Innovation to Shelf – Part 1
The food industry is a complex, global operation combining agriculture, food processing, food packaging, logistics, retail, and marketing. In a recent article, we focused on the value chain in the agri-food business and separated the value chain into three parts, food production, food processing, and food distribution. For this article, we’re looking more closely at food packaging as a distinct area of innovation that plays a significant role in food processing and distribution.
The food packaging industry is highly influenced by consumer trends, advanced materials, government regulations and environmental impact concerns. Food packaging serves multiple purposes from protecting and preserving food, to making products easier to transport, to informing consumers of ingredients, nutritional value, preparation guidelines, and expiration dates. Manufacturers rely on packaging as a means of safely and cost-effectively getting products to consumers and for brand awareness and product marketing. For consumers, packaging innovation has a direct impact on buying behaviour. With all these influencers, strong market competition, and the application of multiple technologies there is a lot of incentive to be highly innovative.
To better understand the food packaging industry we’ve first taken a look at the overall global patent landscape and the number of patent families currently available in this space. From there, we looked more closely at the countries with the most patents in this market. Once we identified the top locations for patent filing, we focused on which companies had the most cited patents. What we found is that Asia (China and Japan specifically) stood out due to the number of patents they have in this space and the huge recent surge in their patent filing rate. We also noticed Universities have very strong representation for overall patent filing as well as patent citations. This is interesting considering in general Universities and Technology Transfer Offices (TTO’s) often struggle with patent licensing, but also highlights Universities as an ideal place to seek out new innovations for investment.
In Part 2 we dive deeper into specific trends and influencers as well as various innovations, technologies and particular patents that we found interesting.
Patents within the food packaging space play a particularly interesting role due to the highly innovative and quickly evolving nature of the industry. Mergers and acquisitions and “buy and build” business models often make far more sense than developing in-house technologies and there are a large number of academic institutions dedicated to packaging science. Additionally, private equity and venture capital firms are particularly active in this space. From both the buyers’ and sellers’ side of an M&A, or tech transfer, proper IP due diligence is necessary to mitigate purchasing risks and to receive an optimal price for the considerable amount of investment that is involved with each innovation.
To familiarize ourselves with the patent data for the food packaging industry, we identified food and drink packaging related patents and uncovered over 17,000 active patent families. Figure 1 below shows the filing timeline of these families. The timeline shows a particularly strong upward trend in the filing rate since the global recession of 2007-2009. It is also notable that the filing rate of academic institutions has grown from a negligible proportion two decades ago to 15% in 2013.
Based on the patent filing rate, there looks to be an increase in R&D expenditure within the food packaging industry. As stated in WIPO’s World Patent Report, R&D expenditure and patent filings are highly correlated. Further validating this positive forecast, the Euromonitor International’s data shows the global food packaging market is projected to grow by 2.4% per year over the next three years to reach a staggering $2.9 trillion by 2019. Another major force driving the market is the increasing global population which is predicted to hit 9.7 billion by 2050. There is a direct correlation between consumer demand and environmental impact from both food production and processing which has an effect on the demand for innovative solutions in the food packaging industry.
Having identified the upsurge in patent filings, it’s interesting then to see where these patents are being filed and who is filing them. Figure 2 shows the filing jurisdictions in application years 2003 and 2008 and 2013. The chart below shows a massive jump in China’s patent filing in this space over this ten-year period.
By a considerable margin, China holds more food packaging related patents than any other jurisdiction. This is consistent with the statistics from the World International Patent Organisation’s research on global patent filings, which shows China is experiencing a boom in filings across many technology domains. Their population is the largest in the world with nearly 1.4 billion people living in China and it is estimated their food processing industry had $2 Trillion in revenue in 2014. It should also be noted that Chinese consumers are changing with the rise of a new middle class that is younger, more willing to spend money, and who are internet savvy which has an impact on consumer information and purchasing preferences.
The US has the second largest amount of food packaging patents. The US also has the third largest population in the world, which is 76% lower than China’s. The third most common jurisdiction is Europe. With three quarters of a billion people, Europe is also a very attractive, growing market to obtain patent protection.
The number of citations a patent has is often used as a simple indicator of patent quality. Figure 3 shows the number of patent filings in the last two decades against citations for leading companies and institutions. Included in the top filing companies are, not surprisingly, the FMCG giants: Nestlé, Procter & Gamble, Unilever and PepsiCo. The chart also shows several start-ups and universities with considerably high numbers of patents. Companies with the best patent portfolios will be found toward the upper right hand corner of the graph. Unilever stand out as a large company with a high average number of citations per patent. Meanwhile Nestlé has filed the most patent families in this area in the last five years. Coca-Cola also has well cited patents and has a higher recent filing rate. Coca-Cola’s position on the graph is in line with a recent IPWatchdog article illustrating Coca-Cola’s strong focus on innovation. They have an External Technology Assessment and Acquisition (ETA) team dedicated to identifying and procuring technologies and innovations that will benefit the company. This has led to strong partnerships with Universities and University Incubators.
With this high-level view we can see there is an interesting role Universities play in this space. University incubators are a prime location to explore potential for Open Innovation or VC investments and potential spin-outs.
Food packaging is unique as the technology is actually often used as a marketing tool and receives a lot of attention. For example, a new water bottle helps to differentiate a commodity product and command a price premium while a new printing technology allows some cans to get 3D effects giving a higher quality feel, especially for beers. For food packaging, the packaging technology is very much part of the consumer experience and is pushed by the marketing team. So marketing execs will seek new differentiators through packaging and seize opportunities when new technologies arise. Reacting quickly to consumer demands in a fiercely competitive market encourages rapid innovation and a push for more compelling and eye-catching products.
For Part 2 we look at some of the trends and themes that are currently influencing the food packaging industry and specifically at some innovative technologies that are meeting specific demands of the industry.