WESTMINSTER, COLO. — Food and beverage manufacturers are showing interest in utilizing artificial intelligence (AI) for product innovation, but the continued practice of manual administrative processes and a lack of a long-term modernization strategy are barriers preventing a full transition into digitized management, according to the 2025 New Product Development Report from TraceGains.
TraceGains collected data from professionals across the food and beverage industry, gaining insights into product development trends within the industry. Other product development trends identified include a focus on developing product perceived as better for you and improving supply chain traceability as well as sourcing more sustainable ingredients.
“We’re pleased with the results of this year’s report showing genuine excitement around AI and digital transformation,” said Paul Bradley, senior director of product marketing for TraceGains. “The downside is that progress is being throttled by outdated workflows and a lack of automation. Amid intense pressure to compete by offering healthier, more sustainable products the majority of brands still operate in the stone age managing product development with emails, spreadsheets, and paper files.”
Investment in innovation advances
The report noted investments into new product innovations are continuing to increase, with 83% of companies increasing new product development (NPD) spending in 2025, up from 76% in 2024 and 64% in 2023. Over half of the companies surveyed intend to boost their spending by at least 11%.
For most companies, the increase in spending is a response to inflation and resource restraints, according to the survey. Forty-five percent of respondents said reducing ingredient and manufacturing costs and meeting consumer demand for healthier products are driving the focus on cost-efficiency, while 39% are driven by competitive pressure.
While companies are increasing spending on NDP, “outdated,” manual practices are hindering product innovation processes. Eighty-two percent of companies depend on manual administrative practices like spreadsheets, email and paper-based systems with 26% saying they’re “very reliant” on the tools, according to the survey. Survey results also showed that 2% of companies are fully automated and digitized.
Although the survey shows that many companies are still reliant on manual practices, attitudes toward AI have shifted in a positive direction since the previous year’s report. Seventeen percent of respondents are “all in” on AI tools, a 7% increase since 2024. Additionally, 32% of respondents remain wary about integrating AI tools into their workplace, which is down from 44%.
The companies utilizing AI are applying it to tasks that include streamlining regulatory compliance, accelerating formulation, analyzing market and consumer insights, generating and testing new product ideas and automating routines and R&D tasks, according to the survey.
Friction in product innovation
Product innovation may be at the forefront for many companies, but the survey showed an evolving industry landscape is adding barriers to meeting goals.
The survey found 69% of companies declare market and economic conditions as a roadblock, 53% believe labor and production costs add friction to product development timelines and 50% report lower levels of ingredient and material availability as an issue.
Health and sustainability
Alongside positive shifts toward AI-utilization is the industry’s focus on better-for-you product formulations. Sixty-seven percent of the manufacturers surveyed recognize the development of products perceived as healthy as a top investment opportunity, up from 60% the previous year.
The development on “better-for-you” topped the surveys “top innovation opportunities in 2025.” Manufacturers also are committing to lessening their environmental footprint through sustainable packaging. Forty-one percent of manufacturers are maintaining sustainable packaging as a priority, though there was a slight decline from the previous report’s 42%. Additionally, 48% of manufacturers are striving for greater supply chain traceability, up 4% from the year before.
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