The Dynamics of the Innovation System for Functional Foods in South Brazil

This study aims at identifying the dynamics of the innovation system for functional foods (FF) in Rio Grande do Sul, Brazil. Functional food is any healthy food claimed to have a health-promoting or disease-preventing property beyond the basic function of supplying nutrients. Health has been named as the most significant trend and innovation driver in the global food and drinks market. Brazil is one of the leading countries in food production and consumption, and the market for functional foods have been growing 10% per year, three times more than the market for conventional foods. Although this food category is considered mature in some developed markets (such as in Japan, in the Nordic countries and in the U.S), it is still unknown for many consumers, especially those located in developing countries. On the other hand, functional foods has been attracting the attention of multinationals and local food industries, since innovation can significantly impact on their competitive advantages. Therefore, in this study, first we are going to investigate consumers’ motivations, attitudes and intention to buy functional foods, since the market demands a better understanding of this trend. A survey with 450 consumers was conducted and provided quantitative insights. Secondly, we identified the availability of functional food products in the local retail market, through observation techniques. Our aim was to confront consumers’ needs with local food companies’ market supply. In a further stage, we are going to analyse the functioning of this innovation system, describing the agents involved in this context and their relations through in-depth interviews with local representatives (stakeholders). Innovation system is here understood as the set of distinct institutions which jointly and individually contribute to the development and diffusion of new technologies and which provides the framework within which governments form and implement policies to influence the innovation process. As such “it is a system of interconnected institutions to create, store and transfer the knowledge, skills and artefacts which define new technologies.” (Metcalfe, 1995). Hence, we are investigating issues such as: Are local food companies ready to innovate in such a competitive and dynamic scenario? How can this system respond to consumers’ demands? Are there conditions for an innovative food network in South Brazil? Our contributions help to shed light into these questions. Preliminary results indicate that the innovation system for functional foods in Rio Grande do Sul is incipient, but it is developing fast. Stronger governance and co-ordination strategies are needed. There are few local functional food products in the market, but those are attractive to consumers and indicate promising opportunities. The survey shows that interviewed consumers presented positive attitudes towards functional foods and enough purchasing power to buy it. Nutritionists and other health professionals have high credibility and could help inform consumers about the benefits of particular categories of functional foods. Food industry itself is not regarded as the most trustworthy source. Finally, this study shows that the understanding of Brazilian consumers is fundamental to help food companies define their strategies. To map the most accepted categories of functional foods is also important, aiming to avoid the “tentative and error” approach