WESTMINSTER, COLO. — New product development spending among food and beverage manufacturers is expected to increase this year, according to survey data from TraceGains.

The findings come from the company’s 2024 R&D and Product Innovation report, which utilizes responses from 261 food and beverage brands to identify key product development trends and challenges.

“Our research reveals a clear imperative for brands to invest in product innovation as numerous transformative shifts coalesce across the industry forcing them to act,” said Paul Bradley, senior director of product marketing for TraceGains.

More than 75% of respondents expect to spend more on new product development in 2024, up 12% from last year, citing desires to remain competitive (51%), reduce costs (46%) and meet consumer demand (42%) as the major factors driving the uptick in investment.

The report showed brands also are increasingly shifting some product development processes in-house as a result of recipe formulation and intellectual property concerns, marking a notable change from pre-pandemic tendencies. For instance, over 70% of manufacturers said concept ideation, ingredient selection and recipe formulation are now handled in-house.

TraceGains found that a majority of brands believe in using artificial intelligence (AI) to source ingredients, materials and formulate products. As of February 2024, 36% of respondents said they already were testing product development with AI.

The technology already has found applications with companies like The Bel Group and Climax Foods, Inc., who developed a plant-based cheese formulation using AI. Additionally, Nestle SA announced in 2022 that it would be using AI and machine learning to streamline product development.

Manufacturers are paying special attention to better-for-you formulations, with 60% expecting better-for-you developments to be the focus of innovations during the upcoming year. Other popular innovation areas include plant-based alternatives (34%) and water/carbon-neutral strategies (26%).

The report also identified that brands are concerned about several macroeconomic factors and internal difficulties with product development. Key challenges included increased production and labor costs, fluctuating demand and commodity pricing, and availability of ingredients and materials. More than half of respondents (56%) cited “a lack of tools to ensure success,” such as appropriate staffing and updated technology, which may inhibit their ability to manage formulations and recipes.

“While it’s evident that brands require robust tools and solutions to navigate these challenges, a significant gap still exists in internal resources that may hinder their progress,” Bradley said.