The Dilemma of the Food Market

The Food industry remains the largest manufacturing sector in the EU with a turnover reaching € 836 billion. It registered an average growth of 1.8 % in the last 10 years (2.6 % in 2006). This growth remains slow with the exception of some very dynamic sectors such as chilled ready meals and the new health sector.

As regards Food Innov, the explanation for this stagnation is primarily down to two trends. The first is a decrease in expenditure on food per family (in favour of electronics, leisure,..) and the second being a slowing population growth combined with an increase in average age. On top of these, the increased competitive pressure on prices plus growing concern with obesity and over-consumption in the West (specifically energy intake compared to energy needs for our current way of life) has eroded the traditional brands value and competitive edge.

Therefore, the Strategy of the Food Industry over the last decade has been to focus on two main areas:

 cost structure optimization (generally driven from a reduction in the workforce ) in order to improve gross operating margin (CIAA 2006 report).
 innovation focused on continuous improvement, packaging design, and range extension - which by essence is very volatile and short term - 80% of new products are taken off the shelf within 3 years-. The major challenge nowadays is how can we build long term strategy based on Innovation and sustain a competitive edge? The innovation created must be strongly based on true consumer benefits as well as sound technology and research.

This must be generated by a long term commitment from the Food Industry (not just the big 10) into research programs which are aligned with the core expertise of each company. Within this context, the R&D organization within a Food Company must be seen as a key function and at the leading edge of development. The current expenditure in R&D illustrates this point where in Europe it is 0.24 % of Net sales, in the USA it is about 0.35 % while in Japan it is 1.21 %.(CIAA 2007)

There has been terrific progress in the last 20 years in the sciences of Molecular Biology, Food Science and Nutrition. Why hasn’t the Food Industry made more aggressive use of this Research to generate better value-added proposals for the consumer’s benefit?

Meet all these challenges with R&D Food Consulting

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