“No pros in postponing R&D,” warn industry execs as recession threatens healthy future
08 May 2020 --- Nutrition companies have been forced to rethink their financial priorities as the COVID-19 pandemic continues to disrupt supply chains and tighten purse strings. Often it’s R&D that suffers when companies scale back during difficult times. However, lessons from the past show that R&D budgets must be prioritized in order to maintain momentum to industry innovation. NutritionInsight speaks with Valio, Monteloeder and American River Nutrition to get to the bottom of how the “new normal” is set to affect capital investment in R&D.
“The coronavirus pandemic poses challenges for nutrition companies, as for all businesses. However, it will also provide new opportunities and new ideas cannot be found without investing in R&D. I believe that if R&D investments are postponed too often, recovery from the crisis may be slower. For some companies, not investing in R&D may even mean that the business melts away,” flags Harri Kallioinen, Senior Vice President, Research & Development of Valio.
Kallioinen recollects how Finland’s industry learned this lesson the hard way, having significantly suffered under economic recession in 1990. Investment in R&D notably helped Valio out of this situation, a practice the company continues today. Valio’s R&D and quality control costs totaled €27.7 million (US$30 million) in 2019 alone.
New ideas cannot be found without investing in R&D, says Kallioinen.Both Dr. Arturo Lizón Nordström, CEO at Monteloeder and Dr. Barrie Tan, President of American River Nutrition call long-term investment in R&D a “must” to take full advantage of the opportunity posed by increased consumer interest in preventive health. “One of the lessons learned with the COVID-19 crisis is how important preventive health solutions are for the healthy future of humankind. This comprises not only nutrition but everything that helps to improve the health habits of individuals, such as digital technologies, to create a personalized nutrition approach,” says Dr. Lizón.
Long-term business vision
Failing to adapt to “the new normal and digital paradigm shift” could cost a pretty penny in the long run, Dr. Lizón warns. “There are no ‘pros’ in postponing the R&D investments. The only thing that justifies this measure is if the management of the company [is forced to] prioritize short-term survival to get through the coming economic recession. This type of crisis has always shown that sound, bold investment always positions you better for growth at the end of the crisis when the economy picks up.”
Monteloeder is now reaping the fruits of its harvest it planted four years ago. “The combination of strong scientific support and effective health ingredients with digital technology to allow personalized nutrition and health self-management was correct. The crisis is showing us that we should invest even more in the short- and long-term in this evolution,” Monteloeder’s CEO details.
In the last five years, the Spain-based company took a calculated risk in investing almost 10 percent of its revenue in R&D. The COVID-19 crisis has accelerated the delivery of these benefits, says Dr. Lizón. This is thanks to the company having “bet on the future.”
Despite both Monteloeder and Valio playing the long game, the pandemic has not bypassed them entirely. In the short-term, Valio has had to re-assessed the timings of its product launches while Monteloeder changed the timing of its previously scheduled clinical trials for 2020, considering physical distance measures makes the process of recruiting people for the latter’s clinical trials difficult.
Postponing R&D conflicts with American River Nutrition's ethical code, says Dr. Barrie Tan, the company's President. “The majority of our long-term clinical trials deal with chronic illnesses, and most of them are temporarily halted. For clinical trials that involve chronic illnesses – especially ones that are co-morbidities to communicable diseases like COVID-19 – postponement would not be an ethical thing for us to do as we don’t know the exposure risk to chronically ill patients.” American River Nutrition currently has nearly ten ongoing clinical trials and the majority of them investigate tocotrienol as adjunctive to chemotherapy in survival. Nonetheless, the company plans to resume trials quickly once restrictions are lifted.
"We should invest even more in the short- and long-term in this evolution," Dr. Lizón highlights.Indeed, NutritionInsight recently investigated how the rise of COVID-19 has thrown a wrench in many companies’ plans for clinical trials as lockdowns and social distancing restrictions continue around the globe.
New opportunities
Lockdown measures and quarantine restrictions have changed the way businesses and consumers alike perceive food and nutrition. “It will be interesting to see if the changes in people’s lives and consumption behavior are here to stay, at least to some extent, also after the crisis. Remote working has increased cooking at home. Restaurants have to focus on takeout. Could food companies make cooking at home even easier and provide new super-easy solutions?” questions Kallioinen of Valio.
Similarly, a new Kerry report highlights how consumer awareness of immune and digestive health may pave a novel avenue for fortifying food consumed outside of the home with probiotics.
“We at Monteloeder believe that despite the tragedy around COVID-19, the nutrition supplement and health ingredient industry has a unique opportunity to demonstrate its value in the predictive health area – more than the usual palliative health,” Dr. Lizón concludes.
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By Anni Schleicher
