Novel food rules killing business

European approval for novel foods takes so long that the business case for launching them has often collapsed before applicants get the green light, according to Europe's confederation of food and drink industries (CIAA).

The Novel Food Regulation, which came into force in 1997, imposes a formal authorisation procedure and safety assessment for new ingredients not widely consumed in the EU prior to 1997.

Its tortuously slow authorisation process had "significantly diminished" the incentive for manufacturers to launch new products, claimed Graham Brookes, a consultant who was commissioned by the CIAA to make an economic impact assessment of the regulation.

The average time taken to gain approval was 35 months, while some companies had to wait five years, said Brookes. "This has made some investments of marginal value."

Uncertainty about the timing of approvals also increased risk and added cost, while the approval mechanism itself encouraged companies to be "followers rather than innovators", he said.

"Companies with 'substantially equivalent' products to those that have already achieved novel foods status can obtain approval almost immediately after the original applicant has gained authorisation. This allows companies that are 'second' to the market to free ride on the back of the original market entrant."

If approval took six months, the internal rate of return would typically be 24%-25%, said Brookes. If approval took two or three years, it might be 17%-18%. If it took five years, the business case could fall apart.

"If this regulation is to create an environment that encourages innovation, the time taken to authorise a novel food must be reduced. Incentives such as exclusive access to markets or compensation for data provision should be considered and uncertainties minimised."

The European Commission is expected to publish a proposal to revise the regulation this month. A spokesman said the changes would "streamline the process"