The Need for Food Innovation in Singapore
Singapore imports up to 90% of its food from around the globe. Multiple countries are sourced for Singapore bound produce to avoid over reliance on one country or region. However, whilst Singapore may import primary produce, this island of innovation has the potential to value add to this produce and to develop high end value food products. There is an increasing awareness on the effects of Western-based diets on physiological health outcomes in non-Westerners. This is a major focus of the Clinical Nutrition Research Centre (CNRC) based in Singapore. The CNRC is a joint initiative between the Singapore Institute for Clinical Sciences, A*STAR and the National University Health System. The scientific expertise in Singapore and the ability to form partnerships with food companies makes Singapore the ideal hub for innovation in food nutrition (Food Industry Asia [FIA], September 2015; Interview with Professor Jeyakumar Henry).
The Market for Food Products: ASEAN
These value added food products would have an immediate market in the region encompassed by the Association of South East Asian Nations (ASEAN). This region is home to approximately 625 million people. If one was to factor in China and India, the potential market extends to over 3.1 billion people.
This is a potentially enormous market for high end value products generated in Singapore. Whilst local Singapore food technology innovators may not have the capacity to supply such a huge market, this could be achieved by forming partnerships with companies around the world including Australia and New Zealand to meet a massive demand for healthy high end value food products. Whilst Singapore might not be known for agriculture, it has the potential to be a dominant player in agribusiness and food technology.
This will involve innovation and innovation leads to intellectual property. The protection and management of this intellectual property can help provide food technology innovators the market security to invest, employ and help contribute to the Singapore economy.
Why Market Food Products in ASEAN?
In an increasingly competitive local environment, there is a need for food innovators to identify new market opportunities whether this be a broadening of a consumer base, identifying new manufacturing partnerships or as a pipeline for further innovation. ASEAN represents an exciting economic region which is creating much interest from a global perspective. Free trade agreements in place between Australia and Singapore, Malaysia and Thailand, and the ASEAN-Australia-New Zealand Free Trade Agreement (AANZFTA), have assisted in creating the potential for businesses to grow and expand in the ASEAN region. This need to grow is helping to drive an innovation dynamism which will lead to new intellectual property in food technology. This includes the development of functional foods to address physiological issues of obesity, heart disease, diabetes and many other conditions influenced or exacerbated by particular food choices. Maximising a competitive advantage offered by this innovation requires effective intellectual property protection and management strategy.
To put the economic potential of the ASEAN region into perspective, according to a publication by the Australian Department of Foreign Affairs and Trade (DFAT) and Austrade “Why ASEAN and why now? Insights for Australian Business, August 2015, the combined GDP of the ASEAN region rose three-fold from 2001 to 2014 to US$2.5 trillion. This highlights the economic power of ASEAN and with Singapore as a financial powerhouse, the entire region is set for unprecedented financial and economic development and prosperity. This is an exciting prospect for the region generally and in particular an opportunity for food and nutrition based companies in Singapore.
The McKinsey Global Institute in 2014 in its report entitled “Southeast Asia at the crossroads: Three paths to sustained economic growth in Southeast Asia” provided data showing that Vietnam, for example, doubled its GDP in only 11 years outstripping well developed countries such as Japan and the US. The International Monetary Fund, World Economic Outlook Database, April, 2015, forecasts that Indonesia, which represents the largest economy in ASEAN, will achieve per-capita GDP growth to 2020 of 4.2% each year. Other countries range from around 2 to 7%.
Economic and Innovation Prospects in ASEAN
The economic prospects, actual and potential for the ASEAN region, are strong. There are many factors which contribute to this positive economic outlook but clear indicators are the demographic potential of a growing population providing a strong and steady work force, expanding affluence with a developing middle class, and a broadening tax base enabling increased revenue for governments to promote urbanisation and infrastructure growth. Such affluence is enabling choices to be made on diet and the selection of nutritional formulations.
Regardless of the technical focus of a food innovation company, no one facet of a company, such as R & D, manufacturing, sales and distribution or marketing, on its own is sufficient for a business to succeed and thrive. There needs to be a common theme binding the components together. Whilst market success is clearly a common goal, a principal functional theme should also be identifying and protecting intellectual property around food innovation to generate high end value food products. There is a variety of intellectual property rights available for a food company including patents, trade marks, industrial designs and copyright and trade secrets. Intellectual property can also be used to proactively restrict competition, keeping competitors free of a market niche to maintain market security. This will give a business the confidence to invest further in innovation. In short, intellectual property can add substantial value to a food innovation company’s bottom line.
Governments also recognise the potential for the ASEAN region. Whilst much more can be done to facilitate intellectual property protection on a regional basis, on a country by country basis there is a growing interest in the value of intellectual property and a healthy respect of the laws governing the protection of intellectual property. These laws are well developed in Singapore, Australia and New Zealand. In fact, initiatives available for ASEAN include ASEAN Patent Examination Cooperation (ASPEC) which is a regional patent work-sharing arrangement between Singapore, Brunei Darussalam, Cambodia, Indonesia, LaoPDR, Malaysia, the Philippines, Thailand and Vietnam.
Role of Intellectual Property and Food Innovation
Innovation is key to a business’s ability to develop and maintain an advantage. The food industry is no exception, with innovation in the form of new ingredients, improved production processes and apparatus, new or improved recipes, new product development, packaging, labelling and branding. Maximising the competitive advantage offered by this innovation requires an effective intellectual property protection and management strategy. The ASEAN region has much to offer as a market for food innovation. Singapore has much to offer as an innovation hub in food technology.
Intellectual Property as a Commercial Tool in the Food Industry
For intellectual property to be an effective commercial tool it needs to be effectively managed. The innovation needs to be identified and then assessed as to whether it is worth protecting. A useful question to consider is whether a company fully understands its intellectual property position and how to use it strategically to grow business opportunities and create market security.
Issues that should be considered regarding food innovation and IP
Posed here are some of the issues which should be considered from the intellectual property perspective. To market a food product, for example, many questions need to be considered, such as:
- What is the intended market?
- How is it to be packaged?
- Is there a specialised brand or trade mark?
- Is there patentable innovation?
In terms of branding:
Is the brand or trade mark local or international?
- If international and the branding is translated into a local language, are there any cultural sensitivities?
A critical factor often overlooked is whether there is freedom to manufacture, use, import or sell the product? That is, is there infringement of any third party patents, trade marks or designs? Furthermore, is the intellectual property protection a business has carved out sufficient to keep competitors well clear?
The key is to be aware of intellectual property rights and their potential to assist in market exclusivity or competitive advantage whilst managing the associated risks as far as a food innovation business is concerned. The various risks associated with launching a new food product, such as regulatory hurdles, legal and financial risks if the supply chains, licences and approvals are not in place, brand dilution and potentially reputational risks if the product is not readily adopted by the marketplace, are generally well managed by the industry. What may be overlooked is managing the intellectual property, its value to a business and its role in developing market penetration in the food industry.
A Culture of Intellectual Property Recognition – Due Diligence
It is important to have a culture of recognising intellectual property and harvesting it. Whether it be branding, patentable technology, design of packaging, a trade mark or overall business appearance, once a food innovator is aware of any intellectual property generated, there is a need to ensure it is aligned with business needs and goals. For example, it may be asked if a new food product is part of core technology or a core product line for that business, or is it rather an experiment in ‘branching out’. This can determine a level of risk from the business perspective. It is then necessary to ensure that one has freedom to use the intellectual property generated. Freedom to operate is determined by undertaking searching of patent office databases in markets of interest, using an independent searching company or through an intellectual property advisor. Due diligence is the key. Be aware of the intellectual property pitfalls that one might encounter or that can be put up as barriers to entry to competitors. Advice should be shared and strategically managed on how best to utilise the intellectual property systems available, whether they be registrable or non-registrable rights.
The Next Steps in Protecting Intellectual Property for Food Innovation
Once intellectual property has been identified and aligned to business goals, then the various components of the intellectual property can be ranked in order of importance in terms of giving a business the most competitive advantage. If protectable intellectual property, it also needs to be of a type that enables a company to detect potential infringers or copiers in the marketplace. For example, if a patent is obtained for packing machinery or for a production process, can a business recognise if unauthorised copying is taking place?
As a business grows, it can then begin to develop strategies to build a stronger and more expansive intellectual property portfolio so that ultimately, a strong wall is built surrounding your product lines and business interests. The aim should be to generate a “picket fence” around a market niche to create impediments to third party market entry or to at least restrict competition.
Food technology and product development: Create, Protect, Exploit
Intellectual property is an important consideration in product development and in gaining a competitive edge in a dynamic and fast moving marketplace such as the ASEAN region. It is a legal means to help you ensure the reputation of a new product. The ASEAN region represents a potentially enormous market. Singapore has the scientific and financial infrastructure to develop high end value food products. Singapore also has a long history of forging partnerships with countries with well established agriculture industries such as Australia and New Zealand.
From a practical perspective, whether a business is new, an SME or a well established larger company, the adage-create, protect and exploit-in relation to intellectual property can give the business a welcomed competitive advantage. Singapore has the capacity to further develop a vibrant food technology industry. Businesses need to consider intellectual property as a metric of financial and innovative performance. It can also be used as a tool to benchmark competitors, such as tracking new product entries into the market place, monitoring innovation in manufacturing or food technology and assessing consumer acceptance. Businesses have many potential encumbrances. However, forward thinking business owners will ensure, with proper management, that intellectual property can be used to enhance business development rather than hinder it.
The need for functional healthy food products to meet an increasingly well informed populace will create business opportunities. ASEAN and other regions such as China and India are creating the market. Singapore, a financial powerhouse of the ASEAN region, has the scientific and commercial expertise and capacity to attract local and International food innovators to supply a potentially enormous market. Other countries such as Australia and New Zealand have well developed food manufacturing companies that could benefit from partnering with Singaporean entrepreneurialism to develop high end value food products.
Innovation leads to new intellectual property which in turn value adds to a food company’s bottom line. The next decade will be an exciting time for food innovation in Singapore and will provide opportunities for partnerships with Australian and New Zealand companies. ASEAN represents a ready made market place.
Singapore is ready for food technology-related agribusiness!