Sectoral innovation foresight

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Sectoral innovation foresight

  1. 1. Sectoral Innovation ForesightFood and Drinks SectorFinal ReportTask 2December 2010M. Leis, TNOG. Gijsbers,TNOF. van der Zee, TNO
  2. 2. Consortium Europe INNOVA SectoralInnovation WatchThis publication has been produced as part of the Europe INNOVA initiative. The views expressed inthis report, as well as the information included in it, do not necessarily reflect the opinion or position ofthe European Commission and in no way commit the institution.This publication is financed under the Competitiveness and Innovation Framework Programme (CIP)which aims to encourage the competitiveness of European enterprises.
  3. 3. Europe INNOVA Sectoral Innovation WatchDetailed insights into sectoral innovation performance are essential for the development of effective innovationpolicy at regional, national and European levels. A fundamental question is to what extent and why innovationperformance differs across sectors. The second SIW project phase (2008-2010) aims to provide policy-makersand innovation professionals with a better understanding of current sectoral innovation dynamics across EuropeSIW Coordination: TNOCarlos Montalvo (carlos.montalvo@tno.nl) Annelieke van der Giessen (annelieke.vandergiessen@tno.nl)Central to the work of the Sectoral Innovation Watch is analysing trends in, and reporting on, innovationperformance in nine sectors (Task 1). For each of the nine sectors, the focus will be on identifying theinnovative agents, innovation performance, necessary skills for innovation, and the relationship betweeninnovation, labour productivity and skills availability.Sector Innovation Performance: Carlos Montalvo (TNO)Automotive: Michael Ploder (Joanneum Research) Knowledge Intensive Business Services: Christiane Hipp (BTU-Cottbus)Biotechnology: Christien Enzing (Technopolis) Space and Aeronautics: Annelieke van der Giessen (TNO)Construction: Hannes Toivanen (VTT) Textiles: Bernhard Dachs (AIT)Electrical and Optical Equipment: Tijs van den Broek Wholesale and Retail Trade: Luis Rubalcaba (Alcala) /(TNO) Hans Schaffers (Dialogic)Food and Drinks: Govert Gijsbers (TNO)The foresight of sectoral innovation challenges and opportunities (Task 2) aims at identifying markets andtechnologies that may have a disruptive effect in the nine sectors in the future, as well as extracting challengesand implications for European companies and public policy.Sector Innovation Foresight: Matthias Weber (Austrian Institute of Technology)Automotive: Karl Heinz Leitner (AIT) Knowledge Intensive Business Services: Bernhard Dachs (AIT)Biotechnology: Govert Gijsbers (TNO) Space and Aeronautics: Felix Brandes (TNO)Construction: Doris Schartinger (AIT) Textiles: Georg Zahradnik (AIT)Electrical and Optical Equipment: Tijs van den Broek Wholesale and Retail Trade: Susanne Giesecke (AIT)(TNO)Food and Drinks: Govert Gijsbers (TNO)Task 3 will identify and analyse current and potential bottlenecks that influence sectoral innovationperformance, paying special attention to the role of markets and regulations. Specifically, the analysis willcover the importance of the different factors in the propensity of firms to innovate.Role of markets and policy/regulation on sectoral patterns of innovation: Carlos Montalvo (TNO)Katrin Pihor (PRAXIS) Klemen Koman (IER)Task 4 concerns five horizontal, cross-cutting, themes related to innovation. The analyses of thesehorizontal themes will be fed by the insights from the sectoral innovation studies performed in the previous tasks.The horizontal reports will also be used for organising five thematic panels (Task 5). The purpose of thesepanels is to provide the Commission services with feedback on current and proposed policy initiatives.Horizontal reportsNational specialisation and innovation performance Fabio Montobbio (KITes) and Kay Mitusch (KIT-IWW)Organisational innovation in services Luis Rubalcaba (Alcala) and Christiane Hipp (BTU- Cottbus)Emerging lead markets Bernhard Dachs (AIT) and Hannes Toivanen (VTT)Potential of eco-innovation Carlos Montalvo and Fernando Diaz Lopez (TNO)High-growth companies Kay Mitusch (KIT-IWW)
  4. 4. Sectoral Innovation Foresight – Food and Drinks Sector December 2010ContentsExecutive Summary .............................................................................................................................. 31 Introduction ................................................................................................................................ 72 Current situation ......................................................................................................................... 8 2.1 Historical evolution of the sector – past and recent trends .............................................. 8 2.2 Sectoral characteristics and current innovation themes ......................................................... 10 2.2.1 Market organisation and market structure ...................................................... 10 2.2.2 Sub-segments................................................................................................. 11 2.3 Evolution, structure and current state of play - implications for future innovations ................. 123 Drivers of innovation and change ........................................................................................... 14 3.1 S&T drivers .................................................................................................................... 14 3.1.1 Epigenetics, nutrigenomics and neurosciences ............................................. 14 3.1.2 Miniaturisation, biotechnology and nanotechnology....................................... 15 3.1.3 Material sciences and intelligent packaging ................................................... 16 3.1.4 Automation, robotics and ICT ......................................................................... 16 3.2 Demand-side drivers and emerging product markets .................................................... 17 3.2.1 Aliments against ailments - health consciousness, disease and ageing........ 17 3.2.2 Food safety and consumer confidence .......................................................... 19 3.2.3 Ethical concerns and sustainability................................................................. 20 3.2.4 Convenience food and take away food/home delivery ................................... 20 3.2.5 Price consciousness, affordability and value for money................................. 21 3.2.6 Taste ............................................................................................................... 22 3.3 Intersection of S&T and demand-side drivers ................................................................ 23 3.3.1 Knowledge-Bio-Based-Economy (KBBE) ....................................................... 23 3.3.2 Consumer sensitivity as crucial factor ............................................................ 24 3.3.3 Innovation and technology as chance ............................................................ 254 Scenarios ................................................................................................................................... 26 4.1 Introduction ................................................................................................................... 26 4.2 Scenarios ....................................................................................................................... 28 4.2.1 Scenario 1: Business as usual (base-line scenario) ....................................... 28 4.2.2 Scenario 2: Going natural ............................................................................... 30 4.2.3 Scenario 3: Cheap & convenient .................................................................... 34 4.2.4 Scenario 4: High tech nutrition ....................................................................... 36 4.2.5 Scenario 5: Emergency .................................................................................. 39 4.3 Concluding remarks ....................................................................................................... 415 Emerging innovation themes and their requirements .......................................................... 43 5.1 New products, processes and technological trajectories ............................................... 43 5.1.1 Inputs from biotechnology and life sciences ................................................... 44 5.1.2 Improved functional foods ............................................................................. 47 5.1.3 Personalised diets .......................................................................................... 48 5.1.4 Medicinal food................................................................................................. 49 5.1.5 Cultured meat ................................................................................................. 51 5.1.6 Insect innovation ............................................................................................. 52 5.1.7 Innovations for fast- and convenience food .................................................... 53 5.1.8 Functional natural ingredients ........................................................................ 53 5.1.9 Nano-based food and beverage ingredients .................................................. 54 5.1.10 Smart food packaging with nanotechnology ................................................... 54 5.1.11 New food preservation methods ..................................................................... 55Europe INNOVA Sectoral Innovation Watch 1
  5. 5. Sectoral Innovation Foresight – Food and Drinks Sector December 2010 5.1.12 High pressure conservation (pascalisation) ................................................... 56 5.1.13 Pulsed electric fields ....................................................................................... 56 5.1.14 Antimicrobial systems for food preservation ................................................... 56 5.1.15 Converging technologies for food safety testing ............................................ 57 5.1.16 Reduction in energy, greenhouse gases and water consumption ................. 57 5.1.17 Miscellaneous: food pills, innovations from space research .......................... 59 5.1.18 Food automation ............................................................................................. 60 5.2 New markets due to societal developments .................................................................. 60 5.2.1 Lifestyle and market diversification................................................................. 60 5.2.2 Demographics – an ageing society ................................................................ 62 5.3 Organisational change and firm strategies .................................................................... 62 5.3.1 Knowledge transfer and open innovation ....................................................... 62 5.4 Establishing trust ............................................................................................................ 63 5.4.1 Flexibility and diversification ........................................................................... 64 5.4.2 Open innovation.............................................................................................. 65 5.4.3 User-driven and user-oriented innovation ...................................................... 65 5.4.4 E-marketing and advertisement (for SMEs) ................................................... 66 5.4.5 SMEs and the future structure of the food and beverage industry ................. 66 5.4.6 Promoting collaboration and a ‘culture of innovation’ ..................................... 66 5.5 Institutional and legal changes ....................................................................................... 67 5.5.1 Food labelling – increasing trust ..................................................................... 67 5.5.2 Global sourcing and standardised safety requirements – legislation and enforcement .................................................................................................... 67 5.5.3 Balance between precaution and innovation .................................................. 68 5.5.4 Establishing more trust in science and perform symmetric assessments ...... 68 5.5.5 Convergence between food and medicine? ................................................... 68 5.5.6 Education and training .................................................................................... 69 5.5.7 More scientific research and development ..................................................... 696 Policy Issues ............................................................................................................................. 71 6.1 Healthy Nutrition............................................................................................................. 71 6.1.1 Making foods and drinks generally more healthier ......................................... 71 6.1.2 Evidence-based assessment of functional food possibilities ......................... 71 6.1.3 Improvement of food safety ............................................................................ 72 6.1.4 Promoting healthy eating and healthy cooking ............................................... 72 6.2 Ecological Sustainability and Ethics............................................................................... 72 6.2.1 Reducing energy and water consumption ...................................................... 72 6.2.2 Ethics .............................................................................................................. 73 6.3 Economy and business .................................................................................................. 73 6.3.1 Affordability and quality .................................................................................. 73 6.3.2 Innovation for SMEs ....................................................................................... 73 6.3.3 Clusters and interdisciplinary cooperation ...................................................... 74References ........................................................................................................................................... 75Annex Workshop participants .......................................................................................................... 80Europe INNOVA Sectoral Innovation Watch 2
  6. 6. Sectoral Innovation Foresight – Food and Drinks Sector December 2010Executive SummaryAlthough food and drinks are essential for human life, the food and beverage industry is generallyperceived as low-to-mid-technology sector as measured on common indicators for innovativeness andsupported by CIS4 data. In principal, however, there exist many innovation possibilities within the foodand beverage manufacturing industry that also include new products and new processing methods,tackling some major challenges like improving health, safety and sustainability. The pleasure andtraditions associated to food can also be a field of innovation.Currently the picture of the food and beverage industry as well as consumer choices seem to bemixed and interests range from preferences for natural and minimally processed foods and drinks over 1 2specialised and fortified and high-tech nutrition to a diversity of convenience and fast foods. Manydifferent factors such as economic prosperity, ecological consciousness, environmental problems,food safety concerns, importance of health, technological progress, acceptance of new technologyand economic prosperity can have an influence on the direction of consumer and industry choices.Built upon different parameters of the factors, different scenarios have been developed in this studythat depict contrasting development lines. Reality will likely not represent such a pure and extremecase as depicted, but these scenarios can represent tendencies of developments and help with theidentification of general chances and challenges. All scenarios are based on elements of current andemerging societal and technological developments that could become pronounced in the future ifcertain directions may be followed. This scientific, technological and societal basis is described inmore detail within the report under the chapter “Emerging Innovation Themes and theirRequirements”. The scenarios also serve as input for the discussion of policy issues andrecommendations.The following five scenarios have been drafted and assessed in regard to plausibility and feasibilitywith experts within the frame of a dedicated workshop.The scenarios will derive from the following assumptions considered as generally fixed within a short-to mid-term timeframe:  Increase in global population  Decline of population in many EU countries due to lower birth rates  Increasing life expectancy in EU countries (aging society)  Increases in scientific and technological knowledge and possibilitiesas well as the following parameters that vary between the different scenarios and make out the core oftheir differences:  Economic prosperity (on world, country and individual basis)1 Food enriched with additional vitamins, minerals and other nutrients2 Which can include “fortified food” (i.e. food enriched with additional vitamins, minerals and other nutrients) butalso special nutritional formulas and compositions e.g. for sports, special diets, emergency rations, military rationsor food substitutes.Europe INNOVA Sectoral Innovation Watch 3
  7. 7. Sectoral Innovation Foresight – Food and Drinks Sector December 2010  Ecological consciousness  Environmental problems (occurrences like draughts, floods, extreme weather that could negatively affect food production)  Food safety concerns (high concerns within society vs. lower concerns)  Importance of health (high interest in healthy living vs. rather low interest, leading to problems like obesity)  Technological progress as function of socio-economic factors that lead to the real application of knowledge and possibilitiesBusiness as usualThis is the reference scenario that depicts the current diversity and huge differences in the food and 3beverage industry ranging from highly fortified and functional food over the trend of natural andorganic products to fast food and food with no considerable nutritional value or even harmfulingredients. This scenario does not score high on overall innovativeness, although some sectors (e.g.functional food) will have great potential while others more or less continue their way of only small and 4incremental improvements in the future. Within society larger gaps may develop between healthy andunhealthy eaters which will also be reflected in individual health. All other scenarios depict situationswhere one of the describe elements may become more prominent.Going naturalThis scenario depicts the growing tendency towards foods products perceived as natural byconsumers and less food processing. Many innovation potentials like the utilisation of geneticallymodified organisms (GMO) or nanoparticles in food production as well as other high-tech experimentsare generally not popular with the consumer. But also conventional “fast food” that is consideredunhealthy will be more and more replaced by other fast alternatives such as salads or fruit. Here,innovations mainly lie in finding ways to process food with healthier ingredients (e.g. natural foodadditives) or improved testing and process automation. A growing consumer concern over theenvironment and ethics (e.g. animal rights, fair trade etc.) are driving factors. This scenario is morelikely under the condition higher economic prosperity and greater concern over health issues. But itcan also become more likely if the perception of ‘’industrial food’’ and industrial food producersbecomes more negative. This can for example be due to food scandals or the uncovering of relationsbetween certain ingredients commonly used in processed food and health risks (e.g. cancer, obesityetc.).Cheap and convenientThis scenario reflects a setting where the general prosperity as well as interest in health, future andinnovation is declining. Contradicting information about nutritional health benefits as well as scientific3 Functional food is defined by the European Commission/JRC as follows: “Functional food (FuFo) is defined asfood that is taken as part of the usual diet and has beneficial effects that go beyond nutritional effects.”http://ipts.jrc.ec.europa.eu/publications/pub.cfm?id=17194 Meaning rather slight improvements over time than sudden and large “revolutionary” or “disruptive” changes.Europe INNOVA Sectoral Innovation Watch 4
  8. 8. Sectoral Innovation Foresight – Food and Drinks Sector December 2010fraud combined with higher budget consciousness leads to a growing disinterest of consumers inhealthy nutrition. Budget (for some involuntarily), fastness, convenience and indulgence are majordrivers. Resources for innovation are rather scarce and companies are mostly interested in costreduction. In extreme cases this could lead to very problematic implications for health and theenvironment. “Cheap and convenient” may become a growing trend for low income groups and peoplewho lack sufficient knowledge about nutrition or time for adequate food preparation. Major problemsassociated with this scenario are obesity and environmental problems.High-tech nutritionIn this scenario technological progress is fast and developments from different disciplines frombiotechnology to material science are influencing innovations in food and beverage manufacturing.The consumers tend to increasingly accept novel technologies in the area of food and drinks. Healthimprovement beyond just healthy nutrition stands in the centre of interest, which is considered to beachievable only through advanced technological modifications of food and beverage products thateven result in medicinal food. This scenario requires economic prosperity as well as high interest innovel technologies. It also bears the potential danger of being too optimistic and thus overlookingpotential negative side effects and may face challenges if problems may occur.EmergencyThis scenario depicts a situation where some of the basic requirements of food security (availabilityand accessibility) are in jeopardy where the main goal for solutions and innovations lies in gettingenough food. The “emergency” scenario is certainly a kind of worst case scenario, but if sustainabilitywill be neglected, this could become a realistic outcome. Current trends in desertification and relianceon monocultures in large scale agriculture already seem to point towards this direction and in manycountries around the world the situation for food security and safe drinking water is already bad andstill worsening.ImplicationsFood and drinks are essential for human life and more and more research emphasises the importanceof nutrition for personal and public health. Therefore the food and beverage manufacturing industry (aswell as the up- and downstream industries) holds great responsibility for human health and wellbeingas well sustainability. Solutions for current challenges such as obesity and other food-related illnesses,age-related conditions, contradicting findings in nutritional research, cost pressure and loopholes infood safety should be addressed in the coming years with the help of social, economic andtechnological innovations. To achieve these goals, interdisciplinary research and development isnecessary, e.g. by involving food technologists, biologists, chemists, physicists, health specialists andmedical experts as well as psychologists, sociologists and cultural scientists.In the principal technological possibilities in the area of food and beverage production are high andeven growing. The major challenge, however, lies in bringing these possibilities in line with customerinterests as well as solving current challenges and fostering the developments towards desirableEurope INNOVA Sectoral Innovation Watch 5
  9. 9. Sectoral Innovation Foresight – Food and Drinks Sector December 2010futures. Although “desirable” could mean different things for different people, it can be said thatimprovements towards the following directions can generally be considered as positive and desirable:  A general trend towards more healthier nutrition and related research and development;  An evidence-based assessment of functional foods on health and wellbeing;  Affordable food with good quality and nutritional value;  Further improvements in food safety;  A reduction of environmental impacts associated with all steps within the food chain (from farm to fork);  A general promotion of and education about healthy eating and healthy cooking;  Making food consumption more enjoyable, fostering culinary diversity and protecting culinary traditions;Europe INNOVA Sectoral Innovation Watch 6
  10. 10. Sectoral Innovation Foresight – Food and Drinks Sector December 20101 IntroductionThis report presents the findings of the Europe INNOVA Sectoral Innovation Foresight on the food anddrinks sector.As a Foresight activity, it addresses medium- to long-term strategic issues for the future developmentof European industries. It thus aims at looking beyond time horizons that can be addressed by simplyextrapolating current trends. While for fast-changing sectors this may imply a time horizon of five toten years, for others a much longer time horizon may be a more appropriate orientation. In the case ofthe food and drinks sector, a time horizon of about ten years has been used as orientation.The objectives of the Sectoral Innovation Foresight are to identify the main drivers of change in thenine sectors under study, to identify innovation themes and associated markets that may jointly have asignificant impact on these sectors, and to develop scenario sketches as frames for exploringvariations in innovation themes and emerging markets. In addition, the enabling and hamperingfactors in the respective sectoral innovation systems have been investigated in order to extractchallenges and implications for European companies and public policy.The final report builds on the findings of a critical review of secondary sources as well insightsgenerated at two Sectoral Innovation Foresight Workshops, organised in June and December 2009 inBrussels. We would like to gratefully acknowledge the contributions of the workshop participants (seeAnnex). Their inputs made it possible to gain new insights into different dimensions of future sectoraldevelopments, and we have extensively drawn on these contributions when compiling this report.However, in order to ensure the overall coherence of the report not all the suggestions raised at theworkshops could be taken into account.Based on an analysis of the current situation (chapter 2) drivers of innovation and change arepresented (chapter 3) in this report. These drivers encompass emerging trends and trend-breaks interms of S&T developments and changing needs/demands, both internal and external to the sectorsunder study. Based on the identified main drivers, scenarios for the development of the sectors arepresented (chapter 4). For each scenario, key innovation themes are then discussed which are seenas the results of the interplay of S&T developments and changing needs under a specific context(chapter 5). In addition, emerging markets associated to such key innovation themes are described. Inthis context, requirements and/or impacts in terms of skills requirements, organizational and structuralchanges are discussed. Finally, in chapter 6 issues for policy are discussed against the background ofscenarios and innovation themes.Europe INNOVA Sectoral Innovation Watch 7
  11. 11. Sectoral Innovation Foresight – Food and Drinks Sector December 20102 Current situationAlthough food and drinks are essential for human life, the food and beverage industry is generallyperceived as low-to-mid-technology sector as measured on common indicators for innovativenesssuch as R&D expenditure, patenting and new product development (cf. e.g., OECD, STAN R&Ddatabase, Hirsch-Kreinsen, 2006) and supported by CIS4 data. In general, innovations in food anddrinks are expected to happen in incremental steps without sudden innovation leaps and majorchanges, especially when it comes to products.2.1 Historical evolution of the sector – past and recent trends5Early examples for food and drinks manufacturing (in the sense of specialised production ofagricultural products outside the context of private homes) can be traced back to over 4000 years ago. 6Indications for early “industrialised” beer brewery can be found in up to 5000 year old Mesopotamian , 7Egyptian and Chinese records. Similar accounts have been found for wine. These records alsorepresent instances of ancient biotechnology by using yeast (a microorganism) for the fermentingprocess. The use of modern biotechnology (genetic engineering) in food processing started in theearly 1980s.Food and drinks processing has also always stood in close relation to advances in agriculture and thedevelopment of cities and division of labour. Therefore it is useful to keep the whole food chain – fromfarm to fork – in mind. Also progressing insights in relation between chemistry, biotechnology andphysics (especially thermal procedures) has been very important for food and drinks manufacturingand preservation, ranging from ancient breweries to the invention of pasteurisation in 1862.Although early forms of food processing date back to ancient times where raw agricultural materialswere modified simple by technical means (e.g. drying, salting, fermenting), the modern, industrialised th thfood and drinks manufacturing of the 19 and 20 century has mainly developed within the military 8context . Nicolas Appert, for example invented the vacuum bottling technique in 1806 for the foodsupply of French troops, an invention that led to the development of tinning and canning by PeterDurand in 1810. A very important factor for large-scale food and drinks manufacturing has been theIndustrial Revolution. Mass production techniques enabled strong changes in retail with the firstsupermarkets being introduced in the mid-1910s, coinciding with considerable innovations in transportand logistics. This in turn engendered changes in the food and drinks industry.The real boom in large-scale manufacturing of foods and drinks appeared during the 1950s and1960s. This time experienced much experimentation and innovation in food and drinks, but also inmany other fields of science and technology. The so-called “TV-dinners” and ready meals were5 http://www.eufic.org/article/en/food-technology/gmos/rid/modern-biotechnology-food-development/ andhttp://www.foodtimeline.org/food1.html6 http://www.encyclopedia.com/doc/1G1-16035893.html7 http://www.germanbeerinstitute.com/history.html8 http://www.foodinnovation.org.uk/view/Food_and_drink_industry/Europe INNOVA Sectoral Innovation Watch 8
  12. 12. Sectoral Innovation Foresight – Food and Drinks Sector December 2010introduced in 1953, the artificial sweetener aspartame was discovered in 1965, and the first microwaveovens for home use were introduced in 1967. The soft-drink industry was born in the 1960, slowlyreplacing the traditional soda stores and vendors. This shows how developments in the food anddrinks industry already then closely related to developments in other sectors (retail, restaurants) aswell as new technologies such as TV-sets and microwave ovens, and welfare driven life-style changeslike the rise of fast food and ready meals.But these developments also brought about societal criticism on new food and beverage productionmethods and techniques as well as newly invented ingredients. The case of saccharin, one of theartificial ingredients, serves as an example. After being introduced in the 1960s, ten year later in the1970s the US FDA already considered banning it again because laboratory tests have shown that highdoses of saccharin increased the incidence of urinary bladder cancer in rats. The ban did not gothrough, but a warning label was required. This was also due to the fact that the doses used in thetests were high and it remained controversial if the results of mice were transferable to humanphysiology.Later developments, such as the introduction of genetically modified organisms (GMO) and moregenerally the rise of biotechnology are proof of new and innovative developments, but have also led tosocietal concerns. Genetic modification in crops which started in the early 1980s (the first recordedGMO plant was an experimental tobacco plant in 1983) as well as animal cloning have led tocontroversies and even bans. The latest developments in nanotechnology for food packaging give riseto similar reactions. At the same time, biotechnology – and perhaps even GMO - can provide us withmore predictable processes, better primary production, new inspection methods and healthier, safer 9and sometimes even tastier food.Criticism about the ‘industrial’ image of food and drinks (industrialisation) has grown since the 1980sand has coincided with increasing attention towards the environment (‘green’ movement) andsustainability issues, health and quality over quantity (slow food as a reaction to fast food). It alsosignifies the beginning of the current trend towards organic, natural, fresh and unprocessed foods anddrinks, and an increasing focus on local and fair trade products and ethical concerns by consumers.Whereas at some time the optical appearance of food – symmetric form, beautiful colour andflawlessness – has been highly regarded and thus has been enhanced by food colouring, additivesand even GMO, today too much ‘perfection’ makes many consumers suspicious by indicating non-naturalness.Health concerns, and more particularly current challenges such as obesity, other diet-related illnesses,allergies, chronic diseases and aging have also stimulated the emergence of new generations of 10functional foods and drinks. Thus, consumer preferences in no way point towards the same9 A taste of the future: research’s role in tomorrow’s food development. Presentation Janez Potocnik, Brussels, 17April 200710 A food can be regarded as functional if it is satisfactorily demonstrated to beneficially affect one or more targetfunctions in the body, beyond adequate nutritional effects, in a way which is relevant to either an improved stateof health or well-being, or reduction of risk of disease (ILSI, 2002).Europe INNOVA Sectoral Innovation Watch 9
  13. 13. Sectoral Innovation Foresight – Food and Drinks Sector December 2010direction. Mainstream trends such as an increasing consumption of convenience foods like pre-packaged and processed foods and drinks, easy to consume products (e.g. “TV dinners”), snacking,fast food, take-away food and out-of-home consumption are likely bound to continue, whereas alsohere health consciousness may get bigger. Fast food chains like McDonalds, for example, areincreasingly advertising with a more health and “natural” image (e.g. no additives in their beef 11products, salads on their menu, providing calorie tables and “going green” ). Other choices,especially in the context of active lifestyles, enjoyment, wellness as well as environmental and socialconcerns have – as a result of steadily rising incomes – also become important consumer trends thatimportantly affect food and beverage sales and consumption.2.2 Sectoral characteristics and current innovation themes2.2.1 Market organisation and market structureThe agro-food sector – i.e. agriculture and the food processing (‘manufacturing’) industry – hastraditionally been characterised by a high degree of governmental intervention, ranging from marketregulation and financial support for farmers to strong safety and health provisions. It also is a sectorthat is critically watched by consumers and consumer advocacy groups. Recent organisationalinnovations such as the introduction of integrated supply chains (‘from farm to fork’), early warningsystems, quality assurance schemes (labelling) and tracking and tracing, together with increased riskmonitoring and assessment by independent food authorities (EFSA, national food authorities) have ledto increased accountability and have added to consumer confidence, although some criticism remains.The food and beverage manufacturing industry is dominated by micro-enterprises with less than 10employees that make up 78.6% of all firms. Yet 0.9% of large companies (250 employees and above)account for more than 50% of the total turnover generated in the food and beverage manufacturingindustry. The largest food and beverage companies are also global players and some of them likeUnilever produce food as well as non-food products. Whether and how this fragmented structure witha large share of micro- and small firms affects innovation and innovation performance is less clear,however. The Community Innovation Survey (CIS), one of the most important sources on innovationtrends and performance in industry, does not collect information at the micro-enterprise level, whichimplies that information on the innovative behaviour of almost 80% of all firms in food and drinksmanufacturing at EU level is not available, at least not in a manner that allows consistent comparisonsacross countries and between sub-sectors.In regard to the employment situation, over 61% of the workforce is employed by SMEs and the foodand beverage manufacturing sector is characterised by a comparatively small share of highereducated and qualified scientific personnel as compared to other sectors. The sector is considered amature industry which is generally perceived conservative and rather inert towards more radicalchanges. This “old fashioned” image, which is however partly outdated in many respects, is stillpresent in the minds of many people and one of the major reasons for the low attractiveness of the11 Cf.: Korea Times 2008: http://www.koreatimes.co.kr/www/news/nation/2008/11/123_33884.htmlEurope INNOVA Sectoral Innovation Watch 10
  14. 14. Sectoral Innovation Foresight – Food and Drinks Sector December 2010sector to a higher educated workforce. Many consumers on the other hand display scepticism towardsinnovations that include extensive artificial modification of food products and thus causing theproducers to stick with well-established product lines while performing rather minor improvements anddevelop items with less ‘artificial’ ingredients.Therefore the food and drinks sector includes a wide array of products, some traditional, some newand innovative. Most innovation in food and drinks is of incremental (i.e. small stepwise improvementsover time) nature. Innovation in the food and drinks domain is and has always been closely linked todevelopments in other sectors of the economy. Throughout history, food and drinks manufacturing hasbeen dependent on (innovative) developments in agriculture. In more recent history preservation andconservation, packaging, logistics and transport and wholesale and retail trade have becomeimportant factors in the development of the foods and drinks industry, followed more recently byinformation and communication technologies (ICT) innovations like radio frequency identification(RFID) tracking, biotechnology and nanotechnology. Many innovations in the food and drinks industryincorporate a combination of different innovations that can include the way a product is produced orprocessed (biotech, nanotech), packaged, distributed and sold. Other can result in entirely newproducts such as functional foods. Marketing and advertisement play a very important role in gettingthe consumer’s attention to buy foods and drinks and stay with certain manufacturers, products andlabels. Especially drinks are often advertised in the context of pop-concerts, sports events, youthculture activities, clubs and discotheques.2.2.2 Sub-segmentsAccording to the NACE-code classification (Rev 1.1), the food and drinks sector can be divided intothe following categories or sub-sectors:Table 1.1 Categories of the food and drinks sector 15 Manufacture of food products and beverages 15.1 Production, processing and preserving of meat and meat products 15.2 Processing and preserving of fish and fish products 15.3 Processing and preserving of fruit and vegetables 15.4 Manufacture of vegetable and animal oils and fats 15.5 Manufacture of dairy products 15.6 Manufacture of grain mill products, starches and starch products 15.7 Manufacture of prepared animal feeds 15.8 Manufacture of other food products 15.9 Manufacture of beveragesAlthough in each sub-sector both traditional and non-traditional products can be found, certain NACEcategories appear more suitable for certain kinds of innovation than others. Innovations in relation totraditional products are much less oriented towards changing the product itself (since it may then nolonger be the traditional recipe or product anymore) but can involve new processing methods andmarketing strategies. Product innovations on the other hand bring about new products or considerableEurope INNOVA Sectoral Innovation Watch 11
  15. 15. Sectoral Innovation Foresight – Food and Drinks Sector December 2010changes to existing products. Product innovations tend to be found more within the categories of dairyproducts (e.g. functional yoghurts, ice creams), sweet and savoury spreads, grain and mill products(cereals, sports- and energy bars), instant drinks and drinks, where a wide palette of functional waters, 12‘superfruit’ juices or energy drinks is already available. This also holds for alcoholic drinks as it isseen in the popularity of the recently introduced (and controversially discussed) light alcoholic drinksand mixes (e.g. breezers) and natural and organic alcoholic drinks with both segments being regarded 13as highly innovative and suitable for experimentation .2.3 Evolution, structure and current state of play - implications forfuture innovationsDue to the nature of the industry and the products, and by looking at past innovation performance, itcan be expected that innovation in the food and drinks industry will continue in a gradual, step-by-stepmanner, with sudden radical innovations or “quantum leaps” not likely to be expected over the next 15-20 years. Technological developments that are rather unproblematic in other industrial sectors, like theuse of (advanced) nanotechnology for materials (see the aerospace or textile industry), are likely tocause more problems and concerns from consumers and regulators when it comes to food andbeverage products.In regard to food and beverage products the main hampering factors towards innovation andexperimentation with novel concepts are not expected due to lacking scientific and technologicaldevelopments as such, but rather due to consumer concerns.Food science can actually be regarded as a form of material science. In contrast to most otherproducts, food and drinks are digested by humans and therefore have to comply with highest safetystandards and fulfil a wide range of sensual satisfaction to please the consumer. Often these tworequirements can conflict with each other: what is considered to make foods and drinks tasteful maypose some health concerns. The complexity of foods and drinks often exceeds other materials andend-products can include a diversity of structures such as foams, complex fluids, gels and glasses thatare made of polymers, proteins, crystals and other molecular structures. If one would simply take outthe fat of sausages (certainly a healthier choice), for example, the product would not taste good,because it would be very dry, have an unappealing texture and flavours could not unfold properly.Therefore the creation of new and healthier foods and drinks requires considerable know-how,research and experimentation, because every component has a certain function and may not be leftout without consequences. In this sense, leaving out a substance or finding a suitable naturalsubstitute could be very innovative.At least part of the food and beverage industry is on the brink transformation - or has already beentransformed - from a low-to-medium tech industry to a medium-to-high tech industry. Novel foods and12 “Superfruit” refers to a marketing term used to describe fruits that possess special nutritional value that isconsidered to be beneficial for health and wellbeing like high amounts of antioxidants or vitamins.13 This is also reflected within the Eurostat CIS4 indicators for innovation activities.Europe INNOVA Sectoral Innovation Watch 12
  16. 16. Sectoral Innovation Foresight – Food and Drinks Sector December 2010functional foods are cases in point. At the same time, important parts of the food and beveragemanufacturing industry are still very much based on and rooted in tradition and conventional foodproducts. Some manufacturing processes and recipes are handed over from generation to generationand are still practiced in such a traditional way. It is not unlikely that the apparent divide between high-tech innovative and low-tech tradition within the sector is likely to get bigger. In a similar vein, wemight expect that the segmentation of markets will continue further, driven by different lifestyles,internationalisation and diverging income developments and leading to a broad variety in consumerdemand – ranging from convenience food and functional foods and drinks over alcopops, breezersand ‘lifestyle’ products to ecologically-oriented foods and drinks and ethnic and traditional products. Incontrast to other industries like electronics or automobiles, the absence of innovative products fromfood and beverage manufacturers does not necessarily mean unsuccessful sales and products.In general it could be said that the technological possibilities in food and beverage manufacturing aremuch larger than what may be acceptable and not everything that can be scientifically ortechnologically done in food and beverage manufacturing will also be wanted, legal and successful.Also certain technological solutions for specific demands and consumer wishes may not be accepted.Although there is demand for functional food with additional health benefits, using certainbiotechnologies (such as GMOs), nanotechnologies (e.g. nano-encapsulation for improved bio-availability) or what may be generally considered as “artificiality” for achieving this goal may not bedesirable.Europe INNOVA Sectoral Innovation Watch 13
  17. 17. Sectoral Innovation Foresight – Food and Drinks Sector December 20103 Drivers of innovation and changeIn regard to the possible differences between technological possibilities and consumer acceptance,some major developments in R&D and science and technology will make the start. Afterwards somemajor demand-side drivers will be outlined that will be brought together in the section about innovationthemes and requirements, where also possible conflicts between technological means and consumergoals are reflected upon.3.1 S&T driversThe food and beverage manufacturing industry profits a lot from research and development that isbeing conducted in (emerging) science and technology (S&T) fields like chemistry and physics (e.g. inregard to separation techniques), molecular bio(techno)logy, medicine, ICT, material sciences,nanotechnology, robotics (for processing and automation) and even neurosciences. A very importantcontribution is the growing interest in and growing understanding of the workings of the human bodyand biological systems in general (e.g. in regard to food spoilage and preservation).A real science-based analysis of food and drinks on a fundamental and molecular basis has only beenmade possible rather recently through improving insights in biotechnology, genetic research and theavailability of the necessary computer power and laboratory equipment. Many technological andscientific challenges for the improvement of food and beverage products still remain, but it is likely thatscience will gradually find solutions to them.Future advances in science and technology coming from areas outside the food and drinks sector,even though some are related to the industry, will most likely have a continuing strong impact on thedevelopment of the sector.3.1.1 Epigenetics, nutrigenomics and neurosciencesImproved understanding about biological systems and the human body matters for the futuredevelopment of the food and drinks industry. As our understanding about genetics is growing, newscientific research is showing that environmental factors like the intake of certain foods and drinks canin fact have influences on gene expression, i.e. influence if certain gene may become active or not.Such insights could lead to new forms of nutrition engineering or even change the way we are thinkingabout the role of food and drinks in our lives.Research going on in genetics, epigenetics, metabolomics (science about metabolism), proteomics(science about the function and structure of proteins) and similar areas have already created theresearch field of nutrigenomics, which studies the effects of nutrition on genes and metabolicfunctions. A very important contribution that makes such research possible comes from advances incomputer sciences that bioinformatics which enable the necessary complex calculations andsimulations (e.g. in regard to protein-protein interactions).Europe INNOVA Sectoral Innovation Watch 14
  18. 18. Sectoral Innovation Foresight – Food and Drinks Sector December 2010New and cheaper possibilities for gene mapping and molecular biology are already emerging as themost computing-intensive tasks in human history (Forbes, 2009). Dropping prices and speed 14increases in genome sequencing – which might come for 1000 US$ around 2014 – will also be animportant basis for possible personalised foods and drinks that are matched to an individual’s geneticmakeup. However, scientists are currently only at the beginning of understanding the real implicationsand meanings of sequenced genome data. Personalised functional food, although not impossible, islikely to take some time until reality and economic feasibility.Also research in neuroscience could provide the basis for the development of new foods aimed atinducing specific neuronal states like happiness, calmness or improved concentration achieved withthe help of specific ingredients. Researchers are, for example, unravelling the neurochemical effectsof chocolate and try to give a scientific basis to so-called “mood foods”.It has also been suggested in research that different combinations of foods and drinks can influencehow nutrients are being utilised in the human body. This could lead, for example, to science-basedcombinations of items in ready meals, leading to healthier overall compounds. Such insights couldalso lead to new forms of marketing innovations, e.g. by providing consumers with science-basedrecommendations for side dishes, vegetables or spices based on their choices being made whileshopping (e.g. the nutrients of this fish are best digested when eaten together with these vegetablesand spices) or composing ready meals based on science.3.1.2 Miniaturisation, biotechnology and nanotechnologyHumans are able to observe and manipulate matter on an increasingly small scale. They are now 15leaving the micro-level and are entering the even smaller nano-scale .Our increasingly better understanding of molecular biology and modern biotechnology also leads tobetter knowledge about the mechanisms behind food contamination and spoilage and also enablenew ways to improve preservation and food safety. So-called lab-on-a-chip modules, which combinetechnologies from ICT, nanotechnology and biotechnology, allow for fast and mobile food testing for avariety of pathogens, bacteria and contamination.Genetic engineering principally allows for the creation of plants (and animals) with some optimisedcharacteristics like increased vitamin level or higher yields, or enable possibilities to get rid ofallergens. Even totally new or modified organisms could be created that may be used to fight offharmful bacteria or produce functional ingredients.As it is the case in other fields of material sciences, nanotechnology also opens up new possibilitiesfor the food and beverage industry. They range from improvements of texture over targeted nutritionand flavour enhancement through “nano-encapsulation” to smart packaging for more safety.14 http://harvardmagazine.com/2007/03/a-personal-genome-machin.html15 "Nano-scale" refers to objects of a size close to 1 nanometre, i.e. = one-billionth of a meter. The "micro-level"refers to micrometre, which equals one-millionth of a meter or 1000 nanometres.Europe INNOVA Sectoral Innovation Watch 15
  19. 19. Sectoral Innovation Foresight – Food and Drinks Sector December 2010Nanotechnology can be used in food processing (e.g. nano-encapsulation of nutrients, nano-emulsions), food packaging (e.g. barrier materials, antibiotic packaging, smart packaging) and sensor 16systems for food safety testing .Although operating on the nanometre-scale is nothing new in food production, many consumers andconsumer advocacy/protection groups are concerned about “nano” in food. Since some elementsreally show different reaction characteristics on the nano-scale in contrast to larger particle andcompound sizes and nano may enter the blood stream and cross the brain-blood barrier more easily,the issue requires careful scientific evaluation.3.1.3 Material sciences and intelligent packagingEspecially the area of food packaging benefits from general advances in material sciences. Anti-bioticmaterials, heat/cold resistant materials, eco-friendly packaging and even edible packaging havealready been developed or are under development. Edible packaging may pose some problems inregard to hygiene if really intended to be eaten, but at least such products will put no harm to theenvironment since they are digestible and biodegradable.Also in line with food sciences being understood as a kind of material science, technologies used inmodern material development and testing like simulations might also be of use for food and drinksmanufacturing. For example, the raw materials coming from farming are always different incomposition, which necessitates changes in processing and ingredients to yield constant andsatisfactory results. Computer simulations could be used to analyse and predict the behaviour ofingredients, physical and chemical properties and even the spread of micro-organisms.3.1.4 Automation, robotics and ICTAs robots are becoming increasingly flexible, versatile and “intelligent” as well as cheaper, they arealso getting much more attention from the food and beverage manufacturing industry. According tostatistics from the World Robotics Report 2008, the food and beverage industry is currently 17responsible for major increases in demands for industrial robots (World Robotics, 2008).Beside the indirect contribution of ICT in regard to calculations in the bio- and nutritional sciences, ICTtechnology is becoming an important part of logistics (e.g. in transports and fast-food-management)and food chain management. RFID-technology allows for consistent traceability and fast productidentification and is also part of smart packaging concepts.16 http://www.foodsafetymagazine.com/article.asp?id=3598&sub=sub217 http://www.worldrobotics.org/downloads/2008_executive_summary.pdfEurope INNOVA Sectoral Innovation Watch 16
  20. 20. Sectoral Innovation Foresight – Food and Drinks Sector December 20103.2 Demand-side drivers and emerging product marketsThe Strategic Research Agenda 2007-2020 of the European Technology Platform on Food for Life 18addresses three major action points (‘key thrusts’) (ETP, 2008: 5) :  Improve health, wellbeing and longevity  Build consumer trust in the food chain  Support sustainable and ethical production.The key action points reflect the major issues that are being addressed by the European food industryand underline the need for developing new processes, products and tools in order to improvecompetitiveness. They are defined in anticipation of today’s and tomorrow’s consumer and societalpreferences.In the coming years the familiar, more or less predictable body of mass consumers of the present willmore and more turn into smaller, narrowly defined target groups each with their own agenda, interestsand preferences. The future is likely to consist of consumers that will increasingly demand everythingat the same time, but also more tailoring to individual needs (e.g. Martin, 2007).The figure below represents a number of demand ‘attributes’ (dimensions) each of which pose and willcontinue to pose challenges for the food and drinks industry.3.2.1 Aliments against ailments - health consciousness, diseaseand ageingPeople are expecting more from their food and drinks than just satisfying their hunger and thirst. Foodand drinks are seen as an integral part for improving health and wellbeing.Consumers seem to get increasingly health conscious – and at least more concerned - about theirintake of foods and drinks. This can be observed not only in the growing interest in functional foods,but even more in the current trend towards natural and organic foods and scepticism about syntheticingredients.Box 3.1 Functional foodsFunctional foods (i.e. food that has added beneficial effects that go beyond nutritional effects) have a rather longhistory. In some cultures, especially China and India, the distinction between foods, drinks and medicine has notbeen very distinct. Although Japan is generally regarded as the birthplace of functional food, prominent Europeanand US examples can also be named. Coca-Cola, for example was invented in 1886 by the pharmacist JohnPemberton and was advertised as containing cola nuts which were thought to have nerve stimulant properties. In1904 the “fitness drink” Ovomaltine was invented and marketed as having positive effects on fatigue. Over time,these drinks have further developed, but they still exist as “functional drinks”. In 1935 the Japanese physicianShirota invented the lactobacillus casei with the help of (conventional) biotechnology for use in the first probioticyogurt drink “Yakult”. In this sense he can be seen as the forefather of today’s functional and probiotic dairyproducts manufactured with the help of modern biotechnology or classical methods. During the 1980s, theJapanese government has approved so-called “Food for Specified Health Use” (FOSHU) and contributed to thefollowing popularity of such products in Europe, starting in the 1990. In 2007, the European Health Claimregulation has been initiated which regulates and restricts health-related claims on foods and drinks.18 See also the ETP’s “Implementation Action Plan”.Europe INNOVA Sectoral Innovation Watch 17
  21. 21. Sectoral Innovation Foresight – Food and Drinks Sector December 2010As the life expectancy of people increases, so does the probability of age-related diseases andailments. Since the bodily constitution and metabolism of elderly people change, other kinds ofnutrition and nutritional balances are required for this age group. This has already led to theintroduction of a new profession: gerontological nutritionist. Food companies are also already reactingtowards this new and growing set of consumers. The interest is also growing on the “preventative”.Much scientific research is being conducted in the area of identifying foods and ingredients that canslow down aging-effects like cellular damage or physical and mental degeneration. However someclaims being made are not based on sufficient and/or accepted scientific evaluation. The currentstriving for improving “healthy aging” is a big driver for food innovations. Still, the huge problems ofobesity and other diet-related illnesses tend to increase, even to such an extent that according tosome the steady rise in life expectancy may come to an end (e.g. Martin, 2007).Currently, however, especially fast-food chains and fast-food products like pizza as well as snacks areheavily criticised as a reason for obesity, imbalanced nutrition and so-called “civilisation illnesses” liketype-II diabetes. Fast food chains, especially McDonald’s, have started to react and are nowadvertising with being more health conscious, offering salads and presenting themselves as caring forthe environment. Another reason for obesity may also lie in the fact that most people in today’s post-industrialised countries need fewer calories due to their work that requires less physical activity andburning of calories. Besides this, the industry is not responsible for the consumer’s eating and cookinghabits.The interest in healthy eating and drinking is huge and currently there exists a wide variety of partlycontradicting advices concerning this topic. Science-based approaches towards more healthy foodsand drinks could represent a big contribution. To meet this goal, a better understanding about therelationships between nutrition and health effects is necessary. Progress in modern bio(techno)logy isof great importance.Box 3.2 Health aspects of alcoholic drinksHealth issues are getting increasing importance, also with alcoholic drinks. Organic alcoholic drinks gainincreasing popularity. Red wine also got a healthy image, because of its anti-oxidant ingredient resveratrol thatmay help to prevent cancer. By using genetic engineering, students from Rice University (US) have developed abeer that contains resveratrol. In January 2010, however, new scientific findings strongly suggest that resveratroldoes not prevent or slow down age-related cell damage as assumed before.19 This is also an example for theuncertainties that still exist in nutritional research.At the same time, the popularity of the recently introduced light alcoholic drinks and mixes (e.g. breezers) havearisen considerable attention. Increasingly these drinks are being consumed by young adults (below 18 years ofage) and even children, with considerable potential health impacts. This has brought governments to respond andstart awareness campaigns to emphasise the negative side of alcohol consumption, especially for the young. Newproducts, especially in the segment of alcoholic drinks are often first introduced over bars, clubs, restaurants anddiscotheques before entering supermarkets or specialty stores. Ways to reduce the negative effects of alcohol oraccelerate the decomposition of alcohol in the body are welcome and innovative ideas, which however have notyet been achieved reliably.Financial and other incentives that stimulate healthy lifestyles and ditto consumption patterns getincreasing attention. As an example serves VGZ, one of the largest Dutch health insurers, who since19 http://www.newscientist.com/article/dn18396-stay-young-on-red-wine-drugs-think-again.htmlEurope INNOVA Sectoral Innovation Watch 18
  22. 22. Sectoral Innovation Foresight – Food and Drinks Sector December 20102005 reimburses clients who use Unilever’s cholesterol-lowering Becel pro-active products, becauseof the products’ beneficial health effects (Unilever, 2005). Scientific research and evidence play animportant role in such bonus/reward schemes. This example reveals some underlying and interestingdevelopments that might become even more common in the future: the blurring border betweenfunctional foods and medicine, the scientific trust in functional foods and new alliances between foodand beverage manufacturers and other sectors (e.g. health insurers). Similarly, the German healthsystem reform envisages health insurance bonus systems for adopting a healthy lifestyle, while non-compliance, for example by diabetics refusing doctor’s advice, will be punished by means of 20supplementary payments (e.g. Müller, 2007).Food allergies are on the rise and can have grave limiting effects on quality of life. As more and morecustomers are experiencing food allergies or food intolerance, the food and beverage industry has toreact by adjusting the choice of ingredients, labelling or finding ways to engineer foods and drinks thatdo not contain allergens (if no medical treatment for allergies can be provided).3.2.2 Food safety and consumer confidenceOne of the most important factors for consumers is food safety. Food scandals, the selling of spoiledfood and contaminations are affecting consumers and the food industry alike and lead to consumersloosing trust in the industry and retailers. The call for safe food is loud, due to food scares andscandals of the past. Globalisation and world-wide sourcing increasingly call for better tracking andtracing by the industry as well as improving health and safety monitoring and control. Independentgovernmental agencies (viz. the European Food Safety Authority (EFSA) and national agencies) playan increasingly important role in securing the safety of food and drinks. This requires the drawing ofclear and transparent roles and responsibilities, alongside with a system of appropriate checks andbalances.Improvements in fast and real-time testing and monitoring “from farm to fork” can be realised with acombination of ICT (e.g. RFID tagging), nanotechnology (smart sensors on packages), biotechnologyand material sciences through improved preservation, better packaging, smart sensing and testingand global traceability (tracking and tracing) and food chain management. Important milestones havealready been set, but even more can be done, especially at a global scale.Safety is very much a matter of organisation within the value chain. Retailers have taken much of a 21lead here and have been very active in setting up integral chain management (e.g. the EurepGAPlabel – European Retailer Produce Good Agricultural Practice, recently transformed into ‘Global GAP’– Global Good Agricultural Practice). Since retailers are the last actors in the food and beverage valuechain, they are very dependent on the input and quality of the food industry, agriculture (especially inregard to raw fruits and vegetables), safety analysis and logistics (e.g. correct storage of products).20 http://www.unilever.nl/onsbedrijf/nieuwsenmedia/persberichten/2005/BecelproactivwordtvergoeddoorZorgverzekeraarVGZ.asp21 EurepGAP is a private sector body that sets voluntary standards for the certification of agricultural productsaround the globe.Europe INNOVA Sectoral Innovation Watch 19
  23. 23. Sectoral Innovation Foresight – Food and Drinks Sector December 2010Food scandals or other kinds of consumer dissatisfaction with certain products are affecting retailersto a high degree, since many customers regard them as responsible.Therefore the future might make food safety more challenging, especially in face of globalisation andcomplex food chains, but technology can also help to improve food safety within complexconstellations, e.g. through better tracking, surveillance and testing methods.3.2.3 Ethical concerns and sustainabilityEnvironmental pollution, the unrestricted use of scarce and non-renewable resources such as oil andgas and – hence – sustainability are rising societal and consumer concerns, not only in Europe butworldwide. Ethics and sustainability – the future of mother earth – go hand in hand. Ethical concernsalso apply to animal rights and to the consumption of animal products. The awareness about animalrights is growing, leading to consumer criticism about industrial farming and the use of growthhormones and antibiotics in mass animal production. Many consumers are choosing more “ethical”products like eggs and meat from free-range animals, “organic” and “fair-trade” products. A growingnumber of manufacturers are already advertising with labels that indicate the utilisation of renewable 22energy sources (e.g. wind, solar and biomass/food waste) being used for production , following thegeneral trend of displaying the manufacturer’s environmental and ethical considerations (e.g. in regardto animal keeping or fair trade) in form of labels..Sustainable food production looks like a large innovation area for the industry, which especiallyconcerns production methods and resource management (renewable energy, energy efficiency, foodwaste management, water management, etc.).3.2.4 Convenience food and take away food/home deliveryConvenience and health are probably the two biggest food and drinks trends; they are at the sametime seemingly contradictions. The choice for convenience food is rooted in changing life-styles, busylives and lack of time. The popularity of convenience food also relates to the diminishing size of theaverage household (two and one person household). The term convenience food applies to readymeals, conveniently packaged and processed foods, snacking and snatched meals, and eating out incanteens, catering establishments and restaurants. However, due to the financial crisis, eating out ison the decline because of the higher costs. ‘Grazing’, eating on the move and ease of container-opening for children and the elderly are all demands that, when being met increase the convenience offood consumption. Technologies for convenience foods focus on: easy to handle, time saving, ready-to-eat and heat-to-eat (ETP, 2005).Potential future demand may develop into the direction of high value-added convenience foods – inparticular functional foods that are designed to meet the nutritional and health needs of every22 E.g. Dagoba Chocolate http://www.dagobachocolate.com/Europe INNOVA Sectoral Innovation Watch 20
  24. 24. Sectoral Innovation Foresight – Food and Drinks Sector December 2010individual. Another future direction is convenience products made from fresh and healthy food.Sustainable and healthy fast food could become an innovation topic.3.2.5 Price consciousness, affordability and value for moneyA considerable share of consumers - and customers in general – acts price conscious in regard tofood and beverage products. The financial crisis has caused at least some customers to turn awayfrom more expensive “natural”, “organic”, “healthy” and “ethical” food as well as high quality foodtowards cheaper conventional products and fast food. The crisis does not only affect the foodconsumption patterns of the lower income strata of society. Even though the food industry is typicallymuch less affected by ups and downs than other sectors (European Commission, 2009), uncertaintyand falling consumer confidence increases the price sensitivity of consumers, with possible demandshifts towards hard discounters (e.g. Aldi, Lidl).Box 3.3 Consumer behaviourThrough the current financial crisis, however, some consumers are tending to cheaper products and thus turningaway from the more expensive ‘natural’, bio, eco, organic and wellness products. As a UK Research and Marketsstudy from 2009 suggests, consumers are already shifting away from some premium market products, whichinclude many ‘natural’ and wellness brands. “Innocent Drinks”, for example, a fast growing and successful Britishmanufacturer of smoothies, experienced 21% drops in sales and the first decline since 1999 in favour of cheaperchilled juices (Research and Markets, 2009). A winner of the financial crisis seems to be McDonalds, whichaccording to the Financial Times is planning to create 12000 new jobs and open 240 new restaurants throughoutEurope in 2009 after a 7.8 % European sales increase in November 2008. Source: Financial Times Online, 2009Discount retailers have already started to adapt towards the consumer wishes of inexpensive qualityand health and even discounters offer “organic” and natural foods, often presented as store brands.More generally, it remains questionable how much additional money consumers, especially those withlower income, would be willing to spend on functional foods and health innovations. Studies alsosuggest people from lower-income strata and less education are more prone to obesity, imbalancednutrition and resulting health problems. A major reason for this is that people with less income tend tobuy foods that are cheap and satiable, but contain more fats, sugars and salt and less valuablenutrients. If the expensive ‘high-tech’ food or ‘organic foods’ show significantly positive health effectsas compared to cheaper products, this could contribute to a divide-like situation between the wealthierand poorer strata of society that effects life expectancy, health and wellbeing.The profit margins of the food and drinks sector are generally low throughout the whole food chain andmarket power within the chain is a serious issue as the example of the recent milk-price drops andmilk-farmer’s protests show. Most food and beverage products are being sold through stores andsupermarkets that seek new ways to attract customers though appealing products, shop designs anda good shopping atmosphere as well as reducing costs. Cost reductions can be achieved throughmore efficient warehousing, supply chain management, automation or through the introduction ofprivate labels (i.e. retailers own store-brands). Retailers and large supermarket discounters haveintroduced private labels as an alternative to the more expensive and established, internationalrenowned brands. Many of these brands relate to quality and ecology-oriented or natural products.Automation, especially in warehousing, can lead to substantial cost savings. The 1 Euro-shops, forEurope INNOVA Sectoral Innovation Watch 21
  25. 25. Sectoral Innovation Foresight – Food and Drinks Sector December 2010example, can only sell for such cheap price because of large-scale rationalisation and automation inwarehousing and logistics (besides cheap product manufacturing in China and Eastern Europe).3.2.6 TasteTaste can be considered as one of the most relevant properties of food when it comes to consumerchoices. However, since taste sensitiveness and preferences are highly individual but also dependenton culture and habit, this dimension is difficult to objectively quantify. There may also be trade-offsbetween taste and other dimensions of foods and drinks like price and health. Researchers likeHarvard’s Daniel Lieberman are suggesting that people’s preferences for what is nowadaysconsidered unhealthy food like too much (saturated) fats, sugars and crispy foods (which can indicatefreshness as contrasting to less fresh items, e.g. in vegetables) is rooted in human evolution and pre-modern living conditions where a preference for energy rich foods, fat and sugar was an advantage for 23survival, conditions which however do not apply to the lifestyle in (post-)industrialised societies .Thus, from an evolutionary/anthropological perspective, taste preferences are related to assessing thenutritional value and safety of food items found in the wild. Humans prefer sweet food because it 24promises fast energy intake and tend to dislike bitter food because many toxic items are bitter .Looking at it from this perspective and also considering neuroscience, biological, cultural andneurological factors play an important role in regard to taste preference.In modern (post-)industrialised cultures, taste has mostly lost its function for distinguishing betweenedible and non-edible items and as already mentioned, some parts of the human evolutionary heritageare not suitable for modern living anymore. However, taste is still a very important criterion for foodchoices, whereas the cultural dimension of tradition - as well as experimenting with the tastes of othercultures – has become a major factor for gastronomy and the industry. This can be seen through theobservation that century old food traditions (e.g. in confectionary, beer, wine, meat specialities) are stillvalued and surviving with their traditional manufacturing methods and ingredients despite modernity.Also recipes from around the world are entering supermarket shelves dominated by industrialproducts. If taste and preferences are tied to specific production methods and ingredients that are notto be altered due to tradition or intellectual property right/trademarks, innovation is of course not reallypossible, except for indirect areas like preservation, packaging or marketing.However, taste preferences can conflict with health as well as innovation. The problematic relation tohealth does not only stem from the human evolutionary/anthropological heritage but can also lead todisputed (but within the EU well regulated) ingredient choices in the context of industrialised andbudgeted food production like certain artificial flavours and flavour enhancers. Some innovative futureideas like nanotechnology-based “programmable food” (cf. 3.1.9) also deal with experimentation of23 http://harvardmagazine.com/2009/05/dissing-evolution?page=0,1 andhttp://samuelsandassociates.com/samuels/upload/ourlatest/AdolescentObesityTowardsEvidenceBasedPolicy.pdf24http://www.unu.edu/unupress/unupbooks/80632e/80632E02.htm#Overview%20of%20factors%20in%20human%20food%20selectionEurope INNOVA Sectoral Innovation Watch 22
  26. 26. Sectoral Innovation Foresight – Food and Drinks Sector December 2010taste, whereas such ideas are currently also considered with scepticism and would face problems withapproval.Modern preservation methods, especially non-thermal ones (c.f. 3.1.11) are concerned with keepingthe taste of foods intact. Other preservation methods are exploring the utilisation of spices (e.g.Rosemary, Wasabi, parsley) that add good taste and at the same time serve as natural preservatives(cf. 3.1.8). This is in so far interesting as here innovation can be viewed from a different perspective,i.e. preserving and maintaining the taste of naturalness of food that is also related to the increasinghealth consciousness of some consumer groups.Molecular gastronomy, i.e. focussing on the scientific biochemical and physical dimension of cooking,a trend that has gained interest over the last years, has been inspired by methods of industrial food 25processing but is also being taken up by the industry . Other food “sub-cultures” like the “slow food”movement are intentionally opposing modern trends of fast, mass-produced and uniform food andemphasise taste, indulgence, health as well as traditional and regional specialities. If regarded as acounter trend to the mainstream and thus as something new, “slow food” could be seen as aninnovation, whereas not in a real technical sense but rather from the perspective of lifestyle, economicalternatives (strengthening regional and rural areas) and marketing.Taste, of course, remains central to food but the relation of taste to health and innovation can beambivalent. Humans tend to prefer tastes related to generally less healthy food in modern contexts(e.g. fat, sugar), but also associate taste with health and healthy eating (savouring the taste) as in theslow food movement. “Artificial tastes” in budget food production cause controversies and exotictastes can awake curiosity but also rejection. Innovations can contribute to better taste preservation(e.g. advanced preservation methods) and even create totally new taste experiences as in moleculargastronomy and some envisioned future nanotechnology possibilities.3.3 Intersection of S&T and demand-side drivers3.3.1 Knowledge-Bio-Based-Economy (KBBE)The food and drinks sector is a large and important part of the European bio-economy. Innovations inthis sector can be seen well within the goals and objectives on the European-Bio-Based-Economy(KBBE), which is defined as “transforming life sciences knowledge into new, sustainable, eco-efficientand competitive products” (“Cologne Paper”, 2007). The realisation of the goals requires a strongsupport for promoting science and research and attracting young people to work in these areas.Currently the situation still seems far from optimal and many industries are talking about a lack ofengineers and declining numbers of students in bioscience and engineering. A major necessity thathas been identified at the 2007 conference ‘En Route to the Knowledge-Based Bio-Economy’ hostedby the German Presidency of the Council of the European Union is the improvement of knowledge25 http://spectrum.ieee.org/geek-life/hands-on/molecular-gastronomy-goes-industrialEurope INNOVA Sectoral Innovation Watch 23
  27. 27. Sectoral Innovation Foresight – Food and Drinks Sector December 2010transfer. “Brain Drain”, i.e. the emigration of European scientist to non-European countries is also aproblem to be addressed (“Cologne Paper”, 2007).3.3.2 Consumer sensitivity as crucial factorThe food and drinks sector is rather unique. Some of the S&T possibilities that could provide solutionsfor demand-side wishes may just not be acceptable to the consumer. For instance, although manyconsumers want allergen-free foods, GMO may not be accepted as a solution. Nanotechnology couldprovide methods for better food safety, but is at the same time regarded as a food-risk itself.High consumer acceptance is however expected from personalised diets and methods for improvedfood testing and food-chain surveillance and management. Already today, one can find innumerablepersonalised-looking advises for healthy eating and nutrition, although many of them do not seem tobe evidence-based. The generally increasing knowledge about the workings of complex bio-systemsand the role of nutrition will very likely contribute positively towards the general goal of producingsafer, healthier and even tastier food based on scientific analysis.Social, cultural and religious aspects are also very important in the area of eating and drinking. Manyreligious or social rules have strict prescriptions about what (and even when) and what not to eat anddrink (e.g. vegan, kosher, halal, ban of alcohol and wine etc.) and how to prepare food and drinks (e.g.in regard to butchering). Eating and taste preferences are also related to culture, e.g. in regard tospices, sweetness and the consumption of certain foods like insects (entomophagy) or specific kindsof meat (e.g. snails, frogs, crocodiles, camels etc.).From past to present, consumer sensitivity and awareness has increased much, whereas the food anbeverage manufacturing industry is currently still defined as low-to-medium technology (Hirsch- 26Kreinsen, 2006, 2008). In regard to expected (future) scientific and technological possibilities, thefood and drinks industry could develop much further towards the characteristics of a high-techindustry, getting more similar to the biotech industry. If one categorises industrial sectors along thedimensions of technology (high technology vs. low technology) and “consumer sensitivity”, i.e. doethical and safety considerations play a great role in regard to products, one could derive the followingsimplified structure:26 http://www.jotmi.org/index.php/GT/article/view/art83/149Europe INNOVA Sectoral Innovation Watch 24
  28. 28. Sectoral Innovation Foresight – Food and Drinks Sector December 2010Figure 3.1 Scientific and technological possibilities of the food and drink industryIn how far especially SMEs can perform this shift, remains very questionable, however. For firms thatproduce traditional foods and drinks which by definition cannot make major alterations in regard toingredients, sourcing and production methods, organisational innovations and networking are and 27remain of major importance (e.g. Kühne et al., 2007).The important question is in how far consumer sensitivity about the safety of food and beverageproducts and new knowledge about nutrition and their health effects can be brought into line with eachother. Is the industry able to take up the consumer interests and the inputs from scientific research todevelop successful new products?3.3.3 Innovation and technology as chanceAlthough some technological developments may not become popular with consumers, there seems tobe much room for innovativeness, although the trajectories may be different of what has been thoughtof in the past about the future, e.g. GMO and food pills. There seems to be much room forimprovement in efficiency and sustainability within food manufacturing, which applies to largeindustries as well as to smaller businesses and organic production. Energy efficiency, a betterunderstanding about how food works in the body, analysing the function of natural ingredients forpreservation, taste, texture and health benefits, improved labelling and packaging to indicate spoilagewhen it occurs (preventing good food from being thrown away and spoiled food from accidentally beconsumed) and ways to establish more trust between consumers and producers can be named assome major issues. There can also be innovation without GMO and adding synthetic nanoparticles,whereas modern biotechnology, genetic science and nano/molecular-sciences can nonetheless playan important role in agriculture, theoretical food science and food control.27 http://ageconsearch.umn.edu/bitstream/6617/2/sp08ku01.pdfEurope INNOVA Sectoral Innovation Watch 25
  29. 29. Sectoral Innovation Foresight – Food and Drinks Sector December 20104 Scenarios4.1 IntroductionThe following sections depict five different scenarios for the possible future development of the foodand drinks manufacturing industry in Europe, highlighting different directions in products andproduction processes manufacturing, societal development and consumer preferences and choice.Reality is likely to be a mix of all five scenarios, however with a greater leaning towards one of them.This makes the depiction of ideal typical worlds valuable, because through this one can get a clearerpicture of the single elements of the potential future reality.Basic framework assumptions:The world population is growing and expected to increase from 6.9 billion in 2010 to 7.6 billion by 282020 . This requires higher levels of agricultural production. Therefore the need for increases inproductivity and yields is one general driver for innovation. In most EU countries, the population isdeclining, however, and aging, nutrition-related health as well as environmental issues are generallyconsidered important and represent topics for innovation. Demographic developments represent arather stable framework condition since significant changes in population only occur slowly.If disregarding possible societal, political and legal interventions, the trajectories of technologicalpossibilities is also quite foreseeable with an increasing gain of knowledge, insight and engineeringcapacities in biotechnology, material science, medicine, computer science and related topics.However, societal, legal and economic aspects as well as public opinion play a significant role indetermining whether new technologies and methods may be applied or not. Thus technologicaldevelopment as such can be seen as a constant, whereas societal (political, legal, economic etc.)factors can vary.The scenarios will derive from the following assumptions considered as generally fixed within a short-to mid-term timeframe:  Increase in global population  Decline of population in many EU countries due to lower birth rates  Increasing life expectancy in EU countries (aging society)  Increases in scientific and technological knowledge and possibilitiesas well as the following parameters that vary between the different scenarios and make out the core oftheir differences:  Economic prosperity (on world, country and individual basis)  Ecological consciousness28 UN Population Statistics http://esa.un.org/unpp/p2k0data.aspEurope INNOVA Sectoral Innovation Watch 26
  30. 30. Sectoral Innovation Foresight – Food and Drinks Sector December 2010  Environmental problems (factual occurrences like draughts, floods, extreme weather that could negatively affect food production)  Food safety concerns (high concerns within society vs. lower concerns)  Importance of health (high interest in healthy living vs. rather low interest, leading to problems like obesity)  Innovation as a function of socio-economic factors that lead to the real application of knowledge and possibilities  Acceptance of new technologies (from a legal as well as individual consumer perspective)The first scenario, labelled ‘business as usual’ serves as a baseline and actually depicts the currentsituation of food and beverage production with the scores for the different dimensions (cf. graph-diagrams) set to an intermediate position. The diagrams of the other scenarios should be read relativeto the baseline (‘business as usual’). Also the developments of the different scenarios are based oncurrent trends in the sector, whereas in each scenario different dimensions are being highlighted.The scoring of the major dimensions: economic prosperity, ecological consciousness, environmentalproblems, food safety concerns, importance of health, technological progress and acceptance oftechnology have not been derived from an extended survey, but estimated by the researchersinvolved in this report and sector workshops during a workshop. They are not to be interpreted in aquantitative way but rather as an orientation to depict the differences of the scenarios.A list of references for the scenarios is provided in a special section in the reference list. This report 29itself has also served as a basis for the scenario-drafting .The first scenario “business as usual” reflects the status quo of the food and beverage production andmarket as a very heterogeneous construct. The other scenarios are measured relative to thisreference scenario depicting relative growth or declines in some of the dimensions.All scenarios can also be related to some of the emerging innovation themes that will be described inmore detail in chapter 5.29 The scenarios have been discussed with experts in the context of a workshop. The attendance rate of expertswas very low (3), however, that actually only in regard to the technological aspects and factual informationvalidation has been achieved, but in regard to implications or the assessment of more or less favourablescenarios the workshop only yielded very limited results from a methodological perspective.Europe INNOVA Sectoral Innovation Watch 27

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