Joanna Krakowiak

Myths and facts about innovations in the foods sector

New technology is most often associated with telecommunications, IT or robotics. Food is seen as a group of products in which innovation is little important, because it is believed that consumers are mostly concerned with prices and quality, but not innovations. However, the dynamic growth in market share of functional foods calls for a critical review of myths that have arisen around R&D projects in the food sector.

Myth 1: innovations only for the largest

Stiffening market competition is forcing reductions in production costs and margins. Small and medium entrepreneurs are succumbing to pressure to lower prices, believing that low product pricing is their key weapon in the battle for consumers. Often, they mistakenly assume that only multinationals with dedicated product development centres can afford to develop products which stand out on the market by meeting the needs of consumers in new ways. Building a competitive advantage based solely on product price may lead to a situation where production loses profitability, and the company’s market position is jeopardised.

Nonetheless, global trends show that the most innovative products originate from small and medium-sized companies: particularly biotech spin-off companies created at universities or in clusters operating in the vicinities of strong research units. In addition, the allocation of funds in the Financial Framework 2014-2020, shows that the budget for implementing the Smart Growth Operational Programme over six years in Poland is EUR 8.6 billion, which is about PLN 35.9 billion, or an average of about PLN 6 billion a year. Although the detailed allocation of funds under this programme will probably only be known at the end of this year, but considering the smart specialisations adopted by Poland, which include innovative technologies, processes and products for the agri-food sector, we may expect that the a significant portion of these funds will go to companies in the food sector. These will be companies which present ambitious and well-prepared feasibility plans for implementing new technologies for producing, packaging or preserving foods. They will have a chance to gain financial leverage, which will enable them to introduce innovative products on the market, thereby gaining a competitive advantage.

Myth 2: R&D only within the firm

The economic downturn means that few companies have their own development departments which can research new products. In extreme cases, funds are invested mainly in marketing and promotion, and new products are developed only by marketing specialists, rather than food technologists. This strategy generates revenues in the short term, but in the long term it can marginalise the market position of the company, which due to insufficient investment in developing innovative products will be just one of many followers and never a leader in the segment or market niche.

Globally, as well as in Poland, a market is beginning to operate for scientific research which allows outsourcing of new product development processes to specialist research institutions. This allows the outsourcing of those types of research and development, which cannot be carried out within a firm due to the high costs of maintaining such teams in-house. Establishing cooperation with universities and research institutes specialising in implementation research on such areas as developing novel compositions of food supplements, and using biological ingredients or nanomaterials in functional foods may be a solution that will help businesses access the latest technologies and facilitate the implementation of those technologies in their products.

The are various legal forms available for cooperation between enterprises and scientific research institutes, from contracts for specific projects, to continuous cooperation agreements and for creating multi-centre Knowledge and Innovation Communities (centres for excellence). Consortium agreements between companies in the food sector and research institutes may be of particularly popularity, because the conclusion of such agreements is a requirement for obtaining EU funding under the Smart Growth Programme.

Regardless of the particular model of cooperation, it is essential to precisely define the purpose to be served by the contract, the obligations between parties – particularly as to financial commitments, the delimitation of tasks carried out within the framework of the agreement from scientists’ other obligations, the allocation of intellectual property rights that may arise in the course of projects, and the protection of provided business secrets.

Myth 3 – Regulatory provisions are a barrier for introducing innovations onto the market

During the eighth Foodlaw Roundtable meeting on Innovation in Foodstuffs, held on 10 April at Wardyński & Partners, representatives of both business and science raised that provisions of food law, which require products to be classified under specific legal categories, create lists of permitted ingredients or health and nutritional claims that a producer may communicate to consumers, but only when specific conditions are met, create a significant barrier in bringing innovative food products to the market.

An example is that the legal risk associated with the unregulated status of plant origin food ingredients, combined with regulations on communicating health claims restricting the possibility of informing consumers on the impact of food containing such ingredients on health, often means that innovative products have no chance of entering the market.

To ensure that the path of introducing a new product to the market ends in success, it is necessary at an early stage of work on it to take into account the regulatory conditions for introducing a product onto the market, particularly in the area of ​​product classification and the obligations that arise from the given classification. For example, if a product does not have a chance to enter the market as a food supplement, it may be worth developing it for specific nutritional needs of people with metabolic disorders and to market it as a foods for special medical purposes (FSMP).

It should also be noted that the obligations under food law are primarily intended to ensure product safety and the protection of consumers. They should therefore be interpreted in a way which is appropriate to the purposes they serve, and not in a way that may result in excessive burdens on manufacturers, particularly when such interpretation is not associated with any real benefit to consumers.

Joanna Krakowiak, legal adviser, Life Science and Regulatory Practice at Wardyński & Partners