How supermarket accelerators & incubators are creating a new landscape for challenger brands

Supermarkets are betting big on innovation. This year has seen a flurry of activity with launches or relaunches of in-house innovation schemes.

First off the mark was Tesco, which replaced its long-running incubator programme with a new accelerator scheme aimed at championing 27 “of the most exciting and innovative brands in the UK” in February.

In March, Sainsbury’s restructured its long-running Future Brands programme, folding it into its wider product development team in a move the supermarket said would help it more effectively “identify opportunities to bring smaller and emerging brands that fit with our strategy”.

In May, frozen giant Iceland launched its “first ever” accelerator scheme, called Brands on Ice, to help suppliers bring exclusive products to its shelves.

A trio of supermarket initiatives followed in September: Waitrose launched its BrandsNew programme; Ocado rolled out its Roots programme for challenger brands; and The Co-op announced the expansion of its The Apiary incubator programme, which now includes a new accelerator scheme.

Even wholesaler Bidfood has got in on the act, kicking off its inaugural Open Doors programme in October.

So, why are supermarkets launching all these schemes? What’s the difference between an incubator and an accelerator? And perhaps most importantly, do they work?

Challenger brands the ‘new playing field’

Thea Alexander, CEO of entrepreneurial innovation consultancy YF, says 2024 will be viewed as a “massive turning point” for challenger brands. They’re the “new playing field” on which the retailers are competing, who are “being quite aggressive about it”.

Admittedly, she has skin in the game. YF has been closely involved in the launch and development of several of the new in-house programmes, and acts as an official partner of Waitrose’s BrandsNew. Still, she’s adamant that if the new accelerator schemes live up to their promise, they’re “going to make a lot of kings in the industry – there’s a lot of opportunity”.

But why the flurry of investment now? After all, supermarket innovation schemes are nothing new. Sainsbury’s was the first to really put its weight behind challenger brands with the launch of Future Brands in 2017. Likewise, for six years, Waitrose owner the John Lewis Partnership ran a retail innovation programme called JLab. Asda, Morrisons and Booths have also all launched in-house challenger brand programmes in recent years.

For those close to the ground, this year’s investments reflect the cyclical way in which most grocers work – and they’re also linked to the improving business and social landscape. New brands provide a key source of growth and range differentiation, which has always been strategically important for grocers, Alexander says. However, the difficult trading environment in the years following Covid, with high inflation and the cost of living crisis, meant many grocers ploughed all their resources into providing value for customers.

“Until this year I don’t think anyone has had the bandwidth to do anything about innovation,” Alexander says. But a more “buoyant atmosphere” is now allowing retailers to be more “strategic in their thinking” again. Supermarkets are investing in the long term once again, considering where the market might be going and what longer-term consumer trends could be driving the key categories in which they operate.

Among those trends, HFSS legislation, consumer desire for more health-focused, functional products, as well as a need to champion founders from underrepresented backgrounds are all key priorities for supermarkets. And challenger brands can bring differentiation into a category in ways that meet these goals far more quickly than major fmcg or conglomerate suppliers, according to Barney Mauleverer, whose cereal challenger brand Fuel10K was sold to Premier Foods, and who just set up the Future of Food Competition.

“They might not always be a massive revenue driver, but bringing in innovation and behaviours that consumers are starting to care about more, challenger brands can bring that angle, and influence the big guys,” he says.

However, as many ambitious startup founders discover, the operating model of big retail can often be at odds with this drive for innovation, Alexander says. Innovation “is never going to be priority number one” for category buyers, who are often balancing managing hundreds of SKUs while working to commercial goals and category calendars.

So creating bespoke programmes that target resources at supporting challenger brands is an effective way for supermarkets to level the playing field and introduce innovation in a relatively risk-free way, without the need for any cash investment.

Each supermarket has its own idea of what support an innovation scheme should offer – often dictated by its specific place in the market, category goals and the type of brands it’s targeting. But broadly speaking, the various programmes fall into three types, to which brands can either apply or be invited by buying teams (see box).

The three types of programme

So called ‘incubator’ programmes – for example, the Co-op’s Apiary scheme, which has helped six new suppliers gain listings this month alone – are typically aimed at challenger brands making their first baby steps into retail. They’re designed to hand-hold founders while they learn what’s required to supply a major retailer.

Typically lasting six to 12 months, members get access to a range of learning and resources, including mentorship from bigger brands. Practical support such as more beneficial payment terms and discounts on sales data are among the common perks, while some retailers may provide cash grants.

‘Accelerator’ schemes – like the recently expanded programme at Tesco – work to broadly the same framework but are for brands that are a bit further down the line and in a position to take the next step. Cohorts tend to be smaller and are typically formed from a pool of existing suppliers – who may already have multiple listings across the sector but need more support to grow either the number of stores or gain listings elsewhere.

“These brands are already existing within the retail market,” says Co-op head of commercial Rebecca Oliver-Mooney, who leads the retailer’s Apiary incubator and its recently launched accelerator scheme. “They are in that ‘acceleration phase’ of taking the learnings and the growth and really going again.”

Finally, there’s a broader group of programmes that don’t fall into either of the previous two categories and have more specific aims. Sainsbury’s Thrive programme, for example, which launched in conjunction with Mission Ventures and Foundervine and is targeted at supporting black-owned businesses. Or Iceland’s Brands on Ice programme, which was launched to help accelerate the development of new, innovative and exclusive products for Iceland.

The programme invites new-to-market brands, but also major suppliers like Britvic and Müller, to pitch innovation ideas to Iceland buyers at quarterly pitching days. While the supermarket provides grants and support from buying teams, the exact level of support is tailored to the needs of each specific brand.

“We’ve learned that doing something that works for small suppliers can actually have a bigger impact on how we work with our entire supply base”

Rebecca Oliver-Mooney, Co-Op

One retailer that’s taking a particularly unique approach, industry watchers say, is pureplay grocer Ocado. Chief commercial officer Amit Chitnis describes its Roots programme – which launched in September – as a “community for challenger brands”.

Unwilling simply to “copy and paste” other programmes, and in order to be as “inclusive as possible”, Ocado invited all small suppliers who had listed with it over the previous 12 months to apply.

Buyers then selected 120 brands from those that applied to join the programme. Ocado doesn’t restrict brands to specific categories but does require them to have not been listed elsewhere.

The programme is still in its early stages, but the plan is that brands will get to attend regular meet-ups and receive mentoring from a pool of 11 brand “champions” hand picked by Ocado having grown successful listings with the retailer. Mauleverer is one such champion, alongside others from brands including Piccolo, Love Corn and TrueStart Coffee.

“If you’re a small challenger brand just starting off your growth journey, the topics you struggle with are often the same,” Chitnis says. “Ocado doesn’t always have the answers. Where we don’t, they’re learning off each other.”

During the first 12 months of their time on Roots, members also get access to preferential buying terms, matched pound-for-pound spending on retail media, as well as free access to Ocado’s Beet data platform. After that, the idea is that the brands remain part of the Roots ‘community’.

Ocado hopes Roots signifies to its supply base that it’s working to support challenger brands. In turn Chitnis believes it will encourage more challenger brands to seek a listing with it.

“There’s no amount of press articles or advertising that would have the same impact as these founders saying: ‘I’ve been working with Ocado for 10 years.’ That endorsement is worth its weight in gold,” Chitnis says.

So, innovation schemes are also great PR for the retailers. But brands enrolled on them have a lot to gain as well.

How much difference do schemes make for brands?

“Crucially, what these programmes give you is the time to get a listing right,” says Jon Walsh, CEO and co-founder of gut-friendly cereal and yoghurt challenger Bio&Me, which took part in Sainsbury’s Future Brands and is a current participant in Tesco, Co-op and Bidfood’s new accelerator schemes.

“Getting off to a good start with the supermarkets, when you’re supermarket ready, is really important. Normally, that requires resources that most startups in that infancy stage don’t have,” he adds.

Practical benefits aside, Walsh says there’s also a range of “soft benefits” to taking part, including far more regular meetings with buyers than under a typical listing. After all, time with buyers is “gold dust” for a challenger brand, he explains. If all goes well, the impact of a scheme’s package on a brand’s rate of sale can be “material”, Walsh says.

Even if participation doesn’t lead directly to a permanent listing there are still huge benefits to taking part, particularly for early stage founders, argues Eugene Patterson, co-founder of Revibed Drinks, which is currently on Co-op’s Apiary scheme and was previously on Sainsbury’s Thrive programme.

Revibed wasn’t given a permanent listing by Sainsbury’s once its time on Thrive finished, but the knowledge Patterson acquired of how the buying process works and what was required to make a brand “retail ready” was invaluable, he says, when it came to securing a nationwide listing with Holland & Barrett.

He admits, like many early stage founders, he didn’t fully understand the “granularity” of what’s required to supply a major retailer before participating in the programmes. “It’s opened up other doors because when I’m speaking to buyers, I’m able to understand their perspective,” Patterson says.

The educational benefits can work both ways, says Co-op’s Oliver-Mooney. As a direct result of feedback received from its early Apiary cohorts, Co-op has changed the onboarding process for all its small suppliers. Onboarding packs now contain much more information about the basic process, and the retailer also hosts in-person sessions to talk new suppliers through the listing process.

“We probably made an assumption that all suppliers sort of know what we mean,” says Oliver-Mooney. “We’ve absolutely learned as a retailer that doing something that works for small or micro suppliers can actually have a bigger impact on how we work with our entire supply base.”

Improving the level of mutual understanding between buyer and supplier is crucial to the long-term success of retailer schemes, believes Tom Forsythe, who led Sainsbury’s Future Brands for three years before leaving the grocer in March 2024. He’s now MD of tea challenger Good & Proper.

A common challenge faced by the Future Brands team was when brands were “too early” in their journey and didn’t have suitable resources or a supply chain that could be scaled at pace – despite the ambition of the founders.

Supermarket innovation schemes thus need to provide foundational support for brands and should be designed to act as springboards to give brands the best chance of making a listing work. However, it’s often still expected that brands have the ability in-house to “hit the ground running” to make the most of the opportunity, Forsythe says – something that’s not always understood, at least initially.

“Being a £250,000 revenue business going into 300-plus Sainsbury’s stores is a huge jump in terms of scale,” he says. “The volume required to service that account can easily put you in trouble from an operational as well as financial perspective.”

There’s also a balance to be found between maximising returns and bringing genuine differentiation to the market, he admits. If different programmes only back brands that they’re confident will become “winners” they risk minimising choices down to the same narrow pool of companies. After all, the same brands can sometimes be found on multiple schemes at the same time.

“The programmes that stand to have the most success, from a customer perspective, will be those that can differentiate themselves from the others,” Forsythe adds.

Ultimately, with many of the new schemes still in the early stages and finding their feet, the key determiners of long-term success are likely to be internal buy-in, senior sponsorship and how well each programme plays into an organisation’s individual strengths, according to Alexander.

Ocado’s Chitnis is optimistic about the flurry of new and improved schemes’ potential. Competition between retailers may be fierce, but he believes the sector has a collective responsibility to ensure that all challenger brands can meet their potential.

“If the startup ecosystem and UK food and drink is more robust and more creative, it’s amazing. It’s great for the supplier ecosystem, it’s great for us collectively as a retailer group, but most importantly, it’s amazing for the consumer.”