Special edition: R&D

Lack of R&D puts EU food sector at risk

By Jane Joseph

- Last updated on GMT

Related tags: International trade, Investment, European union

Europe’s food and drink sector is lagging behind the competition because of investments in R&D have stagnated since 2006, warns the CIAA.

The European Confederation of Food and Drink Industries (CIAA) says R&D investment in the EU sector has stayed at 0.37 per cent of industry output for the past four years. By contrast, investment is higher – and growing - in Japan, the US, Australia and South Korea.

The CIAA says private and public companies should increase their spending on R&D and support coherent EU strategies, such as the European Technology Platform ‘Food for Life’. The CIAA launched the platform in 2005 to focus research spending on health, quality, manufacturing, production consumer trends, food safety, supply chain management, communications, training and technology.

The industry must also sustain the levels of investment needed to reach the 3 per cent envelope proposed by the EU 2020 Strategy, said the association.

Datamonitor analyst Michael Hughes agrees that European food and drink manufacturers must invest in R&D, particularly during times of economic uncertainty.

“Research and development will prove crucial to the food and drink category in the forthcoming years, as manufacturers need to find ways to align with consumer needs and encourage brand and engagement and consumption – particularly important as reduced shopping habits mean that people are becoming more selective with their spending habits,” ​ he said.

Hughes said companies should bear in mind the importance of focusing on key consumer desires, namely products that suggest individualism, health and sensory appeal.

Quoting the 2010 Datamonitor consumer report, he said 72 per cent of consumers are likely to buy a product if it best addresses their needs, while 67 per cent attach more importance to food that they deemed tasty and healthy. In addition, 44 per cent of shoppers regularly try to buy food and drink with added health benefits.

Examples of successful R&D investments in recent years include Kraft’s new innovation centre for biscuits in France and Nestle’s R&D centre in India, which is focused on using local ingredients and spices.

The CIAA’s comments on R&D investment were made in its Competitiveness Report 2010, which said that high input costs and uneven relations with retailers, as well as low levels of R&D, leave the EU lagging behind emerging economies.

The report also flagged up the EU’s declining market share in the global market.

“Surprisingly, after eight years of decreasing trade balance, in 2009 the EU food and drink sector registered an upswing due to a sharp decrease in imports during the economic crisis,” ​it said.

The value of food and drink imports shrunk by over 11 per cent in 2009 compared to 2008, and even more in volume terms. The value of exports dropped by 7.4 per cent while volumes remained the same, as a result of lower prices.

In 2008, the EU food and drink sector had a turnover of €965bn and 4.4m employees.

Related topics: Market Trends

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