The study, published every year by the European Commission, shows food producers worldwide are still last on the list of the top 15 sectors when it comes to spending on R&D, even as their sales continue to show sluggish growth in many markets.
The relatively low spend also contrasts with the size of the sector. For example it is the largest manufacturing sector in the EU.
The European Commission has consistently said the food sector needs to become more competitive by spending on R&D as a means of bringing new products and processing techniques to the market.
As part of a strategy to boost spending in the sector, the Commission announced earlier this year it would spend €61m on five big food research projects to sharpen Europe's competitive edge in food and drink.
The latest study confirms the sector's relative reluctance to shell out more on development. Out of 15 sectors classified in the study, food producers are in last place. The 15 food producers included in the study spent a total of €3.1bn on research and development in 2004, working out to an average of €210.8m.
By comparison, the highest spenders on R&D globally were companies in the automobile and parts sector, which collectively spent a total of 58.5bn on R&D, or an average of €900.3 bn per company.
The food sector spending on R&D made up only one per cent of industry's total investment.
The sector was the only one of the 15 studied in the report that reported a decline in profitability between 2003 and 2004.
Overall the EU's industry R&D remains low compared to other parts of the world, especially the US. R&D spending in the EU overall is close to stagnation, due in large part to the slow-down in business funding.
This year's report compares 700 R&D investors with registered offices in the EU with the top 700 registered elsewhere. Together they invest €315 billion in R&D. This represents just over half of the total R&D investment by the private sector world-wide.
The report shows that EU companies increased their aggregate R&D investment by 0.7 per cent in nominal euro terms. Once two per cent inflation is taken into account R&D spending declined in real terms. Still the nominal gain is an improvement over last year's report, when EU companies reported a decline in R&D spending of two per cent for 2003.
Food producers increased their R&D spending by about 6.3 per cent in 2004, almost double the average 3.1 per cent growth in investment between 2001 and 2004. Only four out of the other 14 category sectors increased their spending by smaller amounts.
About 45 per cent of the EU 700 companies increased their R&D investment about five per cent this year, while 36 per cent decreased theirs. In contrast, the 700 non-EU companies boosted R&D investment by 6.9 per cent in nominal euro terms, compared with an increase of 3.9 per cent in 2003. The figures show the investment gap between EU and non-EU companies continues to widen
Even with the continuing bad news, the Commission was able to pick out some rays of hope. There are more EU than US companies among the top 50
Top EU companies individually invest in R&D at least as much as their competitors from outside the EU. A total of 18 EU companies account for 36 per cent of the total R&D investment in the world top 50 spenders. Another 17 US companies in the top 50 accounted for 35 per cent of spending, while 12 Japanese companies accounted for 23 per cent.
Daimler-Chrysler, an EU-based company now occupies the world's number one position with an R&D investment of €5.66 bn. The next two EU companies are Siemens (€ 5.06 bn) and Volkswagen (€4.16 bn). The top three non-EU companies are Pfizer (€ 5.65 bn), Ford Motor (€ 5.44 bn), and Toyota Motor (€5.42 bn).
Out of the 700 EU companies, Unilever was ranked as the top food producer in terms of R&D spending. The company was the EU's 23rd largest spender on R&D in 2004. Danone was next, placing 101 among R&D spenders. Ireland based Kerry Foods was the third biggest spender in the sector, coming in at position 101 on the list.
Cadbury Schweppes came in fourth, taking position 133 on the overall list, followed by Danisco (position 147), Arla Foods (204), CSM (222), France's Vilmorin Clause Food (243), Netherlands-based Numico (255), Germany's Sudzucker (279), Tate & Lyle (286), Campina (289), Nutreco (296), Aviagen (412), Raisio (421), Royal Cosun (477), Wittington Investments (487), Valio (505), Sygen International (518), Atria (592), Provimi (610), HK Ruokatalo (616), Greencore (624) and Devro (647).
Switzerland-based Nestle was ranked as the food producer with the highest R&D spending among non-EU companies. The company ranked 50 out of the 700 non-EU companies considered in the report.
In a key policy document earlier this year the CIAA called on members to boost R&D spending as a means of remaining innovative and competitive. The association blamed the poor rate of technology transfer from the research phase to the application stage as a major barrier to innovation in the industry.
"It has long been recognized that whilst the quality and quantity of Europe's research community match those of North America and the Pacific Rim, the wider impact of this research is lower than that of these trading competitors because of the less effective transfer of this knowledge to industry," the CIAA stated in a policy document.