EU regulations stymie food innovation, says economist

By Jess Halliday

- Last updated on GMT

Related tags European union

Novel foods regulation is presenting a serious barrier to
innovation by food ingredients companies in Europe, according to a
new economic review, threatening the industry's competitiveness on
the global stage.

Novel foods regulation (EC258/97) was introduced in 1997 as a pre-market approval system for novel foods and food ingredients that do not have a significant history of consumption within the EU before May 15 1997. It is expected that the European Commission will propose a revision of the regulation this autumn, following an initial online consultation on revision initiated in June 2006. This revision is regarded by the industry as an opportunity to redraw approval procedures to be short, predictable and proportionate, and to reward innovators with exclusive market access. The new review by UK-based economist Graham Brooks, who consulted closely with food and ingredients companies, has highlighted specific areas that are hampering innovation - and in fact making imitation a more attractive strategy. Once a product is approved, Brookes said, it clears the way for competitors to launch imitation products very soon afterwards, without having had to stump up their own R&D investment. "Imitation not innovation is rewarded,"​ he said. He added that approvals are unpredictable and often political - that is, in addition to the safety process, novel foods have to go through a political process in Member States. This means it is hard to predict when a product may come to market, making it a riskier process and making the costs pile up. Furthermore, a company usually targets a 20 to 25 per cent rate of return over a product's lifetime to justify the initial R&D costs. If it has to wait 30 months or more for approval before it can even launch, this return can be reduced by 30 per cent, or an average of €4m per product. "With delays now the norm, the attractiveness of investment in Europe is low." ​ According to the Confederation of the Food and Drink Industries of the EU (CIAA), a co-sponsor of the economic review (along with the Platform for Ingredients in Europe (PIE), a case study on novel foods procedure showed novel foods approval to take 2.5 years, compared to 6.5 months for an ingredient to achieve GRAS approval in the US. The CIAA noted that the findings are in stark contrast to the strategy set out by the European Commission in this 2006 Aho report 'Creating an Innovative Europe​'. This report upheld an innovation-friendly market as instrumental in enhancing competitiveness in Europe. "The Commission's rhetoric on community competitiveness must now be matched by its regulations,"​ said Chris Downes of the PIE, which is made up of 15 major ingredients suppliers. "Innovation requires regulatory incentives. Quick procedures and rewards for investment are key."​ The review also builds on a benchmarking report published by the CIAA in June, which sets out how the competitiveness of the European food and drink industry is evolving. The report included figures on R&D as a percentage of industry output up as of 2004. At this point, the percentage for the EU 15 was just over 0.2, compared to 1.2 per cent for Japan and 0.4 per cent for the US. The CIAA said that regulatory constraints to innovation and lengthy procedures such as novel foods have to be changed to make the sector more dynamic. "Urgent action is needed from legislators to create a favourable business environment for EU food and drink processors, enabling them to grasp the competitive challenges they are facing and to transform these challenges into new opportunities,"​ concluded the report. This benchmarking report has been presented to the European Commission. CIAA communications director Sabine Henssler told that the economic review will also be presented.

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