Food industry calls for action to boost competitiveness
behind a proposed economic growth programme for the bloc,
especially in relation research, small and medium-sized businesses,
energy policy and social reform.
"We support the focus on these overall objectives, however, this requires clear commitment from Europe's leaders and needs to be backed by action," stated Jean Martin, president of Confederation of the Food & Drink Industries of the EU ( CIAA).
The appeal is consistent with a CIAA report last year that low spending on developing new products and processing techniques coupled with sluggish export growth, has made the industry vulnerable to increased global competition.
The latest CIAA call for action, issued yesterday, is contained in a document aimed at ministers attending a European Council summit, to be held on 23-24 March.
The document deals with the bloc's "Lisbon agenda", which was formulated by member states in 2000 as a bid to make the EU more economically competitive and create jobs.
"Overall profitability has not been maintained at a sufficient level throughout the food and drink sector to keep and expand investment, notably in research and development," the CIAA stated. "To maintain its position and improve its share on world markets the industry requires greater use of technical know-how and a considerable strengthening of its capacity for innovation."
The CIAA document stresses the need to address more specifically the challenges to growth potential of the EU food and drink sector. International comparisons of the industry's performance indicate it is falling behind under regions.
The organisation calls for an increase in overall research and development spending to stupport innovation and promote a shift to higher value added food production.
The EU's research funding programme should provide a higher share of funds to the food, agriculture and biotechnology sectors, the CIAA stated.
Leaders also need to address the high level of administrative burden placed on EU companies, as a means of reducing the cost of doing business in the bloc.
The CIAA wants more action on bringing down the costs of agricultural raw materials, notably for exporters.
"Agricultural reforms must be implemented and supported by further action if necessary," the CIAA stated.
A World Trade Organsation multilateral agreement is still a priority for the bloc, the CIAA stated. However better trade policy requires a more targeted action by the bloc to improve access to third country markets for EU food and drink exports.
The re-launch of the Lisbon strategy at the European Council meeting in Spring 2005 focused on implementing methods to boost economic growth and jobs.
A new EU industrial policy adopted by the Commission in October 2005 focused on competitiveness, energy and environment, on intellectual property rights, on better regulation, on industrial research and innovation, on competitiveness and market access, on skills and on managing structural change.
The EU food and drink industry is the largest manufacturing sector in Europe, with an annual production valued at €815 billion. The sector employs four million workers.
However the sector is characterised by a high fragmentation of its structure, with a few large companies with a big piece of the pie, and many small businesses operating in niches.
It is exposed to growing pressure from the increasingly concentrated and globally active retail sector, the CIAA noted. The organisation called for action to find a more balanced system governing the relations between suppliers and the retail sector
Sales of food and drink outside the EU's 25 members increased by 1.9 per cent during the first six months of 2005 compared to the same period in 2004, according to figures from the CIAA.
Reform needs to be the guiding principle for national as well as European economic policy"It is vital that member state and EU measures complement each other to create a powerful growth and jobs engine."
According to a CIAA document published previously the bloc's spending on research and development (R&D) remains lower than in other economies when expressed as a percentage of output. The figure is known as "R&D intensity".
Even though the amount spent on R&D in the EU rose by 20 per cent between 1997 and 2001, it accounted only for 0.24 per cent of output in 2001, far beyond the average of 0.35 per cent of its main competitors, the CIAA stated.
Food companies in Australia, Japan, Norway and the US all spend relatively more on R&D than the EU. Japan sits on top of the pile with an R&D intensity reaching almost 0.8 per cent.
Within the EU R&D spending diverges from country to country. The Netherlands and Finland achieve an R&D intensity in the food and drink sector of about 0.50 per cent while new member states are characterised by very low levels. Food and drink companies from large member states, such as Italy, remain below average.
About 77 per cent of food products launched in 2004 were innovative in formulation and only 1.5 per cent of them were innovative in technology, the CIAA noted. Innovation on formulation increased to 77 per cent in 2004, from 66 per cent in 1999 while innovation on both packaging and positioning decreased.
"The EU food and drink industry has registered relatively limited but stable growth over the past three years," the CIAA stated in its report. "International comparisons show that, contrary to the EU, other food production markets are undergoing considerable expansion. This is particularly the case in Latin America and Asia where, for instance, the Chinese food processing industry is continuing to grow at double-digit rates."
As part of a strategy to boost spending in the sector, the Commission announced last year it would spend €61m on five big food research projects to sharpen Europe's competitive edge in food and drink.
In a key policy document last year the CIAA called on members to boost R&D spending as a means of remaining innovative and competitive. The association blamed the poor rate of technology transfer from the research phase to the application stage as a major barrier to innovation in the industry.
"It has long been recognized that whilst the quality and quantity of Europe's research community match those of North America and the Pacific Rim, the wider impact of this research is lower than that of these trading competitors because of the less effective transfer of this knowledge to industry," the CIAA stated in a policy document.
CIAA membership is made up of 24 national federations, including two observers, 32 European sector associations and 21 major food and drink companies
