Tastewise's Tech Is Helping Big Food Move Faster

Speaker 1:
Welcome to TD Cowen Insights, a space that brings leading thinkers together to share insights and ideas shaping the world around us. Join us as we converse with the top minds who are influencing our global sectors.
Rob Moskow:
I'm Robert Moscow, TD Cowan's Consumer Staples Analyst. Today I'm joined by Alon Chen, the CEO and co-founder of Tastewise, a leading consumer intelligence platform powered by data and generative AI, which helps food and beverage brands develop new products by tapping into real-time consumer insights, leveraging generative AI. CPG companies like Nestle, PepsiCo, and Kraft Heinz are successfully using Tastewise to accelerate product innovation, streamline marketing, and enable faster workflows. So Alon, maybe just to start, can you give us a couple of minutes on your background and your vision for what Tastewise can accomplish?
Alon Chen:
Yeah, absolutely. Robert, thanks for having me. So I'm Alon, I'm the CEO and co-founder of Tastewise. We're actually an AI and gen AI solution that started already back in 2017 to help the food industry to get closer to consumer, and to do marketing and sales as well as innovation in a more digital way and faster to the market. We've been doing it for quite a while, actually for the past two and a half years. Thousands of brands use Tastewise, not as a POC, but actually as a real solution that helps the marketing innovation and sales team to actually bring new products to the market, come up with better campaigns, find new audiences, as well as help their sales teams to basically have a better conversation with the retailers to actually win more shelf space.
Rob Moskow:
You do a lot of flavor testing or at least consumer testing to figure out what flavors are popular and emerging. So can you talk about some of the consumer insights that you've uncovered about cooking and flavor preferences recently?
Alon Chen:
Yes, absolutely. So a big part of the consumer's mindset recently has been to get an easy to make solutions at home. So ready to eat, prepared foods are actually doing a great comeback in many categories. For instance, what used to be considered as unhealthy, like frozen vegetables is becoming actually a new choice. By the way, did you know that frozen vegetables have better nutrients than most fresh produce? Just because they're simply frozen right from the yield. So consumers are actually finding this is extremely healthy and actually easy to make at home. They all have air fryers, which is the kitchen appliance that has made the biggest penetration nationwide in the history of home appliances. So this is actually one thing that is happening that's quite prevalent. Another one that we're hearing about from the market, from consumers, as well as from companies reports to the market, is that GLP-1 is making a big impact.
There are different percentages of Americans estimated to be using GLP-1 variants across the nation, and it's actually changing their preferences. They need less food. People with access to GLP-1 actually also have more available income to spend on different products. So this is also making a big impact and a lot of brands are now adjusting their product portfolio and assortment to be able to tap into that. A big category that is ongoing, it's not going to pause its take on consumers' pallets, it's actually what we call gut health or gut support. If you think about the kombucha, the rise of kombucha, the kimchi that's always been there, people fermenting at home, people buying ready-made fermented foods, the rise of cottage cheese is a great way to use a fermented. And some brands are actually fermented and some are not, as a way to actually support gut health as well as indirectly brain health.
And I think that another thing that is less about the consumer need, but is more an ongoing manner is actually the culinary experiences. So a lot of consumers are now going into more granular cuisines. So they're no longer eating just Indian food. They're actually having a Munnar flavor. And it's happening across cuisines and nationalities. And one big one that is actually taking over is the rise of K-pop. So Korean is becoming a really massive success, not just with media and entertainment, but also with food. As you know, Korean food tends to be spicier. So brands like Buldak are making big waves. It's a social first brand, and a lot of people actually are very courageous to try their extremely spicy variants. And I don't know if you tried them, but be cautious.
Rob Moskow:
I'm glad you mentioned GLPs. I think all of us on the investment side are kind of struggling with how can processed food companies capitalize on a trend that inherently means fewer calories, less food. Do you also help companies develop ideas in that regard in your research?
Alon Chen:
Yeah. So I'll give you an example. And GLP-1 is a great topic to be talking about the food industry and changes in consumption that is accelerating, or the changes are accelerating it, and they're changing faster than ever. And it's something that brands are trying to cope with. They're trying to, first, they need to understand the consumer faster, and then they need to know how to respond faster. And I'll give you a few examples. In their attempt to understand the consumer, the most important part is to see what's out there. What's the big trend? Okay, GLP-1 impacted consumers, they're less likely to buy big portions. So all of a sudden, we're seeing that there's an increase in restaurant operators, many availability for smaller portion. It's never been the case. It's faster than ever before. And by the way, I'm mentioning restaurants because they're usually faster to respond to consumer shifts because they don't have the process of repackaging and negotiating with retailers to put something new on the shelf.
So what we're doing, we're monitoring portion control on the restaurant side. So this is one thing. The most top of mind aspect for the brands today is to see what is impacting their category. So if you're a snack brand, you may be impacted differently than if you're just selling packaged rice or ready to cook a meal that maybe you need to reduce the portion, maybe you can create a more premium ingredients because you don't need as much volume anymore, and then adapt. But the most important thing is to understand what does it mean about my shopper and my consumer and my category. And that's where technology comes in because if you are relying on syndicated data that just research generic trends with consumers that may be of your demographics, you may be getting the results wrongly, and you'll be evaluating the results, interpret them in the wrong way.
And as we know, one thing that is clear about the consumer behavior in food and beverage is that you can only trust behavior and not reported potential future behavior. So you need to be observing what people are doing. I'll give you an example on that front. We're seeing a rise in the number of users or consumers that are searching for recipes for one person. So people that are trying to find just a recipe that will be catering for their appetite for the evening .and they don't need to have a four people's portion. So it's interesting because our home cooking panel allows us to see how does it differ from region to region and also across different categories. So if you're doing your next campaign on how to get your frozen broccoli into the market, and content is a big driver for consumption frequency, you really should be targeting, again, the portion controlled behavior when people are actually at their home kitchen are cooking.
So overall, GLP-1 is changing and shifting a lot of things. Companies that were ready in their capabilities to understand consumer trends in real time are actually very well positioned to be winning in the category. And as you know, there's a lot of M&A transaction in the space, so a lot of great opportunities for the up and coming brands as well.
Rob Moskow:
That's interesting. Yeah. But I guess my overwhelming concern, and I think others too, for snacking, is if you're a maker of indulgent snacks and you're kind of relying on the expandable consumption nature of it, like you need them eating that snack three times a day, four times a day, can you still adapt to a GLP-1 user? If you're making potato chips, for example. Have you found ways? Is it possible? Just kind of by coming up with more premium ingredients and smaller pack size, can you still win? I guess inherently you'd have to charge a premium for it.
Alon Chen:
Yes, but the volume that you're providing can be lower. So it will be a trade-off and you can definitely see brands out there that are positioned in a better way. For instance, there's a rise in air-fried potato chips brands. It's an air-fried on the shelf, so you have less oil, and they're using real potatoes, no additives, and so people are actually already choosing and already paying premium for these brands. Now, a big question, and this is again, in correlation with the rise of convenience stores, right? You can see that there's a rise in prosperity in convenience stores, and brands are working really hard in making sure they're available where the consumers are. So if I used to be buying big family packs of snacks when I'm in my favorite weekly grocer or monthly grocer, I now have to make sure and make sure that I'm positioned also where people are grabbing their ready-made sandwich before they go to work.
And this is, again, the need is to adapt not just in your product offering, but also in your distribution. And that definitely is a challenge for the larger brands. But again, even if you go to your favorite convenience store around the corner, you can also see a surge in new brands that were never there, were never getting placed. But Robert, I think that the interesting part about GLP-1 and just one other food trend, it's big and it's impacting a lot of categories, is that you need to be able to respond, and you need to be able to respond fast. And brands today... And this is a shift. I've been in this business for the past eight years, seven years fully now. It's the first time that I'm hearing different narratives from brands when it comes to innovation. In the past when we were working with the large enterprises, the big food, we're working with more than 50% of the big food companies, they were mostly talking to us about, "We need a billion dollars platform."
So if the innovation we're coming up with is not going to be a billion dollars in couple of years, it's going to be discontinued. And now there's a new narrative, and we're hearing different voices because they understand that it's not going to be another one SKU or one brand that will be generating tens of billions of dollars. They will have to build a portfolio and attract consumers in different ways. And this is also an opportunity for the up and coming brands.
Rob Moskow:
Interesting. Okay. I would be remiss if I didn't ask your data sources. So you mentioned you do panels, but I think that the value of AI is that you're tapping into reams of data that's available much more broadly. So can you give us a sense about how the data capabilities have improved through your platform?
Alon Chen:
Yes. So I think again, there used to be this notion that more data is good. And I will just challenge you that just like more food for the human being is not always good, more data is not necessarily good. And this is what we're seeing out there. We used to be in an environment where there was a lot of data hoarding by enterprises, and there was data fatigue, and no one knew how to really put it together and action upon it. What we're seeing today is that the more important thing with, especially with LLM, if you're in gen AI and you're feeding into the machines a lot of data that is not necessarily... Hasn't been tested, checked, and is statistically significant, it's not going to return good results and there's going to be a lot of hallucinations. So the interesting thing is a lot of companies we're working with actually don't want their employees to be using generic LLMs like your general for their day-to-day jobs because they may be getting outputs that are non-reliable.
So what we're doing and the data sources we're curating very, very carefully is promotions data. We have retail data, we have home cooking panel, we have statistically significant social data that is only food and beverage related that does not have noise in it, that is segmented per audiences and locations and cuisines and categories, as well as food service data, restaurant data that allows you to understand, just like I told you, there are new portions in some areas in the US that it's no longer just the kids menu with small portions. It's actually also the main menu where you can have a portion control that we've never seen before that allows you to actually calibrate your understanding and ensure that you're actually making the right decision. So again, more data is not necessarily good in today's environment, and you really have to have a statistically significant data that allows you to move fast without any risk, because if there's one thing that you cannot make is a mistake that will cost you a lot of money or ruin your reputation, and you have to ensure that you have a safe environment.
And this is why, if we're looking at a recent MIT research that indicates that 95% of AI POCs fail. And I'm not surprised because I'm seeing a lot of experimentation and so on, but you have to ensure that your AI is an opportunity, but it's also done in a safe and regulated way. And as we know, every time the LLMs upgrade to a new version, your prompts and your processes may not be as safe as they used to be in the past. So there's always a balance to be made.
Rob Moskow:
And LLM, for those of us who don't know, what does it stand for?
Alon Chen:
So large language models. It's basically your open AI, your ChatGPT, your Gemini, Perplexity, and so on.
Rob Moskow:
Got it, got it, okay. So I wanted to dig a little deeper into how do we from the outside who are trying to invest in these companies evaluate whether a company is doing a good job of leveraging these technologies and who might be behind the curve. They all say that they're adopting them. Are there any questions we should ask them that would help us better understand who's moving well here and who may not be?
Alon Chen:
Absolutely. So one of the things that when we're talking to a new food brand that may be a potential buyer of Tastewise Marketing Gen AI suite, we're actually looking at their website and their social media and their latest press, and we're trying to see what kind of campaigns that they're running. Are they still in the era where it's a one size fit all big advertising campaign on TV that makes you feel good about the brand? Or is it the granular content strategy that is tailored for different audiences, different dining occasions, personalized in a way. And you can see it right away. You can see right away from a brand social media. If they're just using influencers to drive high visibility campaigns, or actually they're trying to solve real... Or be there in the right moments of consumption. And for us, it's very easy. Within minutes, we know if they're talking the talk or walking the walk.
So this is where I would start. And then I think that another big element, as we know, today you can create incredible products, but if your distribution is not there, you're just not going to make a sell. So one of the surprising growing verticals and business cases that we're solving is actually winning more the shelf. And how do you win the shelf more is if you as a brand or your salesperson is able to go to the merchandiser, the shelf manager, and show them why this new assortment or new product is really a good fit to how consumers, let's say Gen Z, highly sought after target audience, are using your products. And usually you get to become the category champion and be dictating how the category and the shelf is going to look like. So if you are the target audience for a potential product and it's not in the right outlet, then the brand is just like challenged and is struggling to actually stay relevant.
Rob Moskow:
Got it. Okay. For my last question for you, I wanted to ask about Walmart's recent announcement that they're going to partner with OpenAI to create an AI first shopping experience. How do you think this is going to change their relationship with their shoppers and what do food and beverage companies need to do to adapt to this?
Alon Chen:
Yeah, it's interesting and I think it's exciting. And Walmart is a giant and is also, it has a unique position in the marketplace. They have more SKUs, more SKUs than any other retail, an average store. So discoverability is almost an ever going challenge that they've been having, and potentially conversational could be a great opportunity for the consumers to have an easier experience when they're trying to shop across different categories. For instance, instead of trying to buy a shirt, you can say, "I want to buy a shirt with the latest K-pop figure ahead of the shopping time." And this may be extremely useful for some shoppers. I think that what was interesting about the release that they mentioned was the shopping experience was one thing, but right after the press release was about training their employees better. So I think there will be figuring out the shopping part as well as trying to do the, use the partnership in a way to also educate and train their two million employees, which is a big challenge that enterprises have.
I think it's interesting. I'm unsure yet if it's really changing or transforming the shopper on the shopping experience. It can be solving a specific need. As I said, I want a light laptop with high rating because I don't want to do the research and I just want to be served the product that just addresses my needs.
Rob Moskow:
Okay. And vendors to Walmart, their goal is to get into the algorithm. So when consumers are asking for these types of products, their brands come up first, I would imagine their challenge will be, well, how do we make sure that our products come up first when consumers are asking for this kind of help?
Alon Chen:
Yeah. So this has been a use case we've been trying to solve already like four years ago because SEO and discoverability on the platforms were a challenge. And I can tell you, it's not very difficult. If you can find a way or find out how consumers are using your product, I just mentioned broccoli and air frying, right? Then your product description should just be highlighting it. Another great aspect, which is touching upon the personalization aspect I've been mentioning. Some vendors have multiple SKUs that may be the same, the very same product, but now the claim, the leading claim can be front and center in the product naming. So on the description side, make sure that you understand how consumers are using your product in which context, so they can be actually increasing the details. And on the title side, sometimes there's a need to create the same product wise to appeal to big enough audiences that really need their problem to be solved.
And it's a great way to A/B test. Where is your bigger target audience with a specific retailer? There's no one size fit all, and this is why you really need to get close to the consumer and be able to understand different audiences in different sizes. When I started in this business seven years ago, I came from Google, I was an executive, I knew personalization is going to kick in, and I'm excited today that we have the solutions, not just the challenges to help the food industry to become a lot more bespoke, personalized, and on trend with consumers.
Rob Moskow:
Oh, that's great. Alon, thank you very much for joining us today. I thought your comments were really insightful and best of wishes to you and your company.
Alon Chen:
Thank you so much for having me.
Rob Moskow:
Thank you.
Speaker 1:
Thanks for joining us. Stay tuned for the next episode of TD Cowen Insights.