How can innovation support a healthier food industry?

As mission-driven businesses characterised by their agility and willingness to defy convention, HCBs are able to quickly innovate to launch solutions that meet increasing consumer demand for healthier products.  

However, these emerging brands require more support to scale and increase their impact. This is why Mission Ventures and Impact on Urban Health formed a unique, cross-sector partnership to establish The Good Food Programme. The programme helps healthier challenger brands and novel food technologies to break through and scale, with the aim of displacing well-established, unhealthier products in families’ shopping baskets.

This report sets out learnings from the pilot phase of The Good Food Programme, and our ambitions for the next phase. 

We also showcase stories and calls to action from HCBs and established companies across the food industry, as well as from investors, young people and policymakers. We demonstrate how innovation throughout the food industry can improve access to healthier food for everyone, no matter their budget.

At Impact on Urban Health, we aim to break the persistent link between living on a lower income and experiencing health and dietary inequalities.We invest in projects that make eating well the easiest – not the hardest – thing to do, and in 2019 we began exploring the role innovation and start-ups could play towards this mission.

We commissioned the Healthier Returns research jointly with Big Society Capital and the Food Foundation, which demonstrated:

• The availability, attractiveness, and accessibility of food in the areas where we live, work, and play have a significant impact on how we eat. 
• Innovators and disruptors, in the form of HCBs, were starting to take on the challenge of making healthier food more widely accessible, and this was especially prevalent in food snacking categories.
• While HCBs were an exciting new force in the food industry, in order to scale and reach more families, they required investment and advisory support to navigate the food industry and set up a successful food business.

Building on these findings, Impact on Urban Health and Big Society Capital established a pilot programme that supported 13 HCBs to enter the market and grow, with a business support programme managed by food industry experts Mission Ventures and an equity fund managed by Ascension Ventures. 

You can read more about the restrictions here and here.

• The total revenue of the brands that went through the accelerator in 2020 increased by 63% within their first 12 months. 
• BSC and IoUH invested £1.5m into the pilot fund. Co-investors supported the pilot brands due to our expertise on food and impact, seeing the 13 brands raise a further £6.5m of investment within 12 months 
• Seven brands secured a major supermarket listing within the 12 months of the programme.

2. Both acceleration support and investment are needed to support ventures to scale but they play different roles.

• Mission Ventures’ industry knowledge and support with consumer insights proved hugely valuable to brands and first time founders.
• Investment was especially needed in the earlier stages of brands’ growth, as this is when funding is required to refine their offering to consumers and gain distribution channels. Investment at this stage can appear high-risk, but, as we detail in later sections, HCBs can also present a ripe opportunity to forward-thinking investors.

3. Families living on lower incomes may switch to HCBs once they are distributed and match competitors’ pricing and promotions.

• Jim Jams saw 61% of its sales at a top four UK retailer come through substitutions for its products over less healthy branded or market leading products. 

Our pilot set out to test whether it was possible to support HCBs to offer healthier, convenient, and tasty products to all families, no matter their budget. We gained promising evidence that this was possible, and we became more familiar with the challenges facing these brands. We now know that:

• HCBs can’t always address the needs of families on low incomes. These brands compete on cost, need to reach significant distribution to be able to bring their price point down. 
• HCBs, like many mission-driven startups, are small, scrappy ventures nipping at the heels of billion dollar companies with vast marketing budgets. They need to raise consumer awareness of their products and their value, but can’t do this alone.
• HCBs start out with a desire to make healthier food but often lack an in-depth understanding of what consumers, especially those living on a budget, value most.
• People who have experience of an issue are best positioned to design solutions for it, however many HCB founders don’t have lived experience of living on a lower income and the impact this has on access to healthier food.

Our pilot programme learned how to effectively address these barriers, and we built the next iteration of the programme to respond in an intentional and structured way.

To achieve these goals, we take a targeted and data-driven approach evaluating potential impact and progress. We analyse the data to identify categories that represent potential value to retailers and investors but lack affordable and healthier options.  Research we conducted with Kantar ahead of our recruitment drive in summer 2022 identified categories where families on lower incomes spent as much or more than wealthier households:

Download the full clean data (.xslx file)

• Mission Ventures overlays its deep insight into the food industry, existing innovation, trends and consumer behaviour to inform its analysis of this data and evaluate potential for scaling new ventures within each category.
• These categories hold approximately £4.3 billion in grocery sales, with £2.2 billion coming from families living on a budget. Crucially, these are categories where families living on a budget are spending more than wealthier counterparts and
  • a) there are few to no healthier and/or affordable products and
  • b) these have yet to see much innovation or new product development.
• We apply this analysis to recruitment and tailoring of the business support. We have supported the growth of a healthier sugar confectionery, a healthier children’s biscuit, and have recently recruited brands creating products in the ‘Flavoured Milk’ and ‘Instant Hot Snacks’ categories. 
• We apply our industry knowledge and insight to categories, such as Frozen Pizza. This is a £560 million category with a huge gulf between healthier options and affordable ones. Despite families on lower incomes having a slightly lower share of spend, it still presents a compelling opportunity for developing and launching healthier and affordable products. Focus on categories like this would benefit retailers by delivering new growth and for investors as brands look to capitalise on less-crowded market opportunities.

Going forward, we will continue to identify agile brands that can disrupt these categories, offering value to consumers, retailers, and investors and present a blueprint to more established manufacturers on how to bring healthier options to market.

Read more about Oonagh’s perspective here >

• Manufacturers are a key driver for change. Bettina Abruzzese, Head of Public Affairs – Healthy Nutrition at Danone UK and Ireland describes how Danone’s commitment to health shapes their entire strategy and approach to innovation.