas,” says Paul Bradley, Senior Director of Product Marketing at TraceGains, “but many organizations find themselves locked into outdated PLM systems, hindering their ability to explore innovative tech solutions.”
The report highlights a worrying reliance on obsolete workflows, with 82% of respondents admitting they still depend on manual methods such as spreadsheets, emails, and paper documents for managing NPD. Significantly, 53% do not utilize a Product Lifecycle Management (PLM) system at all.
Risks of Manual Processes
Relying on manual processes poses significant risks beyond operational inefficiencies.
Gary Iles, SVP Marketing & Business Development at TraceGains, notes that last year’s survey revealed a 20% increase in recalls. “Without digital audit trails or real-time data synchronization,” Iles states, “manufacturers are at risk for allergen misstatements, label inaccuracies, and failure to comply with new regulations, all leading to severe financial consequences and reputational damage.”
“NPD is collaborative,” adds Bradley, emphasizing that nearly all innovation efforts require cross-functional teamwork. “If critical information is trapped in manual systems, mistakes are inevitable.” Moreover, managing restricted substances is a growing complexity, as regulations on additives and packaging can vary widely. “A product might inadvertently target a market where it can’t be legally sold, incurring significant costs,” he explains.
Evolving Economic Pressures on Innovation
The latest report also points out a notable shift in innovation priorities for 2025. Reducing ingredient and manufacturing costs (45% of respondents) ties with addressing consumer health demands as key drivers of innovation, compounded by anticipated raw material price hikes of 7.3% this year.
Brands are increasingly gravitating towards health-conscious formulations; 67% focus on “better-for-you” products, rising from 60% in 2024. However, interest in plant-based alternatives is waning, with only 19% prioritizing such products, down from 33% last year.
Investment in Technology: A Reactive Approach
The survey shows that 40% of businesses are more inclined to invest in technology due to global supply chain uncertainties, while 22% are looking into formulation tools and 13% into compliance tech. This reactive stance reflects an industry that is responding to pressures rather than proactively innovating its digital structure.
Although 47% utilize PLM systems, satisfaction levels are low; only 37% are completely content with their implementation, and 63% report needing additional efforts to meet key business objectives.
AI Adoption Among Mid-sized Companies
Despite infrastructure challenges, AI adoption is on the rise. Seventeen percent of brands are fully committed to using AI for product innovation, an increase from 10% in 2024, as skepticism decreases from 44% to 32%. Mid-sized companies (1,000 to 5,000 employees) are leading this trend.
“Mid-sized brands are more agile because they aren’t encumbered by legacy systems, giving them a competitive advantage in speed to market,” observes Iles.
Bradley adds, “There seems to be an optimal scale for organizations that can leverage technology effectively without being overloaded by outdated processes. AI is advancing rapidly, and larger firms often struggle to keep pace.”
However, while companies are enthusiastic about AI, many lack the foundational digital systems to effectively leverage this technology. Over half (56%) are still somewhat reliant on manual tools, with only 16% having made substantial progress toward digitization.
Though businesses are committing to higher-funded innovation projects, their dependence on outdated practices poses a significant threat. To realize their ambitious goals, companies must not only increase budgets but alsoModernize their product development systems to navigate the complexities of compliance and economic volatility successfully.
Download TraceGains’ full report for further insights into new product innovation in the food industry.
