Mapping current innovation and ... -...

Mapping current innovation and emerging R&D needs in the food and drink industry required for sustainable economic growth

Appendices

Final Report to Defra May 2013

Arthur D. Little Limited One Bedford Avenue London, WC1B 3AU United Kingdom Telephone +44 (0)20 7766 0200 Fax +44 (0)20 7766 0201 www.adlittle.uk.com Reference P12001690

Defra/P12001690/021rep_Appendices.docx 2

Table of Contents

Appendix 1: Methodology used for this study 6

Appendix 2: Survey results 8

A2.1. Overall findings from the survey 8

A2.2. Introduction 8

A2.3. R&D intensity within the survey population 10

A2.4. Drivers for R&D and innovation 11

A2.5. Challenges 14

A2.6 Barriers to innovation 18

A2.7 Potential R&D and innovation targets 20

A2.8 Survey script used to collect this information 22

Appendix 3: Examples of international good practice 30

A3.1 Enterprise Ireland: Bringing businesses and research institutes together 30

A3.2 CSIRO: Creating a technology roadmap for environmentally sustainable food production 31

Appendix 4: Sector definitions used in this study 34

Appendix 5: List of consultees 37

Appendix 6: Assessment of the current UK landscape in technological innovation in the food and drink sector 39

A6.1 Overall performance of the UK food and drink sector 39

A6.2 R&D intensity in the UK food and drink sector 43

A6.3 Activity in each sub-sector of the food and drink industry 45

A6.4 Activity and initiatives in the public science base 55

A6.5 Key policy measures 58

A6.6 Key funding initiatives 61


List of Tables

Table 1: Rationale for the selection of the seven priority sub-sectors 7

Table 2: Summary of current activity in the UK food and drink sector 46

Table 3: Sustainability-based R&D themes for the soft drinks and bottled water sector 55

Table 4: Summary of universities and research and technology institutes mentioned in this study 56

Table 5: Summary of key policy measures mentioned in this study 59

Table 6: Summary of key research funding initiatives measures mentioned in this study 63


List of Figures

Figure 1: Overview of methodology 6

Figure 2: Breakdown of survey respondents by industry sector and company size 9

Figure 3: R&D intensity (R&D spend/turnover), vs. company turnover: indicative Monte Carlo simulation 10

Figure 4: R&D staff as proportion of total staff, vs. total staff: indicative Monte Carlo simulation 11

Figure 5: Large businesses’ top ten drivers for R&D and innovation 12

Figure 6: SMEs’ top ten drivers for R&D and innovation 12

Figure 7: Key words for additional drivers for R&D and innovation 13

Figure 8: Large businesses’ top challenges for R&D and innovation in healthier products and sustainability 14

Figure 9: SMEs’ top challenges for R&D and innovation in healthier products and sustainability 15

Figure 10: Key words for additional challenges associated with developing healthier products 16

Figure 11: Key words for additional challenges associated with environmental sustainability 17

Figure 12: Key words for barriers 18

Figure 13: Top 10 barriers to R&D and innovation 18

Figure 14: Key words for potential R&D and innovation targets 20

Figure 15: Technology roadmap for sustainable food manufacturing 32

Figure 16: Sustainable food manufacturing – path to impact 33

Figure 17: UK manufacturing sector: Turnover by segment (2011) 40

Figure 18: UK manufacturing sector: Change in turnover by segment (2008-2011) 40

Figure 19: UK food and drink sector: Turnover by sub-sector (2011) 41

Figure 20: UK food and drink sector: Proportion of employees by sub-sector (2011) 41

Figure 21: UK food and drink sector: Turnover growth by sub-sector (2008-2011) 42

Figure 22: UK food and drink sector: Number of companies by sub-sector (2008-2011) 42

Figure 23: UK food and drink sector: Change in total number of employees by sub-sector (2008-2011) 43

Figure 24: Global food, drink and tobacco R&D expenditure as a % of value added by country (2000-2008) 43

Figure 26: Global food and drink sector: New product variants by country (2005-2011) 45

Figure 27: UK sales of biscuits, cakes and breads by volume (2011) 47

Figure 28: UK biscuits market shares (2010) 48

Figure 29: UK baked goods market shares (2010) 48

Figure 30: Global share of new product launches by innovation type in the bakery sector (2010) 49

Figure 31: UK dairy product sales (2010) 49

Figure 32: UK dairy market shares (2012) 50

Figure 33: UK oils & fats product sales by volume (2011) 51


Figure 34: UK oils & fats market shares (2010) 52

Figure 35: UK sales of ready meals, by volume (2011) 52

Figure 36: UK ready meals market shares (2010) 53

Figure 37: Global ready meal launches by innovation type (2006-2009) 53

Figure 38: UK sales of soft drinks by volume (2011) 54

Figure 39: UK soft drinks & mineral waters market shares (2011) 54


Appendix 1: Methodology used for this study

The objectives of this study, as set out in Defra’s scope of work, were to:

Deliver a comprehensive review of the current technological innovation activity in the UK food and drink post farm gate value chain which supports competitiveness and resource efficiency.

Identify drivers, challenges and barriers to innovation, building on what is already known to help develop a better understanding of sustainable production in food and drink industry.

Identify opportunities for the application of emerging science and innovation, including suitable advances which may be being pioneered outside of this industry or internationally.

Identify examples of green food manufacturing excellence outside the UK which complements our national research base and is relevant to these challenges.

Define and rank key targets for research and development (R&D) that will have the greatest impact on supporting economic growth while reducing environmental impact.

The focus of this study shifted slightly through subsequent discussions with Defra towards the identification and prioritisation of challenges which could be solved through technological innovation, and of longer term R&D needs, rather than prescribing specific R&D targets where Defra should intervene. In addition, the coverage of examples of green manufacturing excellence outside the UK was broadened to cover good practices in wider Government support. The scope of this study was the UK food and drink value chain from post-farm gate through to reuse/recycle or landfill; the interactions between each step, and the interface between farm and post-farm gate. To deliver this work, a combination of activities were used across a series of five tasks between November 2012 and March 2013, as summarised in Figure 1. Figure 1: Overview of methodology

Tasks:

Activities:

1: Start-up and initial sector prioritisation

2: Map current food and drink industry activity in technological

innovation

3: Identification of high level drivers and

challenges to innovation

4: Identification of barriers, gaps

and opportunities

5: Capture examples of green

manufacturing excellence outside

the UK

Workshops with Defra

X

Literature review X X X

Survey X X

Consultations X X X

Horizon scanning

X X

Timings: November

2012 December 2012 January – March 2013 March 2013

Source: Arthur D. Little


The tasks took place as follows:

1) Start-up and initial sector prioritisation: To reduce complexity in the study, seven sectors within the post-farm gate food and drink sector were prioritised by Defra as part of an initial workshop in November 2012, as summarised in Table 1. These sectors were prioritised on the basis of criteria associated with the relative significance of each sector to the economy; the impact on a greener value chain; and levels of technological intensity.

2) Mapping current food and drink industry activity in technological innovation: This involved a literature review of previous studies in this area and interviews with representatives from industry, universities, research and technology institutes, trade associations, research councils and other bodies and networks to understand levels of current activity.

3) Identification of high level drivers and challenges to innovation: An industry-wide survey was administered during January 2013. The survey asked respondents to prioritise prioritise drivers and challenges associated with the environmentally sustainable production of healthy food. Results of the survey are presented in Appendix 2. The results of the survey, together with a qualitative assessment of consultation responses, were assessed and prioritised in a second internal Defra workshop in February 2013, and “hot spot” challenges were agreed. Hot spots comprised those areas which were important today and were likely to remain important in the future; represented a significant area of unmet need or high technological difficulty, and were areas where Defra could make a difference, relative to other Government agencies or existing initiatives.

4) Identification of barriers, gaps and opportunities: Survey respondents and consultees were also asked to identify barriers to technological innovation. Survey responses were scored and aggregated together with qualitative responses derived from the consultations.

5) Capture examples of green manufacturing excellence outside the UK: Areas of good practice from other countries were identified on the basis of consultation and literature review, and short profiles created for those examples which support the findings and recommendations of this study, or provide examples of what could usefully be done in the future. These examples have been provided in Appendix 3.

6) Define potential R&D targets: A horizon scanning exercise was conducted together with representatives from industry, academia, and research and technology institutes in March 2013 to validate the challenges, and then to identify technological innovation opportunities which fitted well with UK capability and would have a high impact in addressing the challenges. The identified opportunities for technological innovation have been presented in this study.

Table 1: Rationale for the selection of the seven priority sub-sectors

Prioritised sub-sector Rationale

Biscuits, cakes & breads The largest sector in terms of turnover of those considered. Likely to have a high impact on a greener value chain, as it involves transport and processing of commodities

Dairy High levels of technological intensity, particularly associated with environmental sustainability. Important interface at the “farm gate”

Fruit & vegetable processing Significant area of focus from the perspective of health and nutrition

Meat processing Largest of the sectors considered in terms of employment

Oils and fats Likely to have a high impact on a greener value chain, as it involves transport and processing of bulk commodities. Significant area of focus from the perspective of health and nutrition

Ready meals High growth in recent years, relatively high activity in technological innovation, and a role in combining together outputs from multiple other sub-sectors

Soft drinks and mineral waters High intensity in technological innovation

Source: Outputs from Defra inception meeting with Arthur D. Little, November 2012. Note that these sectors were prioritised before detailed sector analysis

had taken place


Appendix 2: Survey results

A2.1. Overall findings from the survey

This appendix sets out the results of an industry survey to understand barriers and opportunities in research and development (R&D) and innovation in the post-farm gate food and drink industry. It was completed by 280 businesses, split evenly between small and medium sized enterprises (SMEs) and large businesses across all sectors in the industry. Some consultancies and academic organisations also responded. In terms both of turnover and staff, SMEs tend to be around twice as R&D-intensive as large businesses, spending around 1.2% of their turnover on R&D and innovation compared with 0.5% for large businesses. There is a ‘long tail’ of highly research and development (R&D) or new product development (NPD) - focused SMEs. Large businesses’ R&D is driven primarily by economic pressures: either directly from raw material costs or competition, or via consumer demand for lower prices. These issues are critical for SMEs too, alongside a broader range of innovation drivers such as regulation and consumer demand for healthy and ‘natural’ foods. Challenges prioritised by SMEs and large businesses are broadly consistent: reducing salt/sugar/saturated fat content dominates the healthy food agenda, while supply chain efficiency and waste minimisation are of higher concern for environmental sustainability. Availability of funding and poor technical skills was identified as the biggest obstacles to innovation, particularly in terms of accessing funding for capital investment. From the perspective of SMEs, there is some skepticism over the value of innovation in the sector: poor returns on innovation and a need to focus on short term demand. Survey respondents suggest that Defra fund innovation in smart and reusable/recyclable packaging, methods and ingredients to extend product shelf life, and more energy/cost efficient processing. They also want Defra to work to improve consumers’ acceptance of healthy products, develop regulation to drive health and sustainable food production, and facilitate collaboration in industry and with academia.

A2.2. Introduction

This survey is one element of a wider piece of work to understand barriers and opportunities in research and development (R&D) and innovation in the post-farm gate food and drink industry. The survey aimed to provide broad prioritisation of a series of pre-defined drivers and challenges, which respondents were asked to prioritise by selecting those which they felt were of relatively higher priority. The list of pre-defined drivers and challenges were developed on the basis of industry consultation and literature review and agreed with Defra. Participants were also able to add additional challenges and drivers. The full survey script is shown in Section A2.8 for reference. This survey is one component of wider analyses and seeks to generate an indicative view of overall priorities to help identify specific areas of activity. As such, the results of this survey are not intended to provide a statistically representative indication of UK wide perceptions, and should be considered as purely indicative. The survey itself was divided up into four sections, as follows:

Drivers: Further subdivided into consumer preference drivers, economic drivers and regulatory & policy drivers. Respondents were asked to pick three options from a list of twenty-two drivers, organised by the three categories mentioned.


Challenges: Grouped by challenges associated with developing healthier products and challenges associated with environmental sustainability. For challenges associated with developing healthier products, respondents were asked to select three options from a list of six. Challenges associated with environmental sustainability were subdivided into four categories, which were: Iimproving supply chain efficiency, Improving efficiency in processing and manufacturing, Minimising waste and consumption of raw materials, and Developing new business tools and methods.

Respondents were asked to select five options from a combined list of twenty-two challenges associated with environmental sustainability across categories.

Barriers: In a free text form, respondents were asked to list up to five barriers to innovation.

Potential R&D targets: In a free text form, respondents were asked to identify up to five potential R&D targets and opportunities to fund if they were in Defra’s position.

The survey was administered via a web portal and was live between December 21st, 2012 and January 28th, 2013. It was sent out via emails and newsletters to approximately 11,000 respondents via a range of industry groups. These included members of the Food and Drink Innovation Network, Campden BRI, Bioscience KTN and the Institute of Food Science & Technology. A total of 280 responses were received, covering 41% small and medium sized enterprises (SMEs) and 41% large businesses1 in the food and drink industry. The remaining 18% of respondents were identified as “consultancies & agencies” or “academia & research institutes”. The survey asked respondents to indicate which industry sector they were classified in. The distribution of respondents by sector is shown in Figure 2. If a survey respondent selected multiple sectors, the survey response would be counted toward both individual sectors chosen2. Further research and investigation took place to re-classify respondents who initially identified themselves as from other food and drink sectors. In order to preserve a clear food and drink industry view in the results, responses from consultancies or research institutes respondents were eliminated from sector analysis and SMEs vs. large businesses analysis. Figure 2: Breakdown of survey respondents by industry sector and company size

Source: survey results, Arthur D. Little analysis

1 SMEs are defined as companies with less than 250 full-time equivalent employees

2 For example, if a respondent selected “bread, biscuits & cakes” and “oil & fats” as his/her business, the survey response would be counted once for the

“bread, biscuits & cakes” sector and once again for the “oil & fat” sector


A2.3. R&D intensity within the survey population

In terms both of turnover and staff, SMEs tend to be around twice as R&D-intensive as large businesses, and there is a ‘long tail’ of highly R&D- or NPD-focused SMEs In order to secure a good response rate, the survey provided pre-defined numerical ranges for companies to report their turnover, staff numbers, R&D expenditure and R&D staff numbers3. To analyse the resultant data a Monte Carlo simulation was performed4. The results are displayed in Figure 3 and Figure 4. Further related analyses were also conducted to complement these graphs, inform the conclusions and confirm the statistical significance of these conclusions. In general, it should be noted that the whole sector focuses on new product development (NPD) rather than ‘purer’ R&D. As such, the term R&D is understood here to mean all the innovation activities of these companies. The following conclusions were drawn:

Smaller companies tend to be more R&D-intensive than larger companies: that is, they spend a larger proportion of their turnover on R&D and innovation. Further quantitative analysis suggests that SMEs typically spend around twice the proportion of

their turnover on R&D and innovation than large businesses (median R&D intensity 1.2% for SMEs vs. 0.5% for large businesses).

There is also a ‘long tail’ of highly R&D-intensive SMEs (potentially spending up to 10% of turnover on R&D and innovation).

This conclusion also applies to staff, with SMEs typically employing around 11% of their workforce on R&D and innovation, compared with around 5% for large businesses.

Figure 3: R&D intensity (R&D spend/turnover), vs. company turnover: indicative Monte Carlo simulation

Source: survey results, Arthur D. Little analysis. See main body of text for more accurate numerical analysis. See footer for methodological notes5

3 Turnover ranges were: <£100k; £100k-£1m; £1m-£10m; £10m-£50m; £50m-£100m; >£100m; unsure/prefer not to disclose. FTE ranges were: 1-50; 51-

100; 101-250; 251-500; 501-1000; >1000. R&D/innovation budget ranges were: <£50k; £50k-£100k; £100k-£500k; £500k-£1m; £1m-£5m; £5m-£20m;

>£20m; unsure/prefer not to disclose. R&D/innovation FTE ranges were: none; 1-10; 11-100; 101-500; 501-1000; >1000; unsure/prefer not to disclose. In

all cases the highest (open-ended) value and unsure categories were excluded from the Monte Carlo analysis.

4 The Monte Carlo analysis randomly assigns to each company specific values for its turnover, staff numbers, R&D expenditure and R&D staff numbers,

with uniform probability distribution within the range provided by the respondent. This process is repeated many times in order to provide an indicative

probability distribution for the variables being analysed

5 Each point represents a simulated company with specific values randomly assigned with uniform probability distribution within the range provided by the

respondent. 91 companies included in the analysis, with 55 (number arbitrarily chosen) Monte Carlo iterations per company resulting in 5005 data points.

Excluded from the research were: Organisations from consulting/research/academia (to focus on industry participants); companies in the top turnover or

staff number ranges (due to the difficulty of assigning a probability distribution for open-ended ranges); and “don’t know” responses.


Figure 4: R&D staff as proportion of total staff, vs. total staff: indicative Monte Carlo simulation

Source: survey results, Arthur D. Little analysis. See main body of text for more accurate numerical analysis. See footnote 5 for methodological notes

These conclusions are likely to be driven by several key factors, the less mature end of the SME sector tends to conduct more NPD than more mature companies (which large businesses are more likely to be). Also the typical nature of R&D, innovation or NPD as a relatively centralised function means that as businesses grow the R&D and innovation function often grows at a lower rate than, say, manufacturing or distribution functions. Finally, to reiterate, the large majority of this R&D and innovation is likely to be more to the ‘D’ or product development end of the R&D continuum; this is especially the case for SMEs.

A2.4. Drivers for R&D and innovation

Large businesses’ R&D and innovation is driven primarily by economic pressures: either directly from raw material costs or competition, or via consumer demand for lower prices. These issues are critical for SMEs too, alongside a wider range of innovation drivers such as regulation and consumer demand for healthy and ‘natural’ foods Survey respondents were asked to pick three options from a list of twenty-two drivers, subdivided into consumer preference drivers, economic drivers and regulatory & policy drivers. Large business drivers Figure 5 shows the top ten drivers which are influencing R&D and innovation across all sectors for large businesses. It shows a clear predominance of drivers related to economic pressures. There are direct economic drivers, with the rising costs of raw materials most frequently cited and increasing competitiveness also important. Other costs of doing business (e.g. labour and distribution) were also cited as drivers for innovation. Alongside this, consumer preference drivers round out the top responses, again with economic issues driving consumers to become more price-conscious. The only top-5 driver that is not primarily economic is an increasing customer focus on diet and health. Altogether, this suggests that those operating in this sector are finding themselves in a situation where their margins are increasingly squeezed, with consumers demanding cheaper products and raw material costs rising. Innovation activities associated with regulation also feature in the top ten, with food labelling and food quality particular focus areas for R&D and innovation activity. Food safety and environmental sustainability feature further down the list in terms of overall priorities (tenth and ninth most important), suggesting that they are typically secondary drivers for innovation. Making health claims is not present in the top ten: whereas macronutrient balance (reducing salt, sugar and fat) is of general concern, development of more advanced functional food appears to be a highly niche activity.


Figure 5: Large businesses’ top ten drivers for R&D and innovation


SME drivers Looking at small and medium sized enterprises, the same drivers are at play but with some variation in terms of relative importance (see Figure 6). In particular, SMEs attach importance to a wider range of innovation drivers. The economic issues described above are still present, with competition being number one driver, but regulation concerning food labelling and food quality tends to be higher-rated, as is consumer demand for both healthy and ‘natural’ foods. Generally, the R&D and innovation activities of businesses large and small are influenced by similar factors but SMEs’ concerns are less dominated by the purely economic. Figure 6: SMEs’ top ten drivers for R&D and innovation



Sector differences Looking now at all sizes of business, breaking the drivers down by sector indicates little variation from sector to sector – but a small number of noteworthy differences are apparent in terms of some sectors scoring certain drivers higher than others. Specifically:

In both biscuits, cakes & breads and meat processing, the costs of doing business and price of raw materials were relatively higher than other priorities.

In dairy, food quality and food safety ranked higher overall, compared to the average.

In fruit & vegetables, the convenience of food products scored the highest overall.

Soft drinks & mineral waters rated “natural” foods as the most important driver – but only marginally more so than others.

Free text analysis Survey respondents were also asked to identify additional specific drivers (written in free text). A basic analysis of these contributions leads to the ‘word cloud’ in Figure 7. The size of each word is proportional to the number of times the word was used by the respondents. More detailed analysis of the free text answers is provided after the figure. Figure 7: Key words for additional drivers for R&D and innovation

Source: Survey results, Arthur D. Little analysis using wordle.net

Detailed examination of individual free text responses found several new drivers or added detail to those previously discussed:

Consumer demand for innovative new products was most frequently mentioned as an additional driver for R&D and innovation, as respondents reported increasing consumer “desire to try new products” and changing consumer demand for taste, quality, functionality, as well as experiences.

A number of respondents said retailer-induced economic pressure and competitive pressure drive product differentiation, such as having to “fight for shelf space” with innovative products.

A few respondents also mentioned company ethical sourcing and corporate social responsibility as drivers.


A2.5. Challenges

Challenges prioritised by SMEs and large businesses are broadly consistent: reducing salt/sugar/saturated fat content dominates across all sectors, while supply chain efficiency and waste minimisation are of higher concern for environmental sustainability Survey respondents were asked to prioritise innovation challenges associated with developing healthier products and those associated with environmental sustainability. A challenge was defined as a scientific, technological or business management need that R&D and innovation activities can help to meet. For challenges associated with developing healthier products, respondents were asked to select three options from a list of six. For environmental sustainability challenges they were asked to select five from a list of 22. Large business challenges The top ten challenges across all sectors for large businesses are shown in Figure 8. The vast majority of respondents agree that reducing products’ salt/fat/sugar content is the top challenge associated with developing healthier products, followed by developing products for targeted customer segments. As for challenges associated with environmental sustainability, those related to improving supply chain efficiency are ranked the highest, particularly by sourcing environmentally sustainable raw materials and optimising supply chain and logistics management. Unsurprisingly given this concern with food sourcing, respondents also score developing methods to sustainably source raw materials highly and consider it the biggest challenge associated with developing new business tools and methods. Therefore issues relating to raw materials sourcing appear several times, highly ranked each time. Respondents also cite minimising packaging materials as a top challenge. Respondents also considered food safety risk control, flexible and efficient plant design, and efficient line changeovers as challenges related to improving efficiency in processing and manufacturing, but marginally less important than other challenges mentioned above. Figure 8: Large businesses’ top challenges for R&D and innovation in healthier products and sustainability



SME challenges SMEs’ responses focus on the same top six challenges, with only minor differences in relative importance (Figure 9). Developing products targeted at specific population sectors, for example, is seen by SME respondents as less important overall than large business respondents. Figure 9: SMEs’ top challenges for R&D and innovation in healthier products and sustainability


Sector differences

Most of the top challenges mentioned for SMEs and large businesses all together are prominent across all sectors. Reducing product salt, sugar and/or saturated fat content, for example, is ranked the top ‘healthier products’ challenge by all sectors. However, some differences are observed in relative prioritisation of these challenges and some sectors also bring other challenges to the mix. Specifically: Biscuits, cakes & breads: challenges related to minimising waste & consumption of raw materials

are given greater prominence; the sector rates developing environmentally sustainable waste disposal and identifying low glycaemic index products higher than average.

Dairy products: the sector gives greater priority to improving processing and manufacturing efficiency, particularly in terms of improving methods of food safety risk control and improving plant design.

Fruit & vegetable processing: the sector cites developing advanced or “smart” packaging to prolong shelf life and improving processing to match the quality and availability of raw materials as more important challenges than others do.

Meat processing: the sector is more concerned than average with improving methods of food safety risk control and (unsurprisingly) gives greater prominence to accessing new sources of protein (e.g. meat substitutes).

Oil & fats: is more concerned than average about food safety risk control.


Ready meals: prioritises reducing the salt, sugar and/or saturated fat content of products even more dramatically than the other sectors.

Soft drinks & mineral waters: the sector is on average more concerned than other by assessing new & emerging technologies.

Free text analysis Survey respondents were also asked to identify additional specific challenges (written in free text). A basic analysis of these contributions leads to the ‘word clouds’ in Figure 10 and Figure 11. The size of each word is proportional to the number of times the word was used by the respondents. More detailed analysis of the free text answers is provided after the figure. Figure 10: Key words for additional challenges associated with developing healthier products


Close analysis of individual free text responses found the following new challenges or added detail to those previously discussed:

Product taste/health trade-off, both in terms of product development and customer perception of taste vs. health, was the biggest additional challenge associated with developing healthier products; respondents found it difficult to “maintain appetite appeal in healthier products.”

Many respondents highlighted the challenge of replacing use of chemical additives with natural ingredients while preserving product shelf life.

Being able to make health claims was also frequently cited, as “products need to be independently tested for any heath claims.” This was also identified by a small number of respondents as a barrier to innovation (in the later survey question).

In addition to reducing products’ salt/fat/sugar content, some respondents also mentioned challenges associated with increasing fibre and reducing calorie content in products by removing fat and small sugars.


Figure 11: Key words for additional challenges associated with environmental sustainability


Given the extensive pre-defined list of challenges associated with environmental sustainability, few additional suggestions were found from detailed examination of the free text responses. The following challenges were mentioned by a few respondents each:

Accurately assessing carbon footprint throughout product life-cycle, such as being able to access “clear carbon data for all raw materials.”

Controlling the costs and availability of environmentally sustainable raw materials and natural ingredients.

Educating consumers about sustainable diets and lifestyle, in order to help minimise waste following consumer use.


A2.6 Barriers to innovation

Availability of funding and poor technical skills are identified as the biggest obstacles to innovation. There is some scepticism over the value of innovation in the sector: poor returns on innovation, a lack of consumer demand and a lack of available innovations seem often to drive a management view that innovation is not a priority The survey asked “what are the biggest barriers or obstacles stopping you from meeting these challenges?” In order not to pre-judge company-specific barriers to innovation, survey respondents were asked to identify up to five such barriers using free text only. A basic analysis of these contributions leads to the ‘word cloud’ in Figure 12. The size of each word is proportional to the number of times the word was used by the respondents. More detailed analysis of the free text answers is provided after the figure. Figure 12: Key words for barriers


The immediate impressions from the word cloud are borne out by detailed examination of the survey (Figure 13). Responses were considered one-by-one and grouped into categories derived to reflect appropriately the concerns identified. Where a single response clearly referred to two separate issues that response was allocated to both relevant categories (for example, “Resources – both in the human sense and money one”). Figure 13: Top 10 barriers to R&D and innovation

Source: Survey results, Arthur D. Little analysis


Considering the top five barriers in more detail:

Financial barriers were overwhelmingly top-rated. The statements made on this barrier were mostly quite general, such as “lack of

funding/resource,” “prohibitive costs,” and “lack of profitability resulting in lack of investment.” Some companies stated that they do not invest because they see insufficient benefits from

innovation. Statements include “short termism – i.e. requirement for immediate return on investment,” and “lack of return on R&D investment due to supermarket purchasing policies.”

Only three responses in this category explicitly identified a lack of Government funding for research as a barrier. These responses are also included in the ‘lack of (right) Government support’ category.

Skills or education was the next highest barrier. Again, most of these responses were simple statements such as “skills,” or “resources – people.” Where the respondents were more specific, they tended to highlight technical skills as being the

primary obstacle. A few companies were concerned about the educational environment. For example, “food science

skills gap in the UK (we often need to recruit from continental Europe)”.

Internal priorities or culture: Mostly these statements identified lack of time or management/technical focus to drive

innovation. Lack of innovation strategy or management buy-in to the need for innovation were also

identified as issues: “management inertia,” and “risk aversion in the business driven by the state of the economy,” for example.

Lack of a risk-taking culture, and inflexible management processes were also identified by several respondents.

Some of these statements mirror also the statements in the financial category regarding poor returns from innovation in the industry. This also relates to the next two main barriers.

Lack of demand from consumers or society, fourth most-cited, may be a driver of the above issues. Typical responses in this category identified “consumer habits,” or “consumer openness to

change” as a major issue. More specific responses suggest that “consumer drive for low prices” is an issue, as is the lack of

“public acceptance of healthier/low salt foods.”

Difficulty of innovation or absence of available new technologies was the final top-five barrier. A general “lack of (protectable) new technology developments” was frequently cited, with the

difficulty of developing new ingredients also identified as an issue: “with nutrition, [the problem] is often taste. Reducing salt and fat without compromising flavour is particularly challenging.”

A separate barrier further down the list relates to this issue: the difficulty of working across the supply chain to identify and use these new technologies or ingredients.


A2.7 Potential R&D and innovation targets

Survey respondents suggest that Defra fund innovation in smart and reusable/recyclable packaging, methods and ingredients to extend product shelf life, and more energy/cost- efficient processing. They also want Defra to work to improve consumers’ acceptance of healthy products, develop regulation to drive health and sustainable food production, and facilitate collaboration in industry and with academia Finally, using a free text form respondents were asked to identify up to five potential R&D targets and opportunities to fund if they were in Defra’s position. A basic analysis of these contributions leads to the ‘word cloud’ in Figure 14. The size of each word is proportional to the number of times the word was used by the respondents. More detailed analysis of the free text answers is provided after the figure. Figure 14: Key words for potential R&D and innovation targets


The word cloud shows words such as “packaging”, “waste”, “shelf (life)” and “sustainable” among the most frequently cited by respondents. A close examination of respondents’ answers was performed to categorise and better understand the suggested R&D targets and opportunities. Specific findings from the examination are:

Funding identified innovation & technology development was most frequently cited and covered the widest range of specific suggested opportunities. The most frequently mentioned were: Developing smart packaging technologies and recycling/reusing packaging materials to reduce

waste. Extending product shelf life, especially with natural methods and ingredients. Investing in energy-saving and cost-saving processing and manufacturing throughout the

supply chain, such as “new chiller cabinet technologies and transport” and “energy recycling from ovens.”

Government led education & communication initiatives was the second most cited funding target. Many respondents identified improving consumers’ understanding of general food and health and

encouraging healthier food consumption as key government initiatives. Some also mentioned the government should support generation of consumer insights (e.g.

funding market research to “listen to consumers and society”) and lead in communicating accurate information about new technologies/ingredients (e.g. GM) to improve consumer acceptance.


Third most frequently, respondents said efforts should be put in developing regulation & policies that encourage the production of environmentally sustainable and healthy food. Most of the suggestions involve incentivising industry good practice and developing

appropriate assessment tools, such as implementing “tax benefits for early adopters (of new technologies)” and “methodologies for evaluating environmental impact and sustainability.”

Improving recycling infrastructure and practices, including enforcing consistency across agencies, was also mentioned by a number of respondents.

Next, respondents also expressed desire for government-initiated collaboration opportunities for the industry. This reflects the last of the top 10 barriers to innovation highlighted above. These include both industry collaborations and collaborations with academia and research

institutes. Specific suggestions include “[encouraging] 'start ups' to develop their ideas in networks with

established business”, establishing local innovation hubs and technological centres of excellence, providing funding for companies to work with consultants of innovation networks and “working more closely with overseas partners.”

Finally, a small number of respondents suggested other general funding ideas that did not fit in categories mentioned above, selected examples of these suggestions include: Funding “X prize style challenges to create breakthrough solutions for the production of

environmentally sustainable and healthy food.” “Smaller grants but more of them – more diversity of solutions.” Funding projects that would meet “specific needs of certain population”, such as senior citizens and

infants.


A2.8 Survey script used to collect this information


Appendix 3: Examples of international good practice

A3.1 Enterprise Ireland: Bringing businesses and research institutes together

Examples of good practice from Enterprise Ireland, the government organisation responsible for developing and growing Irish enterprises in world markets, include innovation vouchers, which provide SMEs with funding to access the public science base, and the Food for Health Ireland programme, which addresses long term collaborative research in a specific industry associated with a specific technological challenge.

A3.1.1 Innovation vouchers: Providing access to technological innovation for SMEs Enterprise Ireland’s Innovation Voucher Initiative provides government subsidies for small businesses who wish to access Ireland’s public science base for the purposes of conducting technological innovation activities. Through an application process, SMEs6 are given a €5,000 voucher to spend on exploring a business opportunity or problem with a registered knowledge provider (from a list of 38), which include higher education institutes and research and technology institutes. Applicants can form groups of up to 10 for larger fund (up to €50,000) to address issues of common concern. Examples of projects funded under the Innovation Voucher initiative include:

Shasta Baby Products worked with Athlone Institute of Technology to develop the prototype of the world’s first portable baby bottle steriliser, which has since been commercialised.

Grafico Ltd, a mechanical and industrial engineering company, developed a stock management system to reduce draft beer waste with the Cork Institute of Technology.

The initiative is considered successful because it provides support for SMEs who wish to collaborate both with the public science base and with other businesses.

A3.1.2 Food for Health Ireland: Collaborative research funding targeted at a specific technological challenge

Food for Health Ireland (FHI) is a partnership among public research organisations and the Irish food industry. It is funded by Enterprise Ireland and industry partners and has a total budget of € 22.5 million. It has an industry-led research agenda which focuses on the development of functional ingredients and products and focuses solely on the dairy sector7. Partners within FHI include University College Dublin, the University of Limerick, Teagasc Food Research Centre at Moorepark and University College Cork together with the Carbery Group, Dairygold, Glanbia and Kerry Group. Facilities are spread across a number of different locations (FHI is described as a virtual research centre in this context)8. FHI is considered successful because it coordinates funding on a specific topic by bringing together research and technology institutes and companies in an area of pre-competitive, collaborative research. The centre serves as a platform for long-term industry-academic collaborations, allowing resource sharing, easier knowledge transfer, and mitigation of investment risk amongst partners.

6 Defined as companies with less than 50 employees

7 A “functional food” as defined as one that serves a purpose beyond basic nutrition, promoting health or reducing the risk of certain diseases

8 See www.fhi.ie, accessed April 2013


A3.2 CSIRO: Creating a technology roadmap for environmentally sustainable food production

As in the UK, the Food and Drink industry is the largest manufacturing industry in Australia9 but faces increasing challenges from global competitors both at home and in the export market. In particular, the necessity to make “more from less”10 resources was identified by the national science agency CSIRO as a global mega trend for the future. Thus creating an environmentally sustainable food manufacturing industry was prioritised to secure Australia’s on-going food supply and ensure the industry’s future sustainability11. To help Australian food manufacturers adopt sustainable manufacturing practices and reduce their environmental footprint, CSIRO undertook a study funded by Enterprise Connect12 to develop a technology roadmap for sustainable manufacturing practices. Released in January 2011, the roadmap aimed to communicate priorities to stakeholders in the food industry by addressing the following objectives:

Identify industry requirements for sustainable food manufacturing and potential technologies to satisfy these requirements.

Forecast technology development opportunities in targeted areas of sustainable food manufacturing.

Create a framework to assist with planning and coordination of technology development by the food industry and related stakeholders.

Identify critical technologies and gaps. Based on findings from a literature review and inputs from external stakeholders via a questionnaire13, telephone interviews and a focus group discussion, a technology roadmap was developed. The roadmap is shown in Figure 15 and contains four categories:

1. Key drivers: Rated high to low from top to bottom.

2. Barriers and constraints: Rated high to low from top to bottom.

3. Key performance indicators: Relative importance is depicted by the length of the arrows (the longer the arrow, higher the importance); timeline for implementation (short (2010-2012), medium (2013-2017) and long (2018 and beyond)) as indicated by the position of the arrows on the roadmap.

4. Key technology areas: Relative importance is depicted by the length of the arrows (the longer the arrow, higher the importance); timeline for implementation (short (2010-2012), medium (2013-2017) and long (2018 and beyond)) as indicated by the position of the arrows on the roadmap.

9 Food manufacturing in Australia employs around 200,000 people with more than $70 billion annual turnover (CSIRO, 2011)

10 How the world responds to increasingly limited resources while trying to meet global demand

11 CSIRO, 2011. Technology Roadmap for Environmentally Sustainable Food Manufacturing

12 Enterprise Connect is an Australian Government initiative to support and promote small and medium businesses

13 Questionnaire responses were collected from 19 participants, including food manufacturers, industry organisations, public research and government

organisations, consultants and retailers


Figure 15: Technology roadmap for sustainable food manufacturing

Source: CSIRO, 2011. Technology Roadmap for Environmentally Sustainable Food Manufacturing

Key findings from the study included the following:

The main driver for sustainability is strongly linked to long term business sustainability and profitability, with economic and government policy identified as the top drivers, followed by environmental, raw material and social concerns.

The main barrier for implementation of sustainability roadmap is a lack of R&D funding, followed by the lack of critical resources/skills and relevant information.

Energy use & carbon footprint, water use & footprint and waste management are ranked top three Key Performance Indicators (KPIs) for environmental sustainability, suggesting preference for short to medium term focused KPIs14.

Highest ranked Key Technology Areas (KTAs) are lean manufacturing, heat & energy optimisation and water minimisation & reuse. Highly ranked technology areas are more likely to yield immediate returns without requiring significant investment, whereas those with lower rankings and longer time frames for implementations are mainly driven by government funded research.

The technology roadmap was intended to be used to raise industry awareness, rather than acting as a universal roadmap for the whole food industry. CSIRO advises each company to develop its own roadmap, based on inherent differences between companies in areas such as operation size, manufacturing processes, products, markets and strategic plans. To inform stakeholders with outputs of the study and ensure industry deployment of sustainable manufacturing practices, a path to impact has been outlined (Figure 16).

14 Comparing to the last three ranked KPIs (public communication, land management and carbon tax/trading benefits), which have more medium to long

term implementation timeline


Figure 16: Sustainable food manufacturing – path to impact

Source: CSIRO, 2011. Technology Roadmap for Environmentally Sustainable Food Manufacturing

CSIRO is now at the second stage in this path, and hosted a series of workshops for food and drink companies throughout Australia in August and September 2012. The roadmap has also been used to inform development of the National Food and Nutrition Research, Development and Technology Transfer Strategy, which aims to set national R&D priorities for the food and nutrition cross-sectorial area for Australia.


Appendix 4: Sector definitions used in this study

Unless stated otherwise, Arthur D. Little has followed definitions used by the Office of National Statistics in the UK Standard Industrial Classification of Economic Activities to define the sectors covered in this study. Biscuits, Cakes & Breads

Bread, fresh pastry goods and cakes (10.71 according to the UK Standard Industrial Classification of Economic Activities)

Manufacture of rusks, biscuits, preserved pastry goods and cakes (10.72)

Manufacture of breads, rolls, pastry cakes, pies,

tarts, pancakes, waffles, rolls, etc.

Manufacture of rusks, biscuits and other dry bakery

products, preserved pastry goods, cakes and snack

products (cookies, crackers, pretzels etc.), whether

sweet or salted.

Dairy

Liquid cream and milk production (10.51/1)

Butter and cheese production (10.51/2)

Manufacture of milk products (10.51/9)

Manufacture of fresh liquid milk,

pasteurised, sterilised,

homogenised and/or ultra-heat

treated.

Manufacture of cream from

fresh liquid milk, pasteurised,

sterilised, homogenised.

This subclass excludes:

– Production of raw milk

(cattle).

– Production of raw milk

(sheep, goats, horses,

asses, camels, etc.).

– Manufacture of non-dairy

milk substitutes.

Manufacture of butter.

Manufacture of cheese and

curd.

This subclass excludes:

Manufacture of non-dairy cheese substitutes.

Manufacture of milk-based soft

drinks.

Manufacture of dried or

concentrated milk whether or

not sweetened.

Manufacture of milk or cream in

solid form.

Manufacture of yoghurt.

Manufacture of whey.

Manufacture of casein or

lactose.


Fruit & Vegetable Processing

Processing and preserving of potatoes (10.31)

Other processing and preserving of fruits & vegetables (10.39)

These exclude

Manufacture of prepared frozen

potatoes.

Manufacture of dehydrated

mashed potatoes.

Manufacture of potato snacks.

Manufacture of potato crisps.

Manufacture of potato flour and

meal.

Industrial peeling of potatoes.

Manufacture of food consisting

chiefly of fruit or vegetables,

except ready-made dishes in

frozen or canned form.

Preserving of fruit, nuts or

vegetables: freezing, drying,

immersing in oil or in vinegar,

canning.

Manufacture of fruit or

vegetable food products.

Manufacture of jams,

marmalades and table jellies.

Roasting of nuts.

Manufacture of nut foods and

pastes.

Manufacture of perishable

prepared foods of fruit and

vegetables.

Reservation of fruit and nuts in

sugar.

Manufacture of prepared

vegetable dishes.

Manufacture of artificial

concentrates.

Meat Processing

Processing and preserving of meat (10.11)

Processing and preserving of poultry meat (10.12)

Production of meat and poultry meat products (10.13)

This class excludes

Operation of

slaughterhouses

engaged in killing,

dressing or packing

meat: beef, pork, lamb,

rabbit, mutton, camel,

etc.

Production of fresh,

chilled or frozen meat,

in carcasses.


chilled or frozen meat,

in cuts.

Operation of

slaughterhouses

engaged in killing,

dressing or packing

poultry.


chilled or frozen meat in

individual portions.

Rendering of edible

poultry fats.

Production of

dried, salted or

smoked meat.

Production of meat

products (e.g.

sausages, salami,

boiled ham etc).

Packaging of meat.

Manufacture of soup

containing meat.

Manufacture of frozen

meat and poultry

dishes.

Wholesale trade of

meat.


Oils & Fats

This class includes This class excludes

Manufacture of crude vegetable oils: olive oil, soya-

bean oil, palm oil, sunflower-seed oil, cotton-seed

oil, rape, colza or mustard oil, linseed oil etc.

Manufacture of non-defatted flour or meal of

oilseeds, oil nuts or oil kernels.

Manufacture of refined vegetable oils: olive oil, soya-

bean oil etc.

Processing of vegetable oils: blowing, boiling,

dehydration, hydrogenation etc.

Manufacture of margarine.

Manufacture of melanges and similar spreads.

Manufacture of compound cooking fats.

Rendering and refining of lard and other edible

animal fats.

Manufacture of margarine.

Wet corn milling.

Manufacture of corn oil.

Production of essential oils.

Treatment of oil and fats by chemical processes.

Ready Meals The ready meals sector, comprises ready-made (i.e. prepared, seasoned and cooked) meals and dishes (10.85). These dishes are processed to preserve them, such as in frozen or canned form, and are usually packaged and labelled for re-sale, i.e. this class does not include the preparation of meals for immediate consumption, such as in restaurants. To be considered a dish, products have to contain at least two distinct ingredients (except seasonings etc.).


Manufacture of meat or poultry dishes.

Manufacture of fish dishes, including fish and chips.

Manufacture of vegetable dishes.

Manufacture of frozen or otherwise preserved pizza.

Manufacture of fresh foods or foods with less than

two ingredients.

Manufacture of perishable prepared foods (e.g.

sandwiches).

Retail sale of prepared meals and dishes in stores.

Wholesale of prepared meals and dishes.

Activities of food service contractors.

Soft Drinks & Mineral Waters The Soft drinks & mineral waters sector (11.07) includes the manufacture of non-alcoholic beverages (excluding non-alcoholic beer and wine).


Production of natural mineral waters and other

bottled waters.

Manufacture of soft drinks:

Non-alcoholic flavoured and/or sweetened waters:

lemonade, orangeade, cola, fruit drinks, tonic waters

etc.

Production of fruit and vegetable juice.

Manufacture of milk-based drinks.

Manufacture of coffee, tea and maté products.

Manufacture of alcohol-based drinks.

Manufacture of non-alcoholic wine.

Manufacture of non-alcoholic beer.

Manufacture of ice.

Merely bottling and labelling.


Appendix 5: List of consultees

Arla Foods (UK and Global) Institute of Food Research

Arthur D. Little (report authors) Institute of Food Science & Technology (IFST)

Bakers Federation International Food Network

Bakkavor Irish Exporters Association

Bernard Matthews Farms JDM Food Group

Bioscience KTN Jon Bell Associates

British Frozen Food Federation Kerry Foods

British Meat Processors Association Leatherhead Food Research

British Soft Drinks Association London Food Centre, South Bank University

Britvic McCormick

Brunel University Mr Organic

Campbell Soup Company National Association of British and Irish Millers

Campden BRI National Association of Master Bakers

Centre for Food Innovation, Sheffield Hallam University National Centre for Food Manufacturing, Lincoln University

Centre for Food Security, University of Reading National Association of British and Irish Millers and a selection of its members

Chemistry Innovation KTN Packaging Federation

Chilled Food Association PepsiCo

Chiquita Pork Farms

Chiquita Brands International Premier Foods

Coca-Cola Enterprises Rexam

Coressence S&A Foods

Dairy UK Seed Crushers and Oil Processors Association (on behalf of Cargill, Archer Daniels Midland and AarhusKarlshamn UK)

Defra Sainsbury's

Dow AgroSciences Seed Crushers and Oil Processors Association

English Beef and Lamb Executive (EBLEX) Technology Strategy Board

Enterprise Ireland Tetra Pak

Federation of Oils, Seeds and Fats Associations The National Association of Master Bakers

Food and Drink Federation The Society for Dairy Technology

Food and Drink Innovation Network (FDIN) Tulip

Food Manufacturing Engineering Group Unilever

Forum for the Future Institute of Food Resaerch

Food and Drink Federation, and members of its Sustainability Steering Group

University of Birmingham

Global Food Security Programme University of Nottingham

GlaxoSmithKline Warburtons

Greencore Weetabix


Heinz Wight Salads

Hilton Food Group Wiseman Dairies

Innovative Technologies WRAP


Appendix 6: Assessment of the current UK landscape in technological innovation in the food and drink sector

This appendix provides further evidence to support the findings in this study by providing an overview of the current state of play in technological innovation in the UK post-farm gate food and drink industry. It describes:

The overall performance of the UK food and drink sector

R&D intensity in the UK food and drink sector

Activity in each sub-sector of the food and drink industry, in terms of the market landscape and areas of technological innovation activity identified by consultees and as part of the survey

Activity and initiatives in the public science base

Key policy measures

Key funding initiatives

A6.1 Overall performance of the UK food and drink sector

The food and drink industry is a major contributor to the economy, and represents the largest UK manufacturing sector in terms of employment and turnover. The sector is dominated by Small and Medium sized Enterprises (SMEs). Biscuits, cakes & breads and meat processing are the largest sectors; the fruit & vegetable processing and ready meals sectors appear to be growing, whilst oils & fats and soft drinks & mineral waters have shrunk slightly since 2008. The workforce overall is shrinking, especially in dairy – though it is growing in the ready meals sector since 2008.

The food and drink industry is a major contributor to the economy, and represents the largest UK manufacturing sector in terms of employment and turnover, and is dominated by SMEs The UK food and drink industry contributed 4.5% of the overall annual £1,682 billion of turnover generated in the UK, making it the sixth biggest UK industry in terms of turnover15. It is the largest sector in the manufacturing industry in terms of both turnover (as shown in Figure 17) and in terms of employment. It accounts for 14.8% of total turnover, and an employer of 15.6% of the overall manufacturing workforce, respectively UK16. The industry comprises 6,660 enterprises (0.4% of the total number of UK enterprises) and a workforce of around 390,00017. The sector is dominated by SMEs, with 95.6% of food and drink companies having less than 250 employees in the UK18.

15 ONS 2011, Annual Business Survey 2010. Excludes alcoholic beverages but includes soft drinks and mineral waters

16 Office of National Statistics, Business Annual Survey 2011

17 ONS 2011, Annual Business Survey 2010

18 Office of National Statistics, UK Business: Activity, Size and Location, 2012


Figure 17: UK manufacturing sector: Turnover by segment (2011)

Source: Office of National Statistics, Arthur D. Little analysis

From 2008 to 2009, the food and drink manufacturing sector experienced an overall increase in terms of turnover (+5.8%), while the other manufacturing sectors suffered a significant decline (-12.4%) Figure 18. The sector has been performing relatively well since then, though growth appears to have declined slightly from 2009 onwards. Figure 18: UK manufacturing sector: Change in turnover by segment (2008-2011)

Source: Office of National Statistics, Annual Business Survey 2011

Considerable differences are apparent in the size and growth of the different segments of the food and drink industry Within the UK food and drink industry, there is tremendous variation between sectors. In terms of turnover, almost one third of total is generated by the biscuits and baked goods and the meat processing sectors combined, whereas oil and fats sector only account for 2% and the soft drinks sector for 5%, as shown in Figure 19.

70,445

74,542 76,697

75,971

434,194 380,200 411,031 439,807

-

100,000

200,000

300,000

400,000

500,000

600,000

2008 2009 2010 2011

£m Food & Drink

Other manufacturing

Revenue growth

+5.8% Food & Drink

Other manufacturing

+2.9% -0.9%

-12.4% +8.1% +7.0%

Revenue


Figure 19: UK food and drink sector: Turnover by sub-sector (2011)

Source: Office of National Statistics, Annual Business Survey 2011. Note that ONS data does not cover the ready meals sector. Turnover for the biscuits,

cakes and breads sector is for 2010 (most recent available data)

Meat processing and bread, biscuits and cakes are also a significant employer, accounting for some 46% of the total workforce (Figure 20). Figure 20: UK food and drink sector: Proportion of employees by sub-sector (2011)

Source: Office of National Statistics, Annual Business Survey 2011. Note that ONS data does not include oils & fats and soft drinks & mineral waters.

Figures for ready meals are from 2009

There are considerable differences in the ways in which the sectors have grown. Food and drink companies in the UK have generally been growing over the last four years, with a total increase in turnover of 5%, despite the fact that total number of companies has slightly decreased by around 1% (Figure 21). Companies in the fruit & vegetables processing sectors have experienced significant growth in terms of turnover (+34%) and the number of companies (+8.2%). However, turnover in the soft drinks & mineral waters, and oils & fats sectors decreased by 12.7% and 10.9% over the last four years – in part because the total number of businesses in these sectors decreased during this period (a reduction of some 8.7% for soft drinks & mineral waters). Whilst comparable data on growth in the ready meals sector is not available, other sources suggest that growth has been strong, at around 6.6% in the UK19. 19 Ready meal sector valued at £1.85bn in 2011 after growing by 6.6% year on year (“Ready Meal Market Report 2012”, Key Note)


Figure 21: UK food and drink sector: Turnover growth by sub-sector (2008-2011)

Source: Office of National Statistics, Annual Business Survey 2011. Note that ONS data is not available for the ready meals sector

Figure 22: UK food and drink sector: Number of companies by sub-sector (2008-2011)


The total workforce employed by the UK food and drink industry has generally declined in all sectors apart from ready meals Overall the total number of employees in the food and drink industry has been flat from 2008 to 2011 (-0.2%) – though considerable change is evident within each sub-segment. The ready meals sector has grown significantly, whilst other sectors have declined – most significantly in the dairy sector (-6,000 employees;-20% in three years). Other sectors have decreased the size of their workforces by between 1% and 10% (Figure 23).


Figure 23: UK food and drink sector: Change in total number of employees by sub-sector (2008-2011)


A6.2 R&D intensity in the UK food and drink sector

R&D intensity in the UK food and drink industry is substantially lower than in other sectors but one of the highest across Europe compared to other food and drink markets In the UK, R&D intensity in the food and drink sector has been relatively steady over the last ten years. A comparison between different countries using OECD data indicates that R&D expenditure in the UK is one of the highest across Europe (Figure 24). However, overall expenditure in European countries is considerably lower than in the United States in the Japan, whose R&D expenditure ratio is on average twice as high20. The figures in Figure 24 should be treated with caution, as they include the tobacco industry as well as food and drink. Figure 24: Global food, drink and tobacco R&D expenditure as a % of value added by country (2000-2008)

Source: OECD Structural Analysis Statistics (STAN) Note that these figures include the tobacco sector

20 OECD Structural Analysis Statistics (STAN) and FDF 2011, Sustainable growth in the Food and Drink Manufacturing Industry

391 390


The amount spent by food and drink companies on R&D varies from source to source, depending on what is considered to be within the scope of R&D – though it can be concluded that R&D expenditure is considerably lower than in other sectors. The latest ONS figures from the “UK Business Enterprise Research and Development” study provide estimate of a total of £350 million spent in 2011, representing only 0.3% of total sales – though this study uses a narrower definition of what is considered to be R&D21, 22. This can be explained by the focus of companies in the food and drink industry on new product development rather than more basic or applied research, or experimental development activities23. The UK is a leader in new product development, in terms of new product variants produced compared to other countries (Figure 25).

21 Office of National Statistics, Annual Business Survey 2010; UK Business Enterprise Research and Development 2010

22 UK Cross Government Food Research and Innovation Strategy, p.24, 2010

23 Frascati manual, 2002


Figure 25: Global food and drink sector: New product variants by country (2005-2011)

Source: Mintel NPD database, 2011. From: Food and Drink Federation, 2011. Sustainable growth in the food and drink manufacturing industry

A6.3 Activity in each sub-sector of the food and drink industry

Revenues, workforce and gross value added (GVA) values for each sector under consideration are summarised in Table 2 below. In terms of current technological innovation activity, three general themes are apparent:

Value and price. Focus is on cost efficiency and minimising costs of the manufacturing/processing. Cost of production has been drastically increasing due to the rising cost of raw materials, whereas value-conscious consumers and retailers are putting extra-pressure on the manufacturer’s margins.

New products and line extensions. Driven by consumer and market trends, many companies in this sector are focusing on short term innovations rather than investing in true research & development, as shown on the chart below. A vast majority of the new products launched are presenting incremental innovations in terms of formulation, positioning or packaging but very little progress in technological innovation.

Reformulation to improve health and nutrition. The most significant type of innovation in ready meals in the last few years was reformulation24, and a large amount of reformulation has taken place as the result of companies removing artificial colors and flavorings or reducing salt and fat content. The rising prevalence of lifestyle diseases such as hypertension and cardiovascular disease is leading ready meals manufacturers to replace these ingredients to appeal to consumers concerned about the high salt and fat content of ready meals.

24 Business Insights, 2011


Table 2: Summary of current activity in the UK food and drink sector

Revenues Workforce GVA at basic prices

Priority sector Revenues 2011 (£million)

Percentage of total UK F&D industry

Percentage change since 2008

Size of workforce 2011


In 2011 (£million)


Biscuits, Cake & Breads 9,260 (2009) 30% +5.3% 108,000 +3.8% 4,168 (2010) +9.9%

Dairy 8,386 10.7% +3.0% 26,000 -10.3% 1,766 +22.3%

Fruit & Vegetable Processing 5,600 7.4% +34.2% 34,000 0% 2,076 +46.0%

Meat Processing 14,741 19.4% +11.4% 76,000 -9.8% 2,735 +4.0%

Oils & Fats 1,111 1.4% -10.9% Not available Not available 212 -38.7%

Ready Meals Not available Not available Not available 26,000 +225% Not available Not available

Soft Drinks & Mineral Waters 3,909 5.0% -12.7% Not available Not available 1,115 +16.3%



A6.3.1 Biscuits, Cakes & Breads The biscuits, cakes & bread sector is dominated by breads, which make up 66% of the total market (Figure 26)25. Consumption in this sector has declined slightly in terms of volume – by 0.2% for biscuits (to 537,000 tonnes in 2011) and by 8.5% for bread, cakes and pastries (to 5.85 million tonnes in 201126. Despite decreases in volumes, the total market value is increasing due to an uptake of higher value artisan products and products such as tortilla and pitta breads. Figure 26: UK sales of biscuits, cakes and breads by volume (2011)

Source: Euromonitor International

The biscuits category is expected to continue to register a more or less flat performance in volume, with marginal growth in the coming years. However, a rise in commodity prices is expected to lead to 2% value growth, whilst price promotions will continue to drive sales over the £1.8 billion mark in 2013. Similarly, the baked goods sector saw a decline in value sales of packaged/industrial bread in 2010, mainly due to price promotions, and the value increase expected will be driven by unit price increase27. The biscuits sector is well consolidated, with United Biscuits holding around a third of the UK’s total market share in this sector. The remainder of the sector comprises private labels, supermarket own brands and other retailers (Figure 27).

25 Euromonitor International: Biscuits in the UK, 2012 ; Baked Goods in the UK, 2011

26 Euromonitor International: Biscuits in the UK, 2011 ; Baked Goods in the UK, 2011

27 Euromonitor International: Biscuits in the UK, 2011 ; Baked Goods in the UK, 2011; Arthur D. Little analysis


Figure 27: UK biscuits market shares (2010)

Source: Euromonitor International, 2011

The baked goods sector is less consolidated. Around 25% of the baked goods sector, including breads, cakes and pastries, comprises artisan products. The other players are the major bakeries (Premier Foods, Warburtons, Allied Bakeries and some of the major supermarkets) (Figure 28). Figure 28: UK baked goods market shares (2010)


Innovation in this sector has been partially driven by the rising consumer demand for 100% natural and organic foods, which has led to the development of products which are free from artificial additives. Manufacturers’ growing focus on reducing fat, sodium and sugar in bakery products has led to the development of trans-fat-free products, calorie-counted portion packs and the further fortification of baked goods with nutritious ingredients such as whole grains.


Much technological activity in the biscuits, cakes and breads sector associated with new product launches focus on product formulation activities, as shown in Figure 29. This accounted for 83% of new product launches in 2010, an increase of 15% on 2007. Particular examples of current technological innovation cited by industry consultees engaged with as part of this work included the substitution of organic and whole grain products, the development of gluten free products, and the development of novel baking technology – largely in collaboration with other industries. There has also been work on salt reduction and the implications of this on the baking process, where salt is used as a raising agent. Figure 29: Global share of new product launches by innovation type in the bakery sector (2010)

Source: Business Insights, 2011

A6.3.2 Dairy The UK dairy market generated total revenues of £9.2 billion in 2011 and has grown at a compound annual growth rate of 5.5% between 2006 and 2011. Milk represents the largest share of the market (Figure 30), but has been growing more slowly than yoghurt and cheese (+4.4% per annum, compared to 6.6 and 6.5% respectively)28. The overall dairy market comprises around 50% private labels. The rest of the market is spread broadly between a number of dairies of a similar scale, with Müller-Wisemann holds a 6.7% market share as of 2012, followed by Dairy Crest with 5.7%, Danone with 4.5%, and Arla Foods with a 2.5% market share (Figure 31). Figure 30: UK dairy product sales (2010)

Source: Marketline, 2011

28 Marketline, Dairy in the UK, 2011


Figure 31: UK dairy market shares (2012)


Those in the dairy sector indicate that most current product innovation focuses on low fat and private label cheese and yogurt products. Low fat was the leading focus area for new dairy product launches, accounting for 11% of product claims in 2006, though this has since declined to 8.8% in 200929. In terms of process innovation, water use reduction has been a considerable focus. For example, Müller Wisemann has invested in a facility to reuse treated effluent at its Bridgewater site, and Arla Foods have recently opened a “zero carbon milk processing facility” at Aylesbury.

A6.3.3 Fruit & Vegetable Processing In terms of volume, the UK market for fruit and vegetables represented 6.9 million tonnes in 2011 - approximately 2.6 million tonnes (£6.6 billion) for vegetables and 4.3 million tonnes (£4.8 billion) for fruit - a value of £11.8 million in 2011, growing at a rate of 2.8% between 2006 and 201130 Markets are expected to grow to around £14.2 billion by the end of 201631. Most examples of ongoing technological innovation were associated with new opportunities in packaging – particularly to prolong the shelf life of packaged fruit and vegetables (e.g. through the use of protective atmospheres, permeable membranes and technologies such as ethylene reduction) whilst minimising the cost of packaging materials was identified as an area of current focus. New styles of serving fruit and vegetables (e.g. as individual, pre-prepared servings) were also cited as being of priority, in terms of addressing a need for greater consumer convenience. In the pre-farm gate sector, varietal improvements through plant breeding were also prominent.


30 Office of National Statstics, Annual Business Survey 2011

31 Marketline, 2012


A6.3.4 Meat Processing Demand for meat has grown significantly in recent years. UK production of meat and poultry amounted to 3.55 million tonnes in 2011, up 4.7% since 2006, and total consumer expenditure on meat at current prices reached £17.42billion, up 18.7% since 200632. The outlook for this sector is less bullish, with overall European meat consumption expected to decline by around 0.4% during 201333 - though growth remains strong in developing economies as affluence rises, providing increased export opportunities. The numbers of enterprises and employees in the sector has also decreased slightly. The meat processing sector is highly fragmented with a wide range of organisations involved in highly complex international supply chains and extremely low margins. A large number of innovative projects have been recently conducted on machinery in order to reduce the cost of processing meat, but also to obtain a uniform level of quality, shape and taste for all products, as well as reducing salt and fat in processed meats. Improving consistency of quality and safety is one of the priorities EBLEX is trying to address through its “meat eating quality and safety research programme34. Priorities pre-farm gate have focused on issues associated with environmental sustainability35, particularly around animal welfare, reducing greenhouse gas emissions from ruminants and modifying animal feeding regimes36.

A6.3.5 Oils & fats The oils & fats market in the UK comprises a total volume of 493,000 tonnes and a market value of around £1 billion, with the majority comprising spreadable oils and fats and vegetable and seed oils (Figure 32)37. Most growth has been in those oils which have a higher mono-unsaturated fat and lower saturated fat content. Figure 32: UK oils & fats product sales by volume (2011)

Source: Euromonitor International, 2012 Oils & Fats in the UK

32 Euromonitor International, online database

33 Global Data, 2012

34 http://www.eblex.org.uk/research/meat-quality.aspx

35 Strategic Framework for EBLEX R&D, 2012-2015

36 Food and Agriculture Organization of the United Nations, “Livestock’s long shadow”, 2006

37 Euromonitor International, Oils & Fats in the UK, 2012


Together, Arla Foods, Unilever and Dairy Crest account for almost 60% of the oils and fats market in value. Private labels hold 13% of the remaining market (Figure 33). In olive oil, Filippo Berio holds number one position with a 23% market value share in 201038. Activities in technological innovation focus primarily on processing of crop feedstocks and countering fluctuations in bulk commodity prices. There are also efforts underway associated with increasing the levels of monounsaturates and decreasing saturates levels through plant breeding. Figure 33: UK oils & fats market shares (2010)

Source: Euromonitor International, 2012 Oils & Fats in the UK

A6.3.6 Ready meals The ready meals sector is dominated by the chilled category, where chilled ready meals and chilled pizza together make up 62.8% of the total sector. In contrast, ambient stable (i.e. canned or preserved) meals make up 6.8%. Figure 34: UK sales of ready meals, by volume (2011)

Source: Euromonitor International, Ready Meals in the UK, 2012

The sector is growing strongly. Total consumption rose by 4.5%, from 1.11 million tonnes in 2008 to 1.16 million tonnes in 2011, while value rose by 8.5% to reach £5.97billion in 201139. Ready meals in the UK have grown largely due to private label products from the “big four” grocery chains: Tesco, Asda, Sainsbury’s and Morrisons. In 2011, the strongest growth within ready meals in volume terms came from prepared salads and frozen pizza, growing by 3% and 2%, respectively. Figure 35 shows that private label products dominate the sector. 38 Euromonitor International, Oils & Fats in the UK, 2012

39 Euromonitor International, Ready Meals in the UK, 2012


Figure 35: UK ready meals market shares (2010)

Source: Euromonitor International, Ready Meals in the UK, 2012

Most innovation is associated with satisfying consumer and customer trends around health, nutrition, convenience, and the attractiveness of international cuisine. Priorities include ensuring quality; maintaining freshness; the reduction of salt, fat and sugar content; and the retention of nutritional value after cooking. Cost reduction in thermally stable packaging is also of importance. Notable work includes a recent project funded jointly by the Chilled Food Association, the Defra LINK Food manufacturing programme, Unilever and BBSRC at IFR concerning the enhancement of sustainability of chilled prepared foods by using risk assessment to set shelf life and reduce processing energy and wastage whilst assuring safety. Other work has focused on reformulation activity to, for example, remove artificial colours and flavourings and reduce salt, sugar and fat content40. Considerable new product development activity also takes place to develop new products and line extensions, as shown in Figure 36. Figure 36: Global ready meal launches by innovation type (2006-2009)

Source: Business Insights, 2011



A6.3.7 Soft drinks & mineral waters The total soft drinks market comprises around 15 million tonnes, of which the largest segment, at 45%, are carbonated drinks, followed by dilutables and bottled water (Figure 37). Figure 37: UK sales of soft drinks by volume (2011)

Source: Zenith International, 2012

The 2012 BSDA report identifies that bottled water, carbonates and still and juice drinks are growing, whilst dilutables are declining. Fruit juice and smoothies reported a robust growth in value despite a decline in consumption levels, and sports and energy drinks are one of the fastest growing categories in soft drinks in the UK. By volume, Coca-Cola Enterprises is the biggest UK soft drink provider, followed by Britvic Soft Drinks (which also bottles a number of PepsiCo soft drinks). A mixture of retailers and manufacturers then follows led by Tesco and Sainsbury’s and then Danone Waters (Figure 38). Figure 38: UK soft drinks & mineral waters market shares (2011)

Source: Euromonitor International 2012

Innovation in the soft drinks sector covers new product development which aims to find ways for companies to add value to their products and fight against commoditisation. Activities in this area are mainly around the use of natural flavours, new ingredients, new formulation or new formats/packaging targeted at consumer convenience (e.g. smaller retail packs). Moreover, health added benefits will continue to attract more consumers, as sugar reduction and the use of natural sweeteners is already on top of the industry’s agenda and lower-calorie drinks continue to drive sales growth. Water use reduction (e.g. through the development of more concentrated dilutables) and waste (e.g. through reduction in the use of packaging) are also a priority for current R&D. Other priorities derived from the BSDA’s sustainability strategy are summarised in Table 3.

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

20%

Perce

ntage t

otal RT

D volum

e

Top 12 UK Soft Drinks companies by volume


Table 3: Sustainability-based R&D themes for the soft drinks and bottled water sector

Common sustainability-driven innovation area

Target Types of innovation

Packaging

Contribute to WRAP’s Courtauld

Commitment 2 target to reduce

packaging waste in the supply chain

by 5% by end of 2012 against 2009

baseline.

Reduce carbon impact of packaging

by 10% by 2012 against 2009

baseline.

Reducing packaging.

Lightweighting.

Use of more recycled materials as

secondary packaging.

Recycled plastic in bottles.

Using waste from other products in

packaging.

Zero waste to landfill Contribute towards the 2015 zero

manufacturing waste to landfill target. Reuse of waste on site.

Reducing water use

Reduce waste water volumes to

contribute to the F&D industry target

to reduce water usage by 20% by

2020 compared to 2007.

Less water usage in line, especially

cleaning of packaging and lines.

Water efficiency at farms and for

irrigation.

Rainwater harvesting and suppliers.

Reducing carbon

Aligned with the Climate Change Act,

the F&D sector’s ambition is to

achieve a 35% reduction in carbon

dioxide emissions from manufacturing

by 2020 compared to 2002 levels.

Energy efficiency at manufacturing

sites, e.g. decreasing the pressure

needed to blow bottles, new

equipment and better insulation.

Use of bio-energy.

Automating processes to turn off if not

in use.

Wind turbines and other energy

generation on site.

Light emitting diode lighting and light

bulbs.

Reduction in refrigeration energy

usage.

Reducing the impact of transportation

Contribute to the F&D overall

objective to reduce the external

impacts of transport by 20-25% by

2012 compared to 2002.

Nothing specific highlighted.

Source: BSDA sustainability strategy, 2012

A6.4 Activity and initiatives in the public science base

The post-farm gate food and drink industry is represented by a wide range of industry and trade bodies, as well as cross-sector organisations such as the Food and Drink Federation and the Food and Drink Innovation Network (FDIN), whose mission is to enable sharing of innovation best practices among the food and drink industry stakeholders. Initiatives such as the National Technology Platform for Food, organised by the Institute for Food Research, creates a linkage to European policy and help to set overall direction. Communication channels are also in place through the bulletins provided by the Biosciences KTN and the _Connect network operated by TSB. Collaborative options also include a number of cross-sector organisations.


The UK food and drink companies can also rely on a number of membership based organisations whose goal is to deliver scientific, technical and legislative support to the sector and other allied industries. These are commercial operations, but captured here for completeness. For example, Campden BRI and Leatherhead Food Research are two major players in the area of providing pre-competitive and near market technical support services to the food industry, and the majority of their activities are focused on near market work on an individual client basis. The UK is also well represented by academic organisations and research institutions which cover basic and applied research and experimental development. Some of those referenced in the main part of this study are summarised in Table 4. A more comprehensive listing can be found in other documents, notably the UK Agri-Food Science Directory41. Table 4: Summary of universities and research and technology institutes mentioned in this study

University/Institute Description

University of Aberdeen

Rowett Institute of Nutrition and Health: Founded in 1913 and integrated into the University of Aberdeen in 2008, the institute’s research focuses on lifelong health, gut health, obesity and metabolic health. It also houses the Scottish Food and Health Innovation Service (funded by Scottish Enterprise) and the Scottish Food and Health Innovation Network (funded by the Scottish Funding Council).

University of Birmingham

The Centre for Formulation Engineering’s Food, Health and Nutrition Group (in the Chemical Engineering Department) focuses on the design of food processes and microstructures, organised by product structure & function, food safety & hygiene and food health & nutrition. An active collaborator with industry, the centre also hosts Bioengineering, Energy & Chemical Industries and Specialty Products industry groups.

University of Bristol The Food Science and Food Safety research groups, based in the Department of Clinical Veterinary Science, conducts research covering areas such as farmed animals and zoonotic pathogens. The groups conduct research projects for government agencies and the food industry. The veterinary school also offers a MSc Meat Science and Technology degree programme, which is distinctive in the UK and highly regarded by the meat industry.

University of Brunel The School of Engineering and Design conducts research in food refrigeration throughout the cold chain, particularly in applications of renewable energy technologies, more energy efficient designs and environmental control systems.

Campden BRI A membership-based organisation (over 2,000 members, £22 million turnover) whose key capabilities include research and development as well as testing, product innovation, process validation, consultancy, auditing and training. It is particularly active in cereals, milling, baking and brewing.

Centre for Process Innovation (CPI)

Part of the High Value Manufacturing Catapult, CPI is a technology innovation centre that works with public and private clients on product and process development projects. CPI works with the food industry on common and pre-competitive R&D problems in areas such as smart chemistry and industrial biotechnology, particularly in terms of production processes and smart packing solutions.

Food and Environment Research Agency (Fera)

An executive agency of Defra, Fera operates at over 40 sites throughout the UK and runs over 600 research projects per year for government agencies and industry customers to support and develop a sustainable food chain. Fera also acts as National Reference Laboratory for chemical safety in food, chemical contaminants in animal feed, pesticide residues and veterinary medicine residues.

Harper Adams University

Food Science and Agri-Food Supply Chain Management Department: The department has a wide range of specialisations in the food sector, including food science & technology, food policy, food ethics, supply chain management and food business management. It offers business services such as research and consultancy, training and professional development courses for the food industry.

41 UK Collaborative on Development Sciences/International Agri-Technology Centre, 2009. The UK Agri-Food Science Directory



Institute of Biological, Environmental and Rural Sciences (IBERS)

A joint initiative between the Institutes of Rural Sciences and Biological Sciences at Aberystwyth University and the Institute of Grassland and Environmental Research, the IBERS conducts multidisciplinary research concerning animal and microbial sciences, environmental impact, and genome diversity. Research groups related to food and drink include diet & health, energy crop biology and plant breeding methodologies.

University of East Anglia (UEA)

The Biomedical Research Centre (BMRC), a collaboration between the School of Biological Sciences and the School of Medicine, Health Policy and Practice, undertakes research in the areas of diet and health, atherosclerosis, diabetes, etc. At the Norwich Research Park, UEA partners with organisations such as the AB Sugar Technical Centre, the Sainsbury Laboratory (John Innes Centre) and the IFR to offer degree programme on sustainable agriculture and food security, conduct research and work with businesses across industries.

Institute of Food Science and Technology (IFST)

An independent qualifying body for food professionals in Europe, whose professional members are eligible to apply for Chartered Scientist status. As the only professional body for all aspects of food science and technology in the UK, it also offers continuing professional development programmes, communicates industry knowledge and informs regulatory and technical developments related to the field.

Institute of Food Research (IFR)

One of the eight institutes that receive strategic funding from the BBSRC, IFR conducts basic scientific research on food safety and nutrition issues in the 'post farm gate' sector of the food supply chain. Research themes include food structure, food bioactives and exploitation of co-products and waste. IFR recently formed a new network to address gaps in food research, innovation and training: “The UK National Technology Platform for Food”.

John Innes Centre (JIC)

Funded by the Biotechnology and Biological Sciences Research Council (BBSRC) and supported by the John Innes Foundation, the JIC is an independent centre of excellence in plant science and microbiology. It is co-located with organisations such as the Sainsbury Laboratory (molecular plant pathology and genetics), Plant Bioscience Limited (IP management and technology transfer) and The Genome Analysis Centre (plant, animal and microbial genomes analysis).

King’s College London

The Division of Diabetes & Nutritional Sciences under the School of Medicine is a UK leader in the field with a strong clinical focus. Major research groups are diabetes research, diet & cardiovascular health, diet & gastrointestinal health and metal metabolism.

Leatherhead Food Research

A membership-based organisation (over 1,500 members, £10 million turnover) whose key areas of expertise are organised around six strategic platforms: Regulatory, Safety, Innovation, Insight, Nutrition and Sensory. Leatherhead offers a worldwide regulatory advice and market intelligence and regular reviews of different market sectors.

University of Leeds School of Food Science and Nutrition: A top food science school in the UK with focuses on food chemistry & biochemistry, food colloids & processing and nutrition & public health. The school also offers research and consultancy services, as well as training courses and partnership programmes for the food industry.

University of Lincoln National Centre for Food Manufacturing: The centre at Holbeach houses the university’s Department of Food Manufacturing and Process Automation and provides a range of services for the food industry, including new product development support, training courses, facilities for commercial hire and research and technical consultancy services.

Newcastle University School of Agriculture, Food & Rural Development: With research themes prioritising rural society & enterprise and sustainable agriculture & food systems, the school hosts a number of research centres and provides a range of services to agriculture and the food industry. These include applied research involving food processing, packaging, logistics, retail and consumer science.

University of Nottingham

The School of Biosciences’ Food Science Division has key areas of strength in brewing science, flavour science, food microbiology, food structure and biomolecular properties. A new Centre for Innovation Manufacturing in Food, dedicated to research in food and drink production with funding from the Engineering and Physical Science Research Council, was announced in February 2013.

Oxford Brookes University

Functional Food Centre: Under the Department of Sport and Health Sciences, the centre focuses on obesity, glycemic control and inflammation studies. It offers research and consultancy services on metabolic testing, weight management, as well as food components and activity.



University of Reading Centre for Food Security: Aimed to address global food security challenges, the centre’s key areas of strength are food chain and health, sustainable agriculture and biodiversity. Dedicated research programmes include modelling of the food system, animals in food security, crop quality for human health and waste in the food system.

Department of Food and Nutritional Sciences: Host a clinical nutrition unit, and a pilot processing plant, as well as operating degree programmes. Operates a Food Chain & Health research theme, with activities in dairy; meat products and health, manufacturing food products for health, and plant-derived bioactive agents.

Sheffield Hallam University

Centre for Food Innovation: The centre provides research and consultancy services in food and drink innovation, offers training and professional development courses and acts as a managed entry point into complementary commercial services for the university’s food sector. Specialist areas of expertise include product development, use of novel and natural ingredients, and sensory evaluation and benchmarking.

University of Surrey Department of Nutrition and Metabolism: Offers degree programmes in nutrition, dietetics, biochemistry, molecular biology, and food science. It collaborates with businesses via technical services and by sending undergraduate students for year-long professional training in industry.

University of Ulster Northern Ireland Centre for Food and Health (NICHE): A leading research institute for human nutrition research, the NICHE is organised by six research themes, i.e. 1) Energy balance, appetite regulation and nutrition education, 2) Folate and related B vitamins in health and disease, 3) Phytochemicals and gut microflora in health and disease, 4) Micronutrient modulation of immune and inflammatory responses, 5) Nutrition, toxicology and child development and 6) Psychological factors associated with food and nutrition.

University of York Biorenewables Development Centre (BDC): Formed by the Centre for Novel Agricultural Products in partnership with the university’s Green Chemistry Centre of Excellence, the BDC provides industry with new processes to convert plants and biowastes into products. It works across industry sectors to develop feedstock, process, and products.

Source: Arthur D. Little analysis

A6.5 Key policy measures

There is a complex array of existing policy measures in the post farm-gate food and drink industry. Those mentioned in this study are described in Error! Reference source not found. below. Summary of key policy measures mentioned in this study


Table 5: Summary of key policy measures mentioned in this study

The UK Cross Government

Strategy for Food Research

and Innovation, 2010

This strategy is the main overarching policy document setting out provisions for

technological innovation in the post-farm gate food and drink industry. It sets out the

need for cross-cutting, multi-disciplinary research around the themes of:

Economic resilience: Ensuring that the agricultural sector is efficient, competitive and

focused on consumer needs, as well as better understanding global food trade and its

implications for food security.

Resource efficiency: Delivery of competitively priced goods whilst progressively

reducing ecological impacts and resource use. Key aspects of eco-efficiency include

measures on waste, energy consumption, renewable energy usage and GHG

emissions, as well as external costs (environmental, social and economic) of food

transport and food imports.

Sustainable ecosystems: The impact of the food system on vital and irreplaceable

resources such as soil and water, air quality, and the biodiversity of plants and animals

need to be managed to maintain a healthy and well managed ecosystem to provide the

ecosystem services needed. Includes farming systems – whole systems approaches to

land management practices.

Sustainable food production and supply: Through enhanced crop productivity, soil

science, livestock production – including disease control and breeding – and

sustainable aquaculture and fisheries.

Sustainable healthy, safe, diets: A more informed society, connected with their food,

and confident in its safety. An improved understanding of the linkages between diet

and health; the trade-offs between sustainable consumption and healthy eating;

consumer attitudes and behaviours; and food safety.

The Cross-Government strategy sets out provisions for – amongst other initiatives – the

following measures:

The Food Security Research Programme, coordinated by BBSRC and delivered

jointly with relevant Research Councils and government departments, and including

close engagement with industry and the third sector. Key aims include strengthening

research coordination and partnerships, building a more integrated community of

researchers, funders and users that extends across disciplines, organisations and

sectors, to provide multi-disciplinary research to ensure a sustainable and secure food

system.

The Food Research Partnership , a governance body which brings together

Government with senior representatives and experts from industry, the research

community and others outside government.

The Technology Strategy Board led Sustainable Agriculture and Food Innovation

Platform, co-funded by Defra and BBSRC with up to £90M over 5 years, to fund

innovative technological research and development in areas such as crop productivity,

sustainable livestock production, waste reduction and management, and greenhouse

gas reduction.

Global Food Security Strategic

Plan (2011 – 2016)

The Food Security Research Programme coordinates multi-disciplinary research

between funders is a result of the cross-Government food research strategy described

above


Foresight - The Future of

Farming and Food:

Challenges and choices for

global sustainability

Foresight investigates the pressure on global food systems between now and 2050 and

identifies the necessary political decisions to ensure sustainable and equitable food

supply for a global population rising to nine billion or more.

The report identified and analysed five key challenges for the future, as follows:

Balancing future demand and supply sustainably—to ensure that food supplies are

affordable.

Ensuring that there is adequate stability in food supplies—and protecting the most

vulnerable from the volatility that does occur.

Achieving global access to food and ending hunger. This recognises that producing

enough food in the world so that everyone can potentially be fed is not the same thing

as ensuring food security for all.

Managing the contribution of the food system to the mitigation of climate change.

Maintaining biodiversity and ecosystem services while feeding the world.

The importance of interconnected policy-making is highlighted as a key conclusion of

the report. Policy in all areas of the food system is urged to consider the implications

for volatility, sustainability, climate change and hunger. High-level conclusions also

include:

Substantial changes will be required throughout the different elements of the food

system and beyond if food security is to be provided for a predicted nine billion people.

Addressing climate change and achieving sustainability in the global food system need

to be recognised as dual imperatives.

It is necessary to revitalise moves to end hunger; greater priority should be given to

rural development and agriculture as a driver of broad-based income growth.

Policy options should not be closed off, as it is important to develop a strong evidence

base upon which to make informed decisions.

Food self-sufficiency is not a viable option for nations to contribute to global food

security, but food system governance is important for maximising the benefits of

globalisation and ensuring that they are distributed fairly.

TSB Biosciences Technology

Strategy 2009-2012

Based on consultation with the industry and other organisations and output of the BIS’

study on industrial biotechnology, TSB considers four criteria for investment42 and

identifies genomics, industrial biotechnology and agri-food as three priority areas.

To implement the strategy, TSB aims to invest in UK businesses that can exploit

biosciences-based technologies within the four criteria for investment and to work with

other organisations to ensure suitable tools are in place. The strategy also sets out

provisions for the Sustainable Agriculture and Food Innovation platform and the

Nutrition for Life programme.

Green Food Project, 201243 The Green Food Project examined the two broad and potentially conflicting objectives

of increasing food production and improving the environment in England. The project

found no single “correct” path in achieving this balance, as it often depends on the

particular circumstances at a given time and in a given location.

Dialogue made about the project also identified direction and strategic steps in areas

such as research and technology, knowledge exchange, future workforce, investment,

effective structures, valuing ecosystem services, land management and consumption

and waste.

42 Four critiera for investment considered: the UK has the capability, there is a large market opportunity, the idea is ready for exploitation and the TSB can

make a difference

43 Defra, 2012. Green Food Project – Conclusions


Defra Business Plan 2012-

2015

Set structural reform plan and planned actions based on identified coalition priorities,

which are:

Support and develop British farming and encourage sustainable food production.

Enhance the environment and biodiversity to improve quality of life.

Support a strong and sustainable green economy, including thriving rural communities,

resilient to climate change.

National Technology Platform

for Food

A network formed by the IFR, Food and Drink Federation, IFST, Campden BRI,

Biosciences KTN and Leatherhead Food Research to bring together UK stakeholders

in the post “farm gate” food chain. It aims to identify gaps in the food research and

address challenges associated with sustainability, diet and health, as well as safety,

quality, efficiency & the consumer. Serving as a platform for the industry, the NTP for

Food focuses on education & training and research & innovation.

European Technology

Platforms (ETP) “Food for

Life” partnerships

FoodDrinkEurope – ETP “Food for Life” – Strategic Research and Innovation Agenda

(2013-2020 and beyond) Confederation of Food and Drink Industries of the European

Union (CIAA) Strategic research agenda sets out a number of priorities on

understanding the impacts of diet and health on interfaces with chronic disease and

diet and ageing.

Agri-tech strategy Forthcoming Defra strategy in agricultural technology.

TSB High Value

Manufacturing strategy 2012-

2015

TSB’s High Value Manufacturing strategy identifies investment strategies to help

accelerate businesses on their innovation journey from concept to commercialisation in

the areas of process engineering capability across food, pharmaceuticals and

chemicals.

Outputs from the Defra post-

farm gate workshop, 2010

The workshop identified some broad challenges which could be solved through

technological innovation, including:

Industry difficulties in meeting rapidly changing market needs and consumer

demand, complying with legislative requirements and meeting national targets in

environmental sustainability and food safety.

The need for industry to be able to adopt more flexible manufacturing systems that

are demand-driven, resource-efficient and responsive, which will in turn help respond to

a need to drive down production costs.

The issue of low product margins for some commodities which constitute a barrier to

independent industrial investment.

Limited sharing of technologies, metrics and tools across complex and diverse

sectors resulting in low uptake and implementation into the food industry.

The relative lack of investment in skills, especially by SMEs.

European food labeling

regulations44

On food labelling, a new set of EU regulations came into force in December 2012 (Food

Information for Consumers). These mainly draw together in one place all the existing

rules on pack labelling and nutrition labelling, but do tighten regulatory constraints. At

the national level, the continuing roll out of the voluntary traffic light system (which

dates back to 2005) is also likely to have an increasing impact.


A6.6 Key funding initiatives

The dominant public research funders are BBSRC, Defra, DFID and the Scottish Government, and more recently, TSB. BBSRC is the highest funder by some margin, given its responsibility for underpinning and strategic research in agriculture, food and health aspects of diet. It has six research institutes, four of which

44 Directive 2000/13/EC on labelling, presentation and advertising of foods applicable until December 12, 2014; the new EU Regulation 1169/2011

(combines Directives 2000/13/EC and 90/496/EEC into one legislation) on the provision of food information to consumers apply from December 13, 2014

(European Commission, 2013)


are primarily dedicated to food and agriculture (Institute of Food Research, Institute for Animal Health, Rothamsted Research and John Innes Centre). In addition, BBSRC continues to support two former institutes, primarily in food related areas – the Roslin Institute and the Institute of Biological, Environmental and Rural Sciences, which are now part of the Higher Education Institutions (HEI) sector. BBSRC also supports the Genome Analysis Centre, to further the UK’s capacity in genomics, with much of its work relating to applications in food and agriculture. Collaborative and industry research funding initiatives are also available – though the BIS R&D scoreboard shows that, for the majority of UK companies, R&D expenditure comes from their own funds (up to 82%) with only 0.3% from UK Government and the remainder from overseas sources. The key research funding initiatives referenced in this study are summarised in Table 6.


Table 6: Summary of key research funding initiatives measures mentioned in this study

Research funding initiatives

Initiative Funder Description Value and timing

Nutrition for Life competition Technology Strategy Board

Funds collaborative R&D projects which stimulate innovation in the food and drink sector with an emphasis on providing healthy and safe foods in the areas of:

Integrating technologies to assist

nutrient absorption.

Nutrient regulation and delivery.

Novel and healthier foods.

Safety, authenticity and

traceability.

Production and Processing of

food/nutrients.

£8 million, with applications open in May 2013

Food theme Knowledge Transfer Partnerships

Technology Strategy Board

Transfer of individual researchers into businesses.

Call for funding under consultation

Diet and Health Research Club – Phase 2

BBSRC Funds pre-competitive research in universities and research institutes in the areas of:

Designing foods to maintain and

improve health.

Understanding food choice and

eating behaviour to improve health

through diet.

Understanding the relationship

between food processing and

nutrition.

Due to open around May 2013

Advanced Manufacturing Supply Chain Initiative

BIS, Birmingham City Council

A funding competition designed to improve the global competitiveness of UK advanced manufacturing supply chains. Aimed to fund collaborative research projects seeking at least £2 million support per project involving a prime or Tier 1 company.

Potential relevance to the agri-tech sector, in terms of bringing together a supply chain for the development of new crop protection products, animal health or nutrition.

£120 million in Rounds 3 and 4 of funding, open in March 201345

Food technology funding

TSB, Defra, the Scottish Government, BBSRC, the Engineering and Physical Sciences Research Council (EPSRC)

Over thirty major collaborative business-led food processing and manufacturing development projects have received more than £11 million worth of government funding, and a total of £23 million including industry collaborations.

£11 million over several years

45 Total funding for Rounds 1 and 2 exceeds £300m


Research funding initiatives

Initiative Funder Description Value and timing

Advanced Food Manufacturing (AFM) LINK Programme

Defra, the Scottish Government, BBSRC and EPSRC

LINK was a government scheme which provided support of up to 50% of the total costs of collaborative research between industry and the research base, the balance of funding being provided by industry. The scheme comprises a number of programmes in defined technology or market sectors which are sponsored by government departments and Research Councils, each programme being made up of collaborative research projects. Examples of LINK programmes funded by multiple bodies include competitive industrial materials from non-food crops (Defra and BBSRC) and Aquaculture LINK (Defra, SEERAD and NERC).

Previous LINK programmes (include Food Quality and Safety LINK and Food Quality and Innovation LINK) were closed or amalgamated with the AFM LINK programme.

Approx. £27million

Advanced training partnerships (ATPs)

BBSRC, IBERS, Aberystwyth University, University of Nottingham, University of Reading, Royal Veterinary College

Developed in response to domestic and global pressures on food production systems, ATPs offer postgraduate level training to employees working in UK agri-food industries.

The initiative is composed of four partnerships worth approximately £13 million to be funded between 2011 and 2016. Each partnership operates under the leadership of an academic institution and focuses on a particular research area, covering the full range of food production, from farm to fork.

£13 million

Sustainable Agriculture and Food Innovation Platform

TSB, Defra and BBSRC

To help improve the productivity of the UK food and farming industries, the platform is investing up to £90m over its five-year life to fund innovative technological research and development projects, in areas such as crop productivity, sustainable livestock production, waste reduction and management and greenhouse gas reduction.

Up to £90 million, spread over 5 years


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