Sales of food and drink outside the EU's 25 members increased by 1.9 per cent during thefirst six months of 2005 compared to the same period in 2004, according to figures released this week by the Confederation of Food and Drink Industries (CIAA).
"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."
Meanwhile, 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 total value of EU's food and drink exports reached €22.07 billion in the first half of 2005, while imports were valued at €19.65 billion, a fall of 0.7 per cent.
North America remains the largest market for the EU's food industry. However EU exports to the region fell by 0.4 per cent during the first half of 2005 to about €5.7 billion.
Exports to Asean-member countries rose by six per cent. They also rose by 11.9 per cent to the group of 15 former Soviet Union states, loosely known as the Commonwealth of Independent States.
The EU's beverages sector, which accounted for more than a quarter of the total exports, increases exports by about one per cent to €6.4 billion during the six month period. Within the total, sales of distilled alcoholic beverages rose by 7.2 per cent, while wine exports fell by seven per cent.
Mineral waters and soft drinks registered a growth of 11.6 per cent to €773 million.
Exports of sugar, confectionery, coffee, tea, baby products and dietetic foods rose by 9.9 per cent during the period to reach €5.6 billion. Exports of diary products rose by 2.4 per cent to reach €2.78 billion.
Meat products sales fell by 2.4 per cent to €2.57 billion. Processed fruit and vegetable exports rose by 6.8 per cent, fish products by 2.5 per cent and animal feed by 10.1 per cent.
Sales of oils and fats fell by 10.6 per cent. Exports of flour and starch products fell by 7.9 per cent.
A study published last year by the European Commission shows food producers worldwide are still last on the list of the top 15 sectors when it comes to spending on R&D, even as their sales continue to show sluggish growth in many markets.
The relatively low spend contrasts with the size of the sector. For example it is the largest manufacturing sector in the EU.
The European Commission has consistently said the food sector needs to become more competitive by spending on R&D as a means of bringing new products and processing techniques to the market.
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.