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Innovation is a major driver in the global food and beverage sector, as consumers increasingly seek healthier, more sustainable and convenient products, while brands work to improve efficiency and navigate economic and supply chain pressures. Scott Dixon, managing director of The Flava People, explains why medium-sized businesses play a crucial role in driving innovation and the unique value they bring to the industry.

Agility and flexibility aren’t words typically associated with the large corporations that dominate the UK food and beverage landscape. While these major players offer advantages – such as robust logistics, global sourcing networks and economies of scale – their size often makes them slower to adapt to new consumer demands or emerging trends. In contrast, small-to-medium-sized businesses can make decisions quickly, focus on specific niches and bring fresh thinking and solutions to the market faster.

Why does innovation matter in food and beverage?

Innovation is critical in the UK food and beverage sector for several key reasons:

• Meeting changing consumer expectations From plant-based diets to functional beverages and sustainable packaging, consumer expectations are evolving fast. Innovation allows brands to keep up by creating new product formats, reformulations or sourcing approaches. A standout example is This, a London-based SME that has redefined the plant-based meat category with hyper-realistic, high-protein alternatives using simple ingredients and bold branding.

  
  

• Differentiation in a crowded market  With retail shelves and digital platforms saturated, standing out is essential. Brands like Trip, which launched a CBD-infused drinks range targeting wellness-conscious consumers, have shown how new formats and ingredients can carve out previously untapped niches in the UK beverage market.

  
  

• Operational efficiency and cost control  SMEs are also turning to tech innovation – such as automation and AI – to optimise production and reduce waste. For instance, Rebel Kitchen and Moma Foods have both embraced lean production systems and strategic outsourcing to remain agile and cost-effective while scaling their operations.

  
  

• Sustainability pressures  With growing environmental awareness and stricter regulations, brands are under pressure to reduce their carbon footprint, use recyclable materials, and minimise food waste. Companies like Oddbox, which rescues surplus fruit and veg directly from growers and delivers them to consumers, are a prime example of SME innovation that meets both commercial and environmental goals.

  
  

• Adapting to market disruptions  From Brexit to inflation and the Covid-19 pandemic, UK food and drink producers have faced unprecedented external shocks. Innovative SMEs have quickly pivoted – adopting D2C channels, rethinking packaging or adapting recipes to new supply realities.

Why are SMEs crucial to innovation in food and beverage?

Agility and adaptability

SMEs can respond to trends with speed and precision. They're able to quickly develop and adapt products to meet the pace of change – whether that’s a sudden surge in demand for a trending ingredient like the trendy Gochujang or a new format that hits a viral moment online. Their smaller size and specialisms are their superpowers when it comes to launching products into market fast and with purpose, a key leverage that can also lock in brand-licensing partnerships.

Another industry example is Dash water, which infuses wonky fruit into sparkling water. They were able to pivot their messaging and scale quickly, capitalising on the growing demand for healthier, no-sugar alternatives without waste.

Innovation-driven culture

Innovation isn't just a strategy for SMEs – it’s often part of their DNA. Their compact and skilled teams thrive on collaboration, curiosity and experimentation. They’re not bogged down by silos or red tape. That spirit creates a culture where new ideas can flourish and be rapidly commercialised.

Cawston Press is another great example – combining heritage British ingredients with modern brand values to reimagine soft drinks. Their team’s continuous focus on natural ingredients and reducing added sugar shows how a clear innovation culture can sustain long-term relevance.

Niche expertise and focus

Many SMEs thrive by owning a specific niche. That specialisation drives authenticity, depth and a loyal customer base.

Take Pollen + Grace, for instance, which began as a small meal delivery service and now sells clean, plant-based ready meals nationwide. Their focus on nutritional integrity and wellness has helped them stand apart in the ready-to-eat category.

In beverages, Minor Figures has carved out a clear identity within oat milk and coffee culture by doubling down on both barista-quality formulation and sustainability credentials.

Collaboration and partnerships

Unlike many large companies that compete vertically, SMEs are often open to collaboration. Whether it’s co-branding, licensing or agile product development, partnerships are a fast route to innovation.

Not only can SMEs prove advantage with commercially driven collaborations, but also with socially driven initiatives that are bespoke to their community.

A similarly effective example is Brewgooder, the Scottish craft beer brand that donates 100% of its profits to clean water projects. By collaborating with craft brewers and retailers, they’ve scaled their mission and reached new audiences.

Driving economic growth

SMEs are crucial to the UK’s food and beverage economy – not just as innovators, but as employers, regional anchors, and exporters. Brands like Pip & Nut and Joe & Seph’s have grown from kitchen-table concepts to nationally stocked brands, supporting jobs, reinvesting locally and showing how entrepreneurial spirit can translate into measurable impact.

The opportunity for industry leaders

For decision-makers in the UK food and beverage sector, SMEs should be central to any forward-thinking innovation strategy. These companies offer fresh perspectives, deep consumer connection, and a willingness to take risks that larger businesses often shy away from.

Whether pioneering sustainable packaging, reimagining category norms or building the next wellness brand, SMEs are shaping the future of the industry. By investing in and collaborating with them, larger businesses, retailers and investors can unlock a powerful engine for growth, relevance and resilience.

For the food and beverage industry to remain competitive and dynamic in the years ahead, supporting SME innovation isn’t just an opportunity – it’s a necessity.