Why Australia’s brand innovation pipeline is broken

Australia is often celebrated as a foodie nation. We pride ourselves on being adventurous eaters, passionate home cooks and loyal café-goers. Yet when you scan supermarket shelves, the story looks very different. A rising tide of private-label products, a reliance on overseas innovation and a sea of ‘me-too’ brands leave shoppers with less diversity than they realise.We don’t have the level of consumer packaged goods (CPG) innovation in Australia that we think we do. In fact, the system is stacked against it.The illusion of choiceConsumers see ‘new’ tags on products and assume innovation is thriving. But many of these so-called launches are line extensions: another flavour of chips, another SKU in the same functional beverage range, another tweak to pack size. Our supermarket shelves are ‘safe’, sanitised and same-same.This isn’t true innovation – it’s incrementalism.Retailers are expanding their private-label portfolios at pace. Private label now accounts for 36 per cent of grocery sales by value in Australia, with Coles reporting an 11.4 per cent jump to $2.9 billion in private-label sales in 2023 and Woolworths posting a 9.1 per cent increase. Shelf space is increasingly reserved for these high-margin house brands, leaving less room for challenger products.Private label isn’t just taking shelf space; it’s taking oxygen, leaving less room for true innovation to breathe.Why innovation struggles to survive here1. Retail concentrationTwo companies – Woolworths and Coles – control about 67 per cent of supermarket sales nationally. That concentration determines not just what consumers see on shelves, but which brands even get a chance to compete.Independent brands are often told they need to prove consumer demand before securing national distribution. Yet proving demand requires scale and visibility, both of which are controlled by the very retailers setting the rules.Coles and Woolworths are not just gatekeepers; they’re competitors. Expecting them to nurture brand innovation while scaling private label is like asking a fox to guard the henhouse.2. High costs and red tapeAustralia is an expensive country to manufacture in. Labour, logistics and compliance costs all sit above global averages. Add to this complex regulations around labelling, packaging and health claims and you’ve got a system that slows product development to a crawl.Our compliance frameworks are designed to keep consumers safe, but in practice, they keep innovators stuck.3. The funding desertPerhaps the biggest constraint is capital. In 2024, equity funding in Australia’s food and beverage sector fell by a staggering 73 per cent. Investors routinely say they want innovation, but most are unwilling to back a business until it’s already scaled.What investors really want is de-risked proof of scale. The catch? Scale is impossible without capital. That’s why so many of our best ideas die in the test kitchen.Compare this with the UK or US, where thriving CPG investment ecosystems exist, from dedicated funds like JamJar Investments and The Craftory to early-stage accelerators that specialise in food and beverage. Challenger brands like RXBar, Graze and Innocent Drinks scaled rapidly in those markets, thanks to early backing and retail openness to risk.4. Siloed consumer insightsToo often, CPG companies mine category-specific data to inform innovation – snacks look only at snacks, beverages look only at beverages. This blinkered approach misses how consumers shop. A kombucha competes not just with soft drinks, but also with alcohol-free beer, functional water and even vitamin supplements.The result? Brands innovate in silos, producing safe extensions instead of category-busting ideas. The system rewards predictability, not originality.The consequencesWhen independent brands can’t scale, the entire ecosystem suffers. Competition flatlines, innovation dries up and consumers lose out on choice, creativity and jobs.Retailers, needing to fill gaps, increasingly turn to imports. That’s why shelves are dotted with overseas ‘hot brands’ while local equivalents languish.Innovation in Australia is often imported, not incubated.The way forwardNone of these barriers are inevitable. Other markets show that when capital, regulation and retail conditions align, innovation thrives. If Australia wants to compete on a global stage, it’s time to rethink how we nurture innovation in CPG.• Champion independentsEmerging brands are where much of the innovation happens, but they’re also the first to fall under the weight of high listing fees, unfair payment terms and patchy access to distribution. Structural support – from independent incubators and mentoring programs, to tax offsets for R&D and fairer retail trading terms – would help these businesses survive the valley of death between launch and scale.• Open up the dataWhen retailers and brands pool insights, they uncover how consumers shop across categories and can innovate accordingly. For example, sparkling water buyers often over-index on kombucha and functional snacks. If brands and retailers shared that data, they could design cross-category promotions, tailor innovation and capture more of the consumer’s basket.• Reform compliance pathwaysStreamline regulation around health claims and labelling to reduce unnecessary delays. Take health claims: a brand wanting to launch a fibre-rich snack may need to navigate overlapping FSANZ standards, therapeutic goods regulations and labelling rules. The approval process can take 12–18 months, even if the science is solid.Harmonising food and health claim frameworks would cut red tape, speed up launches and give consumers access to innovation faster.• Shift investor cultureAustralian founders too often hear: “Come back once you’re in Coles or Woolworths.” By then, the innovation window is gone, or the founder has taken on debt to prove traction.Overseas, investors back teams and ideas earlier – which is why brands like Oatly and Impossible Foods had the runway to scale before global demand peaked. If Australian capital rewarded potential rather than just proof, more homegrown brands could lead on the world stage.Isaac’s Snacks founder Laura Allan describes competing without funding as “near impossible.” With investment, she argues, brands like hers could scale and bring creative options to consumers.If we want to see the next RXBar or Innocent Drinks born here, we need to back brands before they’re profitable – not after they’ve already proved themselves at scale or gone offshore to survive.Call to actionInnovation can thrive only where integrity and creativity are rewarded, not stifled by structural barriers. Get that right and the rewards flow across the board: consumers win with greater choice; retailers win with more engaged shoppers; and the industry wins with a stronger homegrown story to take to the world.Carman’s is a rare example of an Australian brand that fought through, leveraging channel diversification and clever positioning to become a household name. It’s proof that it can be done, but only with grit and persistence against systemic odds.The conditions for innovation in Australia are broken, but they don’t have to be.If we want to see shelves filled with truly innovative, homegrown brands – not just imported products and private-label clones – we need a fundamental reset. Retailers, policymakers and investors all have a role to play in making this happen.The shelves of tomorrow should reflect Australian ingenuity. But it won’t happen by accident. It will happen only if the industry actively chooses to build the conditions for innovation to survive.Chelsea Ford is a CPG strategist and the founder of Females in Food and Foodpreneurs Formula, drawing on decades of experience leading innovation at global consumer brands.This story was featured in the October edition of Inside FMCG.