Five Healthy Food & Beverage Trends on Display at Expo West

From high-protein snacks to better-for-you (BFY), cleaner-ingredient sodas and candies, the enduring growth and strength of the natural food and beverage sector was in full force at Expo West, the industry’s largest and most highly anticipated trade show.

This year, the four-day event — held at the Anaheim Convention Center from March 4 to 7 — featured industry veterans such as General Mills and Hain-Celestial alongside emerging leading brands in the better-for-you food movement like Cleveland Kitchen, Goodles, Purely Elizabeth, Righteous Felon and SkinnyDipped. Roughly 70,000 attendees packed into the Southern California convention center to sample innovative new products from 3,200 exhibitors.

Since the early 2000s, the natural foods category has rapidly outpaced conventional products. That trend is expected to continue, as sales of natural and organic food and beverages are forecast to grow by 8.7% compounded annually through 2027, or more than double the 3.9% annual growth rate for the overall food industry. However, supply-chain disruptions and recent pressures on consumers have created industry headwinds, causing most large food and beverage categories to report flat or down sales on a volume basis over the past 12 months.

Despite these challenges, Solomon Partners expects that strategic acquirers will continue to be attracted to emerging players in this space for their growth potential and attractive consumer demographics. Case in point: earlier this week, PepsiCo announced it is acquiring Poppi for $1.95 billion, after scrapping its own planned launch of a functional soda brand.

Following Expo West, Solomon Partners Managing Director John LeVert, who has attended the trade show for more than a decade, and Director Peter Diamond share their five top trends in the natural and organic space:

• Better-for-You Food and Beverages Reign Supreme. BFY foods and beverages are no longer relegated to a small section of real estate in the back of supermarkets. These items continue to disrupt the space by attracting new consumers, driving incremental consumption occasions and taking share from conventional competitors. For example, the rapid scaling of brands such as Poppi and Olipop have created a new category in better-for-you soda — and Expo West featured many names in this burgeoning segment. The scaling of BFY soda comes as more consumers also reduce their alcohol usage or forgo drinking altogether. Additionally, many food and snack brands are replacing unhealthy ingredients with cleaner options, e.g., swapping avocado and coconut oils for seed oils.

• Packed with Protein. The prevalence of high-protein ingredients was the No. 1 trend at Expo West. Protein-packed products were featured across nearly all categories, both in more traditional settings (including bars, meat snacks, and fresh) and some less conventional areas. The BFY meat snacks category, especially sticks delivering high protein with less added sugar, is now the fastest growing of all snack foods. Companies are also infusing protein into less conventional formats, including salty snacks/chips, ready to drink beverages and desserts. The expanded breadth of protein-forward offerings by food and beverage companies reflects a desire to serve consumers who are prioritizing satiety and seeking longevity, with a focus on strength training and increased protein consumption to add lean muscle mass. We believe this trend is here to stay and will also benefit from the expanded use of GLP-1 pharmaceuticals such as Ozempic.

• Focus on Functional and Nutrient-Dense Products. From energy to brain health, food and beverage brands are creating products delivering health benefits that extend beyond their nutritional value. At Expo West, clean energy was a big product feature — with functional ingredients delivered through a variety of options (ashwaganda, caffeine, L-theanine), product categories (coffee), and formats (shots) — all aimed at delivering better mental acuity, more sustainable energy, and lower stress. We have also observed many consumers increasingly seeking fermented foods that taste great and deliver functional/gut-health benefits. Food as medicine continues to be an innovative area.

• Embrace of Multicultural Foods. We’re seeing growth in multicultural foods due to several factors, including changing demographics and the increasing popularity of cooking videos on TikTok and other social media/online channels. As the market for international foods grows, ethnic brands are innovating across fresh, ambient, and frozen products, most notably within Hispanic, Asian, Indian, and Italian cuisines. For example, Siete Foods is now a leader in the BFY Mexican-American food space, and we expect other multicultural brands to follow suit.

• Growth of the Online Channel. Modern consumers are increasingly connecting with brands that are either digitally native or have a strong ecommerce component. Though online shopping constitutes only a fraction of grocery sales — roughly 17% of all purchases — it remains an important channel for emerging brands to build a following. Like the brands themselves, retailers that have invested in both online and brick-and-mortar operations have been more likely to beat earnings expectations, with Walmart crediting “increased customer transactions in both stores and ecommerce” for its recent, better-than-expected earnings report.

What do these emerging trends mean for dealmaking? We see strong fundamentals pointing to elevated M&A activity, especially as emerging players opt out of the IPO market.

Since the market peak in 2021, emerging brands have sharpened their focus on sustainable and scalable unit economics. Meanwhile, founders and management teams are executing profitable growth plans for brands with $25 million to $100+ million in sales. This financial discipline increases options for their investors and makes the brands more attractive to the big strategics — which are cash rich, starved for growth, and under significant investor pressure to reshape and modernize their portfolios.

But the bar is high for strategic exits. Recent standout examples of Poppi, Alani Nu, Ghost, Simple Mills, and Siete Foods demonstrate that scaled, modern brands are attractive to corporate buyers. Likewise, private equity firms continue to focus on emerging brands and enablers, remaining eager to deploy capital and back businesses and teams in attractive categories.

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