Challenges and Opportunities in a Legacy Sector

May
,
2019

The food industry currently favors established companies, methods, and technologies, but increasing consumer interest in health and sustainability is demanding innovation. This is an opportunity for companies that can provide transformative innovation and disrupt the status quo.

Food and health are inextricably linked. Food consumption plays a critical role in global health patterns and public health conditions that affect healthcare costs and economic potential. Malnutrition includes under-nutrition, which can cause stunted growth, and over-nutrition, which can contribute to obesity, diabetes, heart disease, and cancer (1). One in four children in the world has stunted growth, which imposes economic penalties on national gross domestic product (GDP) that are estimated to be as high as 9–10% in Africa and South Asia (2, 3). Over-nutrition also has a large economic impact; costs associated with obesity, for example, are estimated to be approximately $2 trillion annually as of 2014 (4).

Production of food is also linked to environmental and social sustainability. The industry has a large impact on greenhouse gas emissions, climate change, land and water use, poverty, and social structures (1). Agriculture uses the largest share of the Earth’s land — 38% of the terrestrial surface area — while irrigation for agriculture accounts for 70% of the withdrawal of the Earth’s fresh water (1). The agriculture sector contributes considerably to local, national, and regional GDP and is the basis for small, medium, and large companies around the world. Food availability is a critical consideration for national, regional, and global security (1).

Innovation has been key to sustaining our food system for millennia. Advances in food preservation, as well as methods to increase crop yields, expand distribution, and treat health conditions, have been critical to human survival. Our modern food system has been built on unprecedented advances in industrialized agriculture and commodity production, technologies that improve the shelf-stability of foods, temperature-controlled distribution networks, and nutritional fortification.

The food industry, however, is currently operating largely as a legacy sector, which often favors existing technologies and hinders the development and launch of disruptive innovations (5). An ecosystem of legacy companies, universities, and government institutions define and constrain innovation in this sector, while increasing consumer and government interest in health and sustainability demand innovation dynamism. This tension reveals an opportunity for industry incumbents and/or insurgents to disrupt the status quo through transformative innovation.

This article looks at some of the market forces that will likely shape the food industry, the challenges that the legacy food sector faces, and the potential opportunities for legacy and new companies alike. An evolving innovation ecosystem is emerging that can help to redefine the food sector. This ecosystem is formed by legacy organizations and startups, as well as developing economies, charitable foundations, and private equity and venture capital funds. Collaboration among these entities can enable significant business growth, assisting in the development of new products and services that address the health interests of global consumers and environmental sustainability challenges.

Author Bios: 

Harold H. Schmitz

Harold is a Senior Scholar in the Graduate School of Management at the University of California, Davis.  Harold recently retired as Chief Science Officer for Mars, Incorporated and Director of the Mars Advanced Research Institute following 25 years with the company. During his career in Mars, Harold held positions within the company in Scientific and Regulatory Affairs, Fundamental Research, Analytical and Applied Sciences, Corporate Innovation and Corporate Staff.  Prior to joining Mars in 1993, he was a U.S. Department of Agriculture National Needs Research Fellow at North...Read more

Francesca D’Cruz

Francesca D’Cruz is a consultant at T.O.P., LLC, and is completing her degree in sustainable agriculture and food systems at the Univ. of California, Davis, in the Honors Program, with an emphasis on agriculture and ecology of crop and animal systems. She also works at the Institute for Innovation and Entrepreneurship on campus, promoting the Big and Little Bang Business Competitions. Additionally, she is an undergraduate researcher in the Tell Lab at the veterinary school, where she reviews and analyzes data for the Food Animal Residue Avoidance Databank. D’Cruz serves as the...Read more

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