‘People aren’t going to the grocery store for novelty’: Amid inflation, CPG startups go back to basics

But now, as shoppers’ wallets remain squeezed and inflation shows no signs of cooling down, investors and buyers say they are more interested in simplicity and familiar messaging. They say that the brands they are doing well right now are those that cater to what shoppers already know and love. It could mean that they sell a better-for-you version of a comfort food classic. Or, that they prioritize stripped-down messaging on a label that highlights what a product is and what it does, rather than touting whatever hot new adaptogen it’s using.

Take the lab-grown meat category. Before the pandemic, interest in the category was exploding, led by Beyond Meat and Impossible Foods. In 2020, venture capitalists poured over $1.2 billion into startups developing cell-cultured meats and alternatives. But despite the initial intrigue, these lab-grown meat companies have struggled to win over more than just the early adopters. Beyond Meat reported during its 2023 fourth-quarter earnings that net revenue was $73.7 million, down 7.8% year-over-year.

Recently, Impossible Foods went through a rebrand, to emphasize images of familiar fare, like hot dogs, meatballs and burgers on its packaging. “For a long time, meat eaters didn’t see us as something for them. But our mission relies on attracting meat eaters, so we wanted to do what we could to be more inviting in our approach and messaging,” the company’s chief marketing and creative officer, Leslie Sims, said in a statement at the time.

Startups in other food and beverage companies are taking a similar approach. Poppi’s recent Super Bowl commercial promotes the brand as a guilt-free soda. 

“People aren’t going to the grocery store for novelty, they’re looking for products they can trust and will get the job done,” Anna Whiteman, partner at Coefficient Capital said.

A renewed appetite for basic products  

Whiteman said a few years ago the companies that attracted venture funding were focused on marketing niche and functional ingredients.  

Lab-made food was being heavily funded when investors were willing to gamble on new trends, but investors and shoppers have since lost interest. “We see it most acutely in the plant-based and cellular egg space,” Whiteman said.

The economy is still in a tough spot and inflation is still rising. “Maybe there is an element of fun, but for the most part the focus is on simple messaging right now,” she said.

Whiteman added there is a refreshing swing back from catering strictly to esoteric diets. Many startups are still seeking to develop products with health benefits, but that cater to more than just a very specific segment of health-conscious shoppers. “At the end of the day, what brands realize is people want a good-tasting soda that’s not objectively harmful,” Whiteman said.

Where investors are seeing traction is among companies making modern versions of classic items people grew up with. Whiteman pointed to the green tea-based energy drink Gorgie, which Coefficient has invested in.

Genevieve Gilbreath, founding partner at Springdale Ventures, said people’s inability to spend money on discovery has hurt emerging brands trying to introduce innovative products.  

“The core discovery customer will always be interested in the latest ingredients that are catching fire,” Gilbreath said. But the average shopper isn’t into “the Erewhon phenomena,” as Gilbreath referred to it, in which fancy food hauls have become an activity documented on social media.

In the case of trendy ingredients like mushrooms and adaptogens, Gilbreath said it can be a hard sell because people can’t feel their effect immediately.

As an investor in mac and cheese brand Goodles, Gilbreath said she’s attracted to companies that are bringing back beloved nostalgic recipes. Another brand that’s gaining traction is Chubby Snacks, she said, which offers a healthier take on Smuckers Uncrustables. Gilbreath said there is a case to be made for people’s appetite for familiar favorites. “The world is so complicated right now, and we’re so overloaded all the time,” she said. “That’s why we’re seeing a return to nostalgia.”

Buyers looking for simple messaging 

SkinnyDipped, a snack brand launched in 2016 and is known for their dipped nuts, is trying to expand but still sticking to whole natural foods. The company recently underwent a rebrand and is carried in 25,000 retail doors, most recently at Costco and Publix. Later this year, SkinnyDipped is introducing a line of low-sugar sweet and salty nuts and nut butters. Its products contain anywhere from 2 to 5 grams of sugar per serving.

SkinnyDipped co-founder Breezy Griffith told Modern Retail “We see a lot of challenger brands that pop up that are based on what I think of as niche trends, which are here for a few years before something else takes their place.”

“The buying landscape has really changed,” Griffith said. When the company started, buyers had more time for one-on-one meetings with small brands. “Buyers are getting increasingly pressured with their workload and how much time they’re able to give emerging brands,” she said. 

“One thing that’s still important [to buyers] is consistent authenticity,” Griffith said. And SkinnyDipped’s consistent selling point has been low-sugar and diabetes-friendly products. Griffith said that health concerns about sugar alcohols and artificial sweeteners means people are reconsidering returning to regular sugar in moderation.

She said the brand gained a following of pre and diabetic people due to its low-sugar recipes, who help inform future product launches. The new SkinnyDipped packaging will also feature the sugar and plant protein content more prominently, along with the slogan “snack with no strings attached.”

Another brand that’s sticking with what got it on retail shelves is Gimme Seaweed. The company has been selling its line of naturally flavored seaweed chips since 2012, and hasn’t deviated from the core collection beyond releasing new flavors. This summer Gimme Seaweed is releasing Korean BBQ roasted seaweed snacks, for example.

Diego Norris, CMO at Gimme Seaweed, said the company’s proposition to buyers and grocery shoppers has always been about minimalism. Seaweed chips are naturally plant-based, low calorie and contain vitamins like B12, which Gimme Seaweed leans into the packaging and marketing in its goal to own the category. The label focuses on USDA Organic and vegan certifications. Meanwhile, the brand’s marketing largely revolves around ways to incorporate the chips into recipes.

Nori snacks have been sold at Asian markets for decades, and Norris said many Americans are familiar with the sheet-like chips. “It’s not about being part of a trend, but a genuine commitment to keeping things real and straightforward,” Norris said. This approach to product development, he said, “cuts through the noise of overly processed options.” 

Buyers also appreciate new products that are simple and easy to promote to their customers. Norris said this is the main talking point the company hears from buyers at the moment. “The chorus for simplification isn’t just background noise, it’s growing louder every day,” he said.

That doesn’t mean that there isn’t room for innovation, but it is more centered around introducing products that might have a loyal following among one cohort to other groups of shoppers. For example, internationally-inspired products continue to attract attention. “I’m still bullish on the increase of authentic global flavors, those are the products that are succeeding by bringing new products to mass shoppers,” Gilbreath said. 

Longevity, according to these companies, is important when thinking about new flavors and ingredients during R&D. At SkinnyDippped, according to Griffith, “We always think of how we can create innovative products that people will love not just in a year or two, but 5, 10 or 20 years from now.”