Food innovation: Barriers to success - is New Zealand scoring an own goal?

NZ has everything it needs to be a global food powerhouse, but if we don't overcome barriers to success, we may be out for a golden duck. Photo / FoodHQ

THREE KEY FACTS

• Recent cuts in science funding have resulted in hundreds of scientists leaving the sector and many programmes being shut down.
• Sir Peter Gluckman says Europe has a goal of an overall research intensity of 3%, while New Zealand’s goal is 2%.
• There is a gap between the skills needed to foster innovation and entrepreneurship and the skills available in the workforce.

This article was first published in Future of Food by FoodHQ, written by Vincent Heeringa and FoodHQ chief executive Dr Victoria Hatton.

Part three of a three-part article.

Read part one here - Food innovation: Can New Zealand become a powerhouse?

Read part two here - Food innovation: Three opportunities on the table for New Zealand.

Part one of this article looked into how New Zealand could double its export value in the next decade, while part two examined three opportunities for food innovation - consumer packaged goods, changing land use, and deep tech. This third and final instalment looks at the challenges that could hinder New Zealand’s progress in becoming a world-leading food innovator.

Barriers to success

What needs to change to deliver all the above?

We have been writing about innovation in New Zealand for more than 20 years, and the themes have remained consistent over that time.

We perform poorly compared to other small nations on almost all measures of innovation, including:

• Number of patents per capita;
• Proportion of R&D spend to GDP;
• Volume of R&D by the private sector;
• Number of research scientists per capita;
• Number of Stem graduates per capita.

As a nation, we underfund and undervalue science.

The recent cuts in science funding have resulted in hundreds of scientists leaving the sector and many programmes being shut down.

And we tax innovation badly.

Currently, we tax unrealised gains on Employee Share Schemes, making it harder for start-ups to give their employees shares – a powerful tool for retention and reward.

This would align New Zealand with global best practice.

And unlike Australia and the UK, we provide no tax incentives to capital investments in high-risk ventures.

The Government has reviewed the science system, which has not substantially changed since the 1990s reforms.

The man leading the review, Sir Peter Gluckman, is well qualified, having been the first Prime Minister’s Chief Science Adviser and a strong advocate for higher learning.

He hinted at this recommendation in a paper last year.

In summary, New Zealand is out of step with its peers.

Gluckman said Europe had a goal of an overall research intensity of 3%.

“Naively, public policy in New Zealand continues to assume that the goal of 2% research intensity will largely be met by the private sector, but this takes no account of our corporate mix and the lack of large companies in our ecosystem.

“European experience suggests until public expenditure is more than ~ 0.8%, private sector investment will not increase beyond roughly that of the public sector.”

Most developed and many developing countries have programmes for innovation, where the government matches dollar for dollar every industry dollar that is spent with a university.

This does not exist in New Zealand but would help build an innovation framework in New Zealand, support talent growth on shore, and is the simplest way of driving innovation and collaboration across the value chain and industry.

Beyond funding, there are other hurdles to innovation, almost all of them cultural or organisational.

FoodHQ is about to launch a scholarship fund for students wanting to join the Food Technology Programme at Massey University as one way to engage young people in the subject. Photo / FoodHQ

Doing, not learning

Alan Renwick, a relative newcomer to New Zealand, said his perception was that our organisations prefer doing over learning.

“This is just me speaking now, but I find there’s a cultural gap between people who love knowledge and people who love action, and boards are full of action people.

“They want to see things being done, but then when they delegate to staff, there’s a risk-averse culture of managers who are not leaning into the new knowledge.”

Silos and duplication

For a small country, we have an impressive number of organisations operating in silos, duplicating efforts.

Research shows that the average Russell Group University in the UK has 4000 academic staff; the average New Zealand university has closer to 1000.

This leads to higher administration costs, duplicated functions, and limited capacity for key activities like research impact.

Dr Victoria Hatton said in Palmerston North, the innovation ecosystem was “fragmented”.

There is Massey Ventures Ltd, the Factory, Sprout Agritech, two CRIs, the Central Economic Development Agency and Callaghan Innovation.

It’s not clear who does what, who helps who to innovate and at what stage of the commercialisation pipeline these organisations step in.

“They’re all set up with good intentions, but there’s a reasonable amount of competition to create the biggest impact from R&D,” Hatton said.

“With limited funding in such a small ecosystem, there must be ways to centralise and find synergies.

“And I doubt Palmerston North is alone in this.

“We need to turn it on its head and say, how can we design a national innovation system that is outcome orientated, not parochial.”

Inwards focus

Nicola O’Rourke finds that entrepreneurs aren’t as commercial as they should be.

“We don’t understand scale,” she said.

“We’re quite happy to sort of tinker around in our sheds, then go to market and realise we haven’t spent enough time working out who the consumer is.

“I think it’s got worse post-Covid. We’ve almost done the opposite of being globalised.

“Get back out into the markets. What’s happening globally?

“Look at where the big needs are changing and find what our role is in that as a country.”

Fragmentation

It’s hard for entrepreneurs and investors to navigate their way through the “system”.

Grant Verry is the co-chief executive of New Zealand Food Innovation Network, which provides connected solutions across the idea-to-market journey.

He said we have not created a joined-up innovation system, especially in fields that don’t have a well-worn path, like plant-based foods or emerging proteins.

“I think the opportunity for success is to create a purposeful innovation ecosystem.

“One that works in sync between research, start-ups, industry, funders and government.

“We already have a lot of great stuff going on; the opportunity for us is to activate it with international scale in mind.”

Writing in Newsroom, chair of Cawthron Institute Cath McLeod said New Zealand was “far from that kind of coordinated, strategic approach at present – if I’m honest, it’s a bit of a mess”.

“While there is incredible work happening in pockets across our research, science and innovation system, there is so much overlap, competition and bureaucracy, that examples of successful real-world application of R&D innovation are few and far between.”

Lack of sophistication

Too many food entrepreneurs lack business acumen, relying on happenstance for growth.

Nicola O’Rourke wants to see a shift from opportunism to design.

“A lot of the conversations I’m having with early-stage food and beverage businesses are about growth by design, not just responding to incoming calls.

“There’s nothing wrong with opportunistic sales, especially for testing and learning in the very early stages, but you’ve got to be very careful about where you put the limited capital you’ve got.”

Talent shortage

A gap is growing between the skills that we need to foster innovation and entrepreneurship and the skills that are available in our workforce.

Dr Victoria Hatton said there was real concern that we would be unable to add value to the food we grow because the pool of talent in our innovation ecosystem was shrinking.

“We need to do something magical to make food tech, food science, innovation and entrepreneurship appealing to young people.

“We need to think seriously about how we can supercharge the capability-building pipeline to ensure we can deliver our goals to add value.”

Hatton is scheming up ways to do just this.

FoodHQ is about to launch a scholarship fund for students wanting to join the Food Technology Programme at Massey University as one way to engage young people in the subject.

But Hatton is also considering ways to use TikTok to influence and attract young talent to the food innovation ecosystem.

Conclusion

For a country that prides itself on ingenuity, we could do with a motivational kick.

Ranking 25th on the global innovation survey is disappointing.

We have the resources, the history and the talent. We can’t seem to reach for the prize. It’s like watching the All Blacks choke in the last quarter.

The story of Dale Bowie, of Wellington’s Development Kitchen, summarises the theme.

An understudy of UK chef Hester Blumenthal – whose foamy dishes pushed the edge of gastronomy – Bowie is pioneering new flavour profiles, trying whacky combinations like offal and seaweed to make ice cream.

His experimental kitchen was funded by industry and government to explore new flavours – a hugely missing factor in the New Zealand story.

“I think developing flavour is the opportunity for all New Zealand produce,” Bowie said.

“When we look at honey or beef or fish, we produce fresh, sustainable ingredients with an amazing story – and that’s great.

“But why are we happy with the status quo?

“We’ve got such an amazing story, but we need something else to seize an opportunity to become more than just a footnote in global cuisine.”

Sadly, Bowie’s kitchen is now closed, perhaps a victim of reduced science funding but also a lack of industry backing, as export-focused food companies like Fonterra do application development in-market as every market differs in sensory needs.

Bowie feels it’s possibly because we aren’t brave enough.

“New Zealand’s awesome at doing things well, but there’s a little bit of the Kiwi thing of being safe and not being prepared to make that huge jump, that leap of faith.

“We’re a cautious country.

“One of the things that really gets me is this term return on investment – it implies eliminating creativity because creativity doesn’t provide a guarantee.

“There is no way that I can say to you that if you pay me half a million dollars, I’ll guarantee success.

“But without risk, there’s no return”.

“It’s funny, really. Everyone’s excited. They understand exactly what we’re doing. But because we’re a bit different, it’s very difficult to put us in a box and say, ‘oh it’s one of those and we’ve done that before.’

“So, I’m feeling optimistic. I think at a certain point the lights will go on, they’ll go, we need to reopen The Development Kitchen.”

How long will that take? What needs to change to make that happen?

Like the Development Kitchen, New Zealand has everything it needs to become a global food powerhouse.

What’s the hold-up?