Willingness to innovate in the German food and tobacco industry

Consequences for corporate success

In a sector comparison, the proportion of innovators (companies that have successfully carried out at least one innovation project) in the German food and tobacco industry fell more sharply in 2002 than in any other sector in the manufacturing sector in Germany. In 2002 the proportion of innovators in the food and tobacco industry was 48% (2001: 62%). The food industry thus slipped to 11th place in comparison with all sectors of the manufacturing industry, while in 2001 it was still 8th place.

In contrast to the declining number of innovators, the expenditure on innovation in the food and tobacco industry reached a new high of €68 billion in 2002. This corresponds to around 72% of the expenses for innovations in the entire German economy. The large companies in the industry in particular continue to invest heavily in innovations.

The sharp decline in innovators within the industry is largely due to the fact that firms that introduced only one type of innovation in previous years did not do so in 2002. However, the increasing internationalization and clear export orientation in the food industry make cost-saving and quality-improving process innovations as well as product innovations necessary for the success of the company. This is also indicated by the overall increase in innovation expenditure by companies.

An industry-internal analysis also shows how important innovations are for the success of companies in the food and tobacco industry. Economically particularly successful companies invest a larger proportion of their turnover in innovation activities than less successful ones.

However, companies with positive returns on sales differ from those with negative returns not only in terms of innovation input, but also in terms of innovation output. While only around 1 percent of the sales of the companies with negative returns can be attributed to new-to-market products, this share is around 4% for the rest of the industry.

The difference in the cost reduction portion becomes even more obvious. According to this, the companies that are particularly successful are those that succeed in countering the increasing cost pressure by adapting and improving their production processes, since they can also operate successfully in the expanding export markets in Asia and Eastern Europe. The proportion of cost reductions in companies with positive returns is around 5 percentage points higher than in companies with negative returns.

Further information on the innovative developments in the German food and tobacco industry can be found in the ZEW industry report "Innovations" available.

Source: Bonn [bve]