In a key policy document last year the EU's food industry association called on members to boost research and development (R&D) spending as a means of remaining innovative and competitive.
The association blamed the poor rate of technology transfer from the research phase to the application stage as a major barrier to innovation in the industry.
In a bid to turn the trend around the Confederation of Food and Drink Industries (CIAA) is meeting with groups of scientists on 2 February in Brussels to formulate a strategic agenda for research in the EU. The plan will be delivered to the European Commission in March this year in a bid to channel more of the bloc's research funding into the industry.
"The leading position of the EU agro-food industry will be threatened in the medium- to long-term if effective measures are not taken to improve its innovative power," the CIAA states in a discussion document for the meeting. "Given the size and importance of this sector, such a decline will have serious 'knock on' repercussions for the European economy -- employment, income, and growth -- as a whole."
The meeting is part of the European Technology Platform (ETP) on Food for Life, launched by the CIAA last year. The ETP is a bid to focus research spending on health, quality, manufacturing, production consumer trends, food safety, supply chain management, communications, training and technology transfer.
"An effective integration of strategically-focused, trans-national, concerted research in the nutritional food and consumer sciences and food chain management will deliver innovative, novel and improved food products for, and to, national, regional and global markets in line with consumer needs and expectations," the CIAA states in a consultation document.
The CIAA noted that the EU's research efforts have been fragmented and low due, in part, to the composition of the sector with its many small and medium sized businesses.
"In general, small-sized companies do not invest greatly in R&D," the CIAA noted. "Large companies tend to focus more on marketing, since the strategy of 'selling the emotional benefits' of food has proved very profitable, and it is difficult to retain exclusive market share for long enough to give a return on capital investment."
As a result, there are no effective drivers for large R&D investment in industry, the CIAA noted. National governments and the EU have further contributed to fragmentation by not supporting breakthrough science for the agro-food sector because their focus has been largely centred on food safety, the CIAA stated.
The CIAA hopes to encourage increased R&D spending from the private and public sectors and target research on the priorities outlined in the document. It also hopes to involving more of the smaller companies in the innovation process.
The organisation noted that in the developed world, organic growth in the food market has been less than one per cent annually and the relative proportion of expenditure on food is declining.
The situation is further compounded by the increasing bargaining power of retailers, which serves to depress suppliers' margins even further.
Currently, health and well-being account for nearly one-third of the drivers for innovation in Europe. The figures reflect the growing global demand from consumers for healthier diets.
"R&D efforts in this area will further help to fuel growth in the European agro-food industry," the CIAA stated. "New products will have to fit the needs, lifestyles and incomes of consumers," the CIAA stated.
The European agro-food industry is the largest manufacturing sector in Europe. The food and drink industry had a turnover of €810 billion euro in 2004 and employs about four million people. There are about 280,000 companies operating in the sector, of which 99 per cent are classified as small and medium enterprises (SME).
But low spending on developing new products and processing techniques coupled with sluggish export growth, has made the EU's food industry vulnerable to increased global competition, according to the CIAA. The bloc's spending on R&D remains lower than in other economies when expressed as a percentage of output. The figure is known as "R&D intensity" .
Even though the amount spent on R&D in the EU rose by 20 per cent between 1997 and 2001, it accounted only for 0.24 per cent of output in 2001, far beyond the average of 0.35 per cent of its main competitors, the CIAA stated.
"It has long been recognized that whilst the quality and quantity of Europe's research community match those of North America and the Pacific Rim, the wider impact of this research is lower than that of these trading competitors because of the less effective transfer of this knowledge to industry," the CIAA stated in a policy document.
Food companies in Australia, Japan, Norway and the US all spend relatively more on R&D than the EU. Japan sits on top of the pile