Entrepreneurial Innovation Is Driving Disruption in the Food Industry

By Robert Bikel

Last year a group of entrepreneurs debuted viable new meat alternatives: plant-based protein burgers that recreate the meat experience -- even smelling like beef, sizzling when cooked, and “bleeding” a fermented alternative to blood.

If, at first blush, this sounds like a marketing nightmare bound to offend vegetarians and carnivores alike rather than a triumph of innovation, consider this: Hour-long lines formed outside Traci Des Jardins’ iconic Jardiniere in San Francisco as patrons sought out the new meat-free Impossible Burger, forcing the restaurant to offer purchase vouchers. Likewise the Beyond Burger, a meatless burger that debuted at a Whole Foods Market in Colorado, first sold out in an hour.

Our society has reached a pivotal moment in its relationship with the food industry. After decades of passively accepting the food industry’s offerings without a high degree of public scrutiny -- regardless of whether those products were unhealthy and/or unethically sourced -- consumers are increasingly asking empowering, health-related questions in earnest. And even better: They're demanding change.

As often is the case in “consumer revolutions,” entrepreneurs -- not industry stakeholders -- are the ones meeting consumer demand and driving massive innovation and disruption in the food industry.

While large manufacturers continue to try to convince Americans that sugary breakfast cereals are good for kids, innovators are disrupting the industry and forcing food-conscious consumers to pay attention. If industry stakeholders continue to slowly trail entrepreneurs rather than expedite their own efforts, it will be at their own peril; those who fail to adapt will find that consumers are taking their business elsewhere.

In its defense, the food industry has implemented changes, albeit measured, from the point-of-origination to the point-of-sale. Many companies are embedding sustainable practices along their supply chains, reducing waste, and championing human rights and social causes.

Some mature, traditionally-structured companies -- including Whole Foods and General Mills -- have set up venture capital arms to explore innovation, allowing them to experiment at the margins of their core business to learn about and potentially uncover game-changing opportunities.

But many of these actions are reactive. High-profile documentaries such as "Food Inc.," "Super Size Me" and "Taste the Waste" have highlighted troubles in food sourcing and health impacts, as have social activism campaigns by food vigilantes. There is growing awareness of ethical problems with inefficiencies and food waste, estimated at about 40 percent of food supply in the United States. Even mass litigation has put food companies under a consumer microscope, continuing with the battle over GMOs.

Additionally, the food transparency movement has led to a growing awareness of where food originates, under what conditions it arrives on our plates, and what role the supply chain plays in those endeavors.

While these developments have accelerated responses in an industry dominated by large, publicly-traded corporations -- which are highly attuned to the public’s desire to balance accountability to shareholders with sensitivity to the public good -- those innovations are far outpaced by entrepreneurs who are actually re-imagining consumers’ relationship with food.

Startup ventures are pushing the envelope on food industry disruption. At New York-based Square Roots, an urban farming incubator program, entrepreneurs have developed vertical, soil-free farming techniques that use less water and space than traditional farming, and operate without seasonal restrictions.

In Germany, young innovators are opening the world’s first “packaging-free” supermarket to minimize waste, reduce transportation costs and improve the overall impact of food consumption on the environment.

And Back to the Roots, an Oakland, California-based company founded by two college students who gave up corporate jobs for lives of social entrepreneurism, offers numerous "ready-to-grow" (mushroom kits) and "ready-to-eat" (non GMO, minimal ingredient cereal) products which are now being sold in thousands of locations nationwide.

Even though food entrepreneurs often start small, their initiatives can lead to large-scale disruption. The once-small beverage company Honest Tea, now owned by Coca-Cola but acting as an independent business unit, recently struck a deal to sell its organic and Fair Trade certified beverages in Wendy’s restaurants—not a typical hot spot for diners interested in sustainable foods.

The noted entrepreneur Seth Goldman, Honest Tea’s co-founder and “TeaEO” emeritus, said the partnership allows Honest Tea to purchase more than 1 million additional pounds of organic ingredients. And Goldman is going beyond what he calls the “undoing,” or simplification, of food. In his role as executive chairman of the board for Beyond Meat, Goldman embraces the “redoing” of food, or “taking an existing category and redesigning it in a way that overcomes the perceived nutrition or health shortcomings of that product.”

There is no corporate safe haven from disruption, even in such a vital, basic product as food; there are no signs that the public longs for the “good old days” of junk food, minimal animal welfare safeguards and environmental exploitation.

Driven by entrepreneurial innovation, the food industry as a whole is wisely beginning to use that knowledge to re-imagine its core offerings. More companies, and even now, entire industries, need to look to cutting edge innovators and progressive entrepreneurs who are responding to societal demand and practices -- or risk being left behind.

Image credits: 1) Dan Gold via Unsplash; 2) Courtesy of the author

Robert Bikel is Director of the Socially, Environmentally, and Ethically Responsible (SEER) Program at Pepperdine Graziadio School of Business and Management. The 6th Annual SEER Symposium, “The Recipe for Innovation,” which explores next-generation business strategies focusing on entrepreneurship, values, and innovation, will be held February 3, 2017.