Goodman Fielder Limited, 2 Smith Street, Summer Hill, NSW 2130.
A number of significant trends in both the agricultural production and food processing sectors have led to a closer integration of these sectors.
The past decade has seen a continuing move away from an historical commodity focus towards an emphasis on value-adding. At the same time the integration between agricultural production and food processing has been driven by a variety of competitive forces leading to what is now termed the “Agri-Food Value Added Chain”.
The agri-food industry dynamics that are driving these changes are:
- Globalisation of markets for food products, food raw materials.
- Globalisation of ownership and control of food manufacture, production and logistics.
- Consumerism – increased consumer purchasing power and consumer discrimination.
- International trade both in processed foods and agricultural products – multilateral trade liberalisation.
- Regulation and policy – international agreements for common regulation and policy.
- Technology expansion – rapid technological progress in life sciences and in intellectual property generation and ownership.
Trends in globalisation and the quest for value-added and differentiated food products have become key factors for the profitability and future growth for agri-food industries. Nowhere is this more apparent than for the cereals industries. The trends identified are equally important for the cereal grains industry as for the wide variety of cereal-based food products at the consumer end of the market chain.
The application of technologies in cereals industries has become a critical competitive factor in the success for these industries.
Technologies have already played a key role in the move from the historical commodity orientation to one of value-adding.
Technologies have played a role in the integration between the agricultural production sectors and food processing.
Technologies are a vital element in the development of new value-added food products.
Technology is fundamental to all businesses in today’s agri-food marketplace.
Technology provides the principal, and often only, route to:
- Differentiating products
- Reducing cost
- Providing new business opportunities
- Aligning food products with consumer needs
- Facilitating and supporting strategic change.
Biotechnologies have played an important role in the development of food products over many centuries. In recent years the “modern biotechnologies” of molecular biology and gene technologies have gained a significant role in the cereals sector.
Very high levels of research investment have been made, worldwide, in the field of genetic transformation of a number of agricultural commodities, including cereal grains. A number of cereals has been successfully transformed, using gene technologies, at the research level. Some cereals have lent themselves more readily to such transformation than others e.g. corn and rice. Ease of transformation is very much related to the degree of complexity of the genetic structure, e.g. diploid as compared to hexaploid.
Whereas there has been much research on genetic transformation for cereals, which has led to successful outcomes at a research level, the route to commercial production at the agricultural production level has been more difficult for cereals as compared to other agricultural commodities. Corn is an exception since there are now significant areas of commercial production for a number of genetically modified (GM) corn varieties. For other agricultural crops with agri-food significance, development and release of GM varieties have been mostly developed with soybeans, oilseeds, cotton, potato and tomato.
The future for further development of GM cereals will be dependent on a variety of issues that will now be considered in some detail.
The topic of gene technologies as applied to cereal crops is very timely because:
- Consumers are aware of gene technology and its application to the food chain
- International companies are making very significant investments in research and development
- Significant intellectual property positions are being prepared
- Seed companies are being concentrated into three or four global players
- Commercial success will be linked to consumer acceptance and regulatory environments.
At the present time there has been unprecedented attention and debate on the issue of GM foods. This has certainly been the case in Australia and New Zealand, but it has also been an escalating issue internationally and particularly in Europe. The focus on genetically modified organisms (GMOs) in Australasia has paralleled the development of the Standard for GM foods by ANZFA (Standard A18 – Food Produced using Gene Technology). Specifically, the debate has centred on two main areas; firstly, the processes of regulatory approval for use of specific GM derived foods in the food chain; secondly, the question of labelling for GM foods. There are, of course, other issues of public debate which are of importance to the cereal grains industries, including environmental aspects of release of GM field crops, and the commercial structure for control of intellectual property and commercialisation of GM field crop genotypes.
It is very difficult to predict at this time what the outcomes will be in the present debate with regard to ultimate consumer acceptance of the application of gene technologies to foods. One only has to look at the present position in Europe where it is most likely that consumer acceptance of GM foods will be delayed for a number of years. On the other hand there is a difficult position in USA, and even North and South America generally, where consumer acceptance of GM foods has been stronger. Cultural and regulatory differences between Europe and USA are factors impinging upon the GMO impact in the agri-food area.
Whereas the present level of attention to GM foods is perhaps unprecedented, it is not a new phenomenon in regard to consumer attitude to introduction of new technologies into the agri-food sector.
In recent history of the food industry, a number of new technologies have been adopted and in several cases have led to paradigm shifts, roughly once a decade.
Heat Preservation, “Food Processing”
Technologies for Food Product Development
Speciality Food Ingredients
Food Packaging Systems
Aseptic Packaging, UHT Processing
Foods with Nutritional Positioning
These developments arising from the application of new technologies into food products came about because of consumer needs, including changing demographics, changing lifestyles, increasing knowledge of and interest in food and increasing consumer awareness of the role played by foods in health and lifestyle requirements.
Science and technology offer both the food industry and regulatory authorities methods to assess and manage risk, improve food safety and increase appeal to consumers.
A number of the changes noted above faced consumer resistance at the time of introduction. Important examples were a backlash against pasteurisation, suspicion about food additives and preservatives - “chemicals in foods”, then there was a scare about microwave cooking.
Food irradiation of course was an immediate concern, and it is still not fully in place.
Novel foods, functional foods or nutraceuticals are currently receiving attention and questions, both from consumers and regulators.
Genetic selection for desirable traits has been used for many years in traditional plant and animal breeding, as well as selection from the mutations of microorganisms. New biotechnologies are being used in fermentation, enzymes and cell cultures.
Gene technology could change aspects of the food chain from farm to supermarket. It could:
- Enhance agricultural productivity
- Lower costs
- Contribute to more sustainable agriculture
- Allow new products with better qualities
- Enhance food nutrition
- Increase manufacturing efficiency
- Improve quality assurance
- Make food companies more competitive.
The technology will be applied to food over three time horizons, with each horizon adding value to products. Horizon 1 covers agriculture, increasing efficiency, protecting plants and improving sustainability. These developments are now occurring. Horizon 2 will introduce new traits, enhance nutrition and taste, and enable increased yields of food constituents. Products with these benefits are not on the market yet. Horizon 3 will see industrial, pharmaceutical and biochemical applications for plants, and functional foods. These are a few years away.
Horizon 1, where the emphasis has been on agriculture, has seen explosive growth. Areas planted with genetically modified soybeans have grown from 400,000 hectares in 1996, to 5.25 million hectares in 1997, to 14 million hectares in 1998. Most of this is in North and South America. Large areas of genetically modified maize, potato, tomato, oilseeds and cotton have been planted.
Consumer acceptance will be vital for successful commercialisation. Some of the issues raised by gene technology are:
- Consumer attitudes to gene technology
- Consumer views on specific foods
- Food regulation developments internationally
- Research investment in gene technology with an agri-food (rather than a biomedical) focus
- Intellectual property ownership of key technologies.
The last area mentioned above raises the question of how Australia and New Zealand will manage their roles. Many value added benefits could come from improved agricultural production, but consumers are raising the question as to how such benefits will relate to them.
It has been mentioned that a second horizon for gene technologies in agri-food sectors will need to embrace consumer benefits in the composition, quality and attributes of food products. Consumer acceptance may be higher since consumers may be able to see demonstrable benefits for themselves.
Market research has shown that consumer food choices are driven by:
- The desire for healthy, nutritious, safe foods
- Convenience – how food fits with lifestyles
- Taste and enjoyment
- Value for money.
Consumer acceptance of gene technology is affected by information gained through mass media and word of mouth, perceptions of the role of scientists, industry and governments, religious and ethical considerations, the understanding of risks versus benefits, the activities of consumer activists and the marketing strategies of food companies. Consumers want to see that regulatory authorities have addressed food safety, efficacy and environmental issues.
International studies of consumer attitudes show that personal benefits are the driving force. Consumers support strong, independent oversight, particularly in the USA. Probably as a result of recent problems, Europeans have a lower opinion of their authorities.
The processes of gene technology are unfamiliar and misunderstood. Consumers are demanding adequate information. Technical terms need to be chosen carefully and explained clearly.
Consumers desire technological growth at a modest, careful pace. The mode and efficacy of presentation and marketing of gene technology products are critical.
Consumers are clearly saying that they want to have a choice in terms of GM derived foods. This, of course, relates both to the labelling question and to the area of consumer information about GMOs with respect to foods.
Finally, in regard to the question of whether or when gene technology will be applied in the agri-food chain, and therefore in the cereals industry sector, it is clear that the horse has already bolted and the stable door is well and truly open. The question which we will all be asking with great interest is whether we should catch the horse return it to the stable and keep the door shut?!