Spend for a rainy day

Small firms (SMEs) are the lion's share of the 280,000 firms represented by Confederation of the Food Industries in the EU (CIAA). They also generate around half of the sector's 870bn Euros turnover.

But small firms face some major threats; not least that Europe's share of world food and drink export markets is falling, under pressure from emergent nations with lower costs. The CIAA puts Europe's share of world exports at just 20% - down from 24% a few years back.

While the big multinational players have the option of relocating their operations to countries within the emerging markets they increasingly serve, for many nascent food businesses that just isn't an option.

To compound the problem, Europe's food sector is fragmented, with many small firms not investing in research and development (R&D) to give them the edge they need to compete with overseas operators. If something radical isn't done to address this issue, claim leading food researchers, the consequences for European food manufacture could be dire.

Brian McKenna, emeritus professor of food science at University College Dublin, speaking at the CIAA's recent congress in Brussels, criticised European public-funded research programmes for merely paying lip service to small firm involvement in projects. He described their involvement as "nominal"

The future's not bright

McKenna wants food research projects to focus more on the types of near-market food products that are of interest to SMEs, rather than focusing primarily on pre-competitive research, which he claims has little relevance to many small firms. "We are all going to have to be innovative in the way we involve SMEs in our research programmes," said McKenna.

But Europe's food producers are not investing enough in R&D for the future, claim the experts, spending just a fraction of sectors such as pharmaceuticals and biotechnology. Worse still, the spend on R&D as a proportion of sales averaging 0.24% is decreasing, warned Wim van Gelger, senior vice president for Danone and board member of the European Technology Platform (ETP). "We need to accelerate the speed and quality of innovation and increase R&D spending," said van Gelder. He also criticised the duplication of R&D. "We need to optimise knowledge capture and dissemination of knowledge between Member States and towards SMEs," he said.

The European Commission's ETP Food for Life Vision for 2020 and beyond was launched in Brussels in July 2005 and aims to make the sector more competitive through innovation.

It is claimed to be far more "industry driven" than previous initiatives and has sustainability at its core. Food for Life is underpinned by three pillars: social responsibility, economic viability and the environment, according to Thomas Ohlsson, emeritus professor at The Swedish Institute for Food and Biotechnology, chair of a Food for Life group on sustainability.

A research agenda has been proposed to help Food for Life meet the innovation challenge. A plan describing the research, training, education and dissemination required to fulfil the strategy was agreed in October 2008, with an estimated budget of €2bn for the first five years. "This is not just a vague plan; it has all sorts of concrete actions," said Van Gelder. The improvement of consumer health, well-being and longevity will be core to the research, he said, with priority areas on brain health, cognitive decline and ageing.

Ken Ash, deputy director of the Organisation for Economic Co-operation and Development, suggested future global demand would mainly be for more higher value-added processed food products. Ash's views on the growing importance of value added foodstuffs were picked up on by Antonio di Giulio, head of food, health and well-being at the EC's DG Research. "The value is in the processing rather than the commodity itself," he said. Di Giulio suggested that some form of public-private partnerships might be a good way of encouraging more food industry investment in R&D relevant to its needs.

The waste issue

If sustainability is at the centre of Food for Life, then the huge mountain of waste generated along the supply chain is one of the biggest issues to address. In total, waste accounts for a staggering 50% of total production, claimed Ohlsson. Some put the figure even higher. "Waste is one of the major issues for sustainability in the future," he said.

While the big guys such as Nestlé, Unilever and packaging specialist Tetra Pak have made waste reduction a core plank of their corporate social responsibility plans, said Ohlsson, many small firms struggling to survive in today's economic climate have yet to recognise the enlightened self-interest that reducing waste offers. As well as reducing production costs, it simultaneously reduces their environmental impact - something that is set to have an even more tangible commercial cost in future.

As ever, it all basically comes down to threats - and opportunities. FM