CIAA flags food and drink innovation shortfall

By Jess Halliday

- Last updated on GMT

Related tags Cent European union

The European food and drink manufacturing industry is performing
below average on nine out of 12 indicators of innovation, says a
new report from the CIAA that highlights the need for increased
investment and data protection.

The Confederation of the Food and Drink Industries of the EU (CIAA) has just published its new report Data and trends of the European Food and Drink Industry 2007​, in which it values the sector's turnover at €870bn in 2006, compared to €850bn the previous year. Despite this 2.5 per cent growth, however, sector is ranked in the lower part of the innovation performance ranking according to 12 innovation indicators. The only indicators in which the industry is performing above average are in the share of enterprises that receive public funding to innovation (14.2 per cent, against an average of 12.2 per cent), the share of enterprises using trademarks to protect innovation (18 per cent, against average 12.3 per cent), and the share of firms innovating in-house (35.6 per cent against average 35.5 per cent). The most innovative EU member states in food products were seen to be Belgium, Sweden and France. Trademarks v patents ​ Interestingly, there is a greater tendency for firms to use trademarks to protect innovation than patents (patent use is at 4.7 per cent, against an average of 8.1 per cent). When a firm applies for a patent it has to release rather a lot of information about the process behind the invention. While the actual​ invention is protected, the fear is that competitors will get around the patent by tweaking the process just slightly. The result is that the inventor has a reduced competitive advantage, despite having made the investment. Novel foods and competitiveness ​ A similar concern about disclosure of information and competitive advantage was raised last year in relation to the approval process for the novel foods regulation. A briefing published last July on the economic impact of the novel foods regulatory procedures on the EU food and drink sector, by economist Graham Brookes. Brookes said that once a product is approved, it clears the way for competitors to launch imitation products very soon afterwards, without having had to stump up their own R&D investment. "Imitation not innovation is rewarded,"​ he said. Moreover, companies also have a reduced rate of return on their investment because of the amount of time they have to wait for approval. If it has to wait 30 months or more for approval before it can even launch, this return can be reduced by 30 per cent, or an average of €4m per product. There are hopes that the effect of the novel foods regulation on innovation will be reduced however, as the European Commission last month adopted a proposal to amend the current rules. Included in the package are measures to streamline the process, thus reduce waiting times. In addition, there are provisions for data protection of newly developed scientific evidence and proprietary data that is provided to support an application. Cooperation and expenditure ​ Another innovation marker in which the food and drink sector comes in below average is in the percentage of SMEs that are cooperating with each other. Here, the food and drink average is 3.9 per cent, against an average of 5.8 per cent. The European food sector is highly fragmented, with SMEs making up 99.1 per cent of the business population. SMEs generate 48.1 per cent of food and drink turnover, and employ 61.6 per cent of the workforce. On the other hand, the fact that a high proportion of firms are innovating in-house further indicates the closed nature of innovation on the sector, taking place behind closed doors. In terms of expenditure, the CIAA report showed that innovation expenditure as a percentage of total turnover in below average, at 1.1 per cent compared to an average of 2.1 per cent. R&D expenditures as a percentage of value-added is at 1.2 per cent, compared to 1.7 per cent average. Other markers in which the EU food and drink sector falls below industry average are: share of employees with higher education; share of firms that use training; share of total sector sales from new-to-market products; share of total sector sales from new-to-firm but not new-to-market products; and share of enterprises that use design registrations.

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