The U.S. food industry is undergoing monumental changes as it faces issues of genetically modified ingredients, educated consumers, and a shift to a larger focus on environmental and health friendly activities.
Innovation is challenging for the food processing industry due to flavor, texture, temperature, customs and consumer price constraints. Many companies incorporating better ingredients, such as organic, face challenges in finding supplies of appropriate ingredients. Companies incorporating improved processes and techniques face the issues of whether the new processes and techniques are safe for consumers and whether they can be used on a large-scale.
Many different food industry companies are
involved in research and development activities. Federal
R&D tax credits are available to those companies involved
in reducing the toll on the environment and animals while
increasing the health benefits of America's food.
Enacted in 1981, the federal Research and Development (R&D) Tax Credit allows a credit of up to 13% of eligible spending for new and improved products and processes. Qualified research must meet the following four criteria:
Eligible costs include employee wages, cost
of supplies, cost of testing, contract research expenses, and
costs associated with developing a patent. On December
18, 2015, President Obama signed the bill making the R&D
Tax Credit permanent. Beginning in 2016, the
R&D credit can be used to offset Alternative Minimum tax
and startup businesses can utilize the credit against payroll
Start-up companies have been taking big steps towards creating healthier alternatives to the foods we currently eat. According to CB Insights, in 2012 venture capital firms invested $350 million into food projects, a significant increase compared to the $50 million invested in 2008.
Unreal Brands Inc., a candy company based in Boston, makes their candy products without artificial colors/flavors, preservatives, hydrogenated fats, or genetically modified ingredients (GMOs). Their product has 25% less sugar than comparable candy on the market and has added protein and fiber, factors that consumers are considering more now than ever.i
Hampton Creek Foods' Beyond Eggs makes an egg substitute using plants like peas, sorghum, and beans, in which two large food companies already use in cookies and mayonnaise. This process is highly efficient by eliminating the safety issues of egg farming and decreasing waste production. Lyrical Foods makes its Kite Hill brand cheese using almond milk and macadamia milk and was the first nondairy cheese sold by Whole Foods Market.
Instead of sodium chloride, Nu-Tek Salt
uses potassium chloride to lower sodium intakes.
Food companies are now seeking to replace their genetically modified ingredients with non-GMO ones, which has proven to be a struggle for some companies. The movement to label GMO ingredients in products is growing rapidly and on June 3, 2013 Connecticut became the first state to pass a GMO labeling bill. This bill would require food manufacturers to label products containing genetically modified ingredients, but the bill will only take effect if four other states, including one with a contiguous border, pass a similar statute.
Furthermore, Vermont and Maine state legislatures have approved bills requiring foods containing GMO ingredients to be labeled as such. The same legislation is pending in over 24 other states and on May 25th, 2013 consumers worldwide rallied against GMO foods and threatened the boycott of unlabeled GMO products.
Genetically modified foods are created by inserting genetic materials, sometimes from completely different plant species, bacteria, and viruses, straight into plants. Controversy remains about whether this is a health threat but consumers are demanding labels for their foods.
The pressure is on for many food companies to gain 'Non-GMO Project' certification. ThinkThin makes Crunch snack bars with some genetically engineered ingredients and their largest buyer, Whole Foods Market, wanted more non-GMO products. Thinkthin owner, Lizanne Falsetto encountered numerous difficulties when changing over to non-GMO. The company began selling certified non-GMO Crunch bars in April 2013, after 18 months of searching for ingredient suppliers and working on maintaining the same taste and texture as with the old ingredients.
Demand to attain 'Non-GMO Project'
certification has soared, in March 2013 about 300 companies
signed up for certification, after Whole Foods announced they
will require labels on all GMO products sold in stores. This
is illustrated by the rising prices of non-genetically
modified crops. Two years ago non-GMO soybeans cost about $1
more than GMO soybeans, today they cost about $2 more.
Figure 1 illustrates an overwhelming percentage of U.S. food staples that are now genetically modified:
To convert meaningful shares of these crops to non-GMO is going to require substantial innovation.
In addition to the difficult certification process and limited non-GMO crop supply, switching to non-GMO crops also involves changing the soil because GMO tainted soil will not be suitable for conventional crops.
Livestock industry companies are also among
those seeking non-GMO crops in order to stay concurrent with
the high demand for eggs and meat products from animals that
have never been fed genetically modified diets.
To address the issues of maintaining taste, consistency, and mouth feel, food companies may turn to applied science. The field of molecular gastronomy combines science and technological advances in equipment with natural enzymes used in food processing. Scientist Rachel Edwards-Stuart has been exploring the role of science in flavors of food. Edwards-Stuart is a consultant for enhancing the perception of flavor. Using transglutaminase, an enzyme that holds different proteins together, Edwards-Stuart "glued" a pork chop to a chicken breast creating a delicious outcome.
Edwards-Stuart was hired to create a
something similar to Willy Wonka's gobstopper, in which
something starts tasting like one food and moves to tasting
like others, for the London restaurant, The Fat Duck. Due to
the functionality of the gobstopper people would eat them
differently, some may chew on it and some may suck on it,
these indifferences would create simultaneous flavors instead
of separate ones. Edwards-Stuart created a drink instead,
creating consistency because almost everyone drinks the same
way while using a straw.
Five-ounce Burger at a Beefy Price
Netherlands researchers have created the first in vitro hamburger which has been constructed from pieces of beef muscle tissue. Referred to as cultured meat, this five-ounce, $325,000 hamburger is the result of billions of cells grown in a laboratory. By extracting myosatellite cells (stem cells) from cow necks and combining it with fetal calf serum as a growth medium, the cells merge forming small muscle fibers (myotubes).
Although this in vitro burger, without any fat, "tastes reasonable good", this technology is far from large-scale manufacturing and distribution. The process is very expensive and requires a continuous supply of livestock to obtain muscle tissue cells. Another obstacle is the consumer appeal of the cultured meat and the consumer opinion of whether it is meat or not.
University of Missouri researcher Gabor
Forgacs has a similar cultured meat process that involves 3-D
bioprinting technologies which may produce thicker muscle
tissues and speed up the process. Nicholas Genovese at the
University of Missouri is working on the development of a stem
cell that is created from a regular cell, for example, this
process would allow a skin cell from a pig to be turned into a
stem cell that can reproduce indefinitely and grow into muscle
tissue, resulting in cultured pork.
Advantages to this process include the need
for a much smaller population of cattle and higher efficiency
because only the meat is being produced, not the additional
unused cow parts. With the necessary research and development,
this cultured meat process could also alleviate the livestock
industry's struggle to provide non-GMO fed meats.
Recent studies show that the produce we now consume is quite low in phytonutrients. Phytonutrients are compounds found in produce that reduce the risk of cancer , cardiovascular disease , diabetes , and dementia , our four major national health problems. The loss of phytonutrients is believed to go back around 10,000 years to when we began farming.
Technology has allowed for phytonutrient comparisons of our current supermarket produce to wild plants:
When our ancestors stopped foraging for food and started farming, they chose the least bitter crops to plant and favored plants low in fiber and high in sugar, starch and oil. Now it is recognized that many of the bitter, sour, and astringent tasting crops have the highest phytonutrient contents.ix
Corn is just one of the many crops where growers we have bred the nutrients out over time to significantly lower levels. Teosinte, the ancestor of our present day corn has 10 times the amount of protein but was not farmed because it was not soft or sweet enough. In the 1920's geneticists applied numerous forms of radiation to corn seeds to study the arrangement of plant genes and the seeds were stored for research.
39 years later a geneticist discovered that the kernels were 10 times sweeter than regular corn and began developing commercial varieties of the 'supersweet' corn which were made available in 1961. As the first GMO food to be introduced in the U.S., 'supersweet' corn has since taken over the supermarket and most, if not all, of our corn can be traced back to experimental radiation.
Figure 2 illustrates the comparison of nutrition content between our present day lower nutrient white corn and its healthier ancestors using milligrams of anthocyanins (a phytonutrient) per 100 grams of dried corn:
Many food industry companies are making moves towards healthier products as well as making the more challenging move towards non-GMO ingredients and certification. Companies engaged in research and development activities assisting this effort may be eligible for federal and state R&D tax credits.
Charles R Goulding Attorney/CPA, is the President of R&D Tax Savers.
Andrea Albanese is a Project Manager with R&D Tax Savers.
Charles G Goulding is a practicing attorney with experience in R&D tax credit projects for a host of industries.
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