Food and beverage manufacturers are working closely with one of the largest ingredient suppliers as they look toward innovation to help offset a sharp drop in product volumes, the head of Ingredion said in an interview.
CEO Jim Zallie said engagement, both online and in person at its 32 “idea labs” around the world, rose 26% last year as customers placed a greater priority on using its insight and expertise to co-create or find solutions for product development. The uptick in consumer engagement helped fuel Ingredion’s record $8.2 billion in net sales in 2023.
With customers cutting back on purchases or changing their buying habits in other ways due to higher prices, manufacturers realize new products are vital to attracting shoppers, Zallie said. It’s a sharp contrast from a few years ago when COVID-19 and supply chain disruptions forced companies to put new product innovation on the back burner in favor of keeping shelves stocked with the most in-demand items already being made.
Food and beverage makers “need to create better mousetraps and innovate,” Zallie said. “We’re seeing more customer engagements driven around innovation that we think, hopefully, bodes well not just for [20]24, but [20]25 for innovation.”
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Ingredion’s roughly 1,300 products are sold around the globe in 120 countries to more than 18,000 customers, including restaurants, private label food makers and large CPG companies making everything from chips and pudding to ice cream, plant-based burgers and candy.
Last year alone, 70% of new global product launches contained a starch, sugar reducer, plant-based protein or one of the other ingredients that Ingredion produces.
“Customers are looking for good ideas from wherever they come from,” Zallie said. “And if you’re going to be a preferred supplier, and you’re going to earn the right to supply them with the majority of a particular ingredient category, they want you to be a problem solver. They want you to be an opportunity spotter. They want you to bring new concepts.”
Improvements in the supply chain also have prompted companies that purchase products from Ingredion to revert to “more normalized” ingredient stockpiles in 2023. With consumers no longer loading up their freezers or pantries, and with less of a concern among food manufacturers for a larger “safety stockpile” in case of a disruption, businesses have felt confident cutting back on inventories.
The destocking, Zallie said, has largely “worked its way through the entire supply chain.” Volumes have started accelerating, a trend he expects will continue throughout the rest of 2024 as a slowdown in the rise of inflation and a drop in many commodity prices create a more favorable economic environment. Inflation will need to be watched closely, however, as well as the spending habits of lower-income shoppers.
Volume growth “should be enduring, but it’s going to be something that we’ll be watching very carefully,” he said. “In the meantime, it’s extremely important for us to be operationally very efficient and be agile on our manufacturing and supply chain.”
Ingredion has spent millions of dollars since 2021 improving the efficiency, transparency and visibility of its supply chain, particularly in regions where it previously experienced constraints. It has upgraded its ability to forecast demand, lessening the chance that it’s left holding excess, higher-priced inventory.
The company also has expanded production in several regions. In China, the largest global market for food starches, Ingredion built a facility in 2022 to increase output and help it more reliably meet growing demand in the area. Last year, it invested in the production of specialty starches in Mexico, a move that improved reliability for the ingredient by shortening shipping distances and improving the company’s environmental footprint.
“Ingredion is operating under the learnings from the pandemic, where the investments we made, have made our supply chain more resilient and our regional self-sufficiency better,” Zallie said.
