Research and Development/Tech Change/Emerging Technologies,

Eller, David G.

English

Research Papers in Economics

Biotechnology --Diversification, and the Food Industry
by
David G, Eller
Chairman & CEO
Granada Corporation
Houston, Texas
I congratulate this society for coming up
with the overall theme of “New Markets, New
Marketing and New Thinking.” It strikes a
chord with me, since the Granada Corporation
has been built around this very theme. It is,
therefore, a pleasure for me to be a part of this
conference and to contribute to discussions on
“Applications of New Technology.”
A goal of the Granada Corporation is to
provide leading edge technology to the food
industry. My topic of “Biotechnology--
Diversification, and the Food Industry” allows
me to discuss our own activities, but I will also
make some general comments about the
emerging technologies, which are now referred
to as biotechnology. I will include discussion
about trends in the food industry, both from
integration and distribution standpoints.
The past two decades of activity in
research and technical development in the food
industry have been marked by work on food
components (especially proteins), energy con-
cerns, and quality and safety issues. In contrast,
the coming decade will probably be remembered
as the era of biotechnology. It is worth our
time to discuss briefly what biotechnology
encompasses to understand the significance of
this statement.
The Office of Technology Assessment
(OTA) uses two definitions of biotechnology.
The first broad definition is any technique that
uses living organisms (or parts of organisms) to
make or modify products, to improve plants or
animals, or to develop microorganisms for spe-
cific use. This definition encompasses tradi-
tional technologies such as fermentation that
have been used to produce food and food
ingredients for thousands of years. To dif-
ferentiate between those traditional approaches
and the new techniques now coming into being,
Journal of Food Distribution Research
OTA formulated in 1988 a new definition for
biotechnology. It is: The industrial use of
recombinant DNA, cell fusion, and novel biopro-
cessing techniques. This is the biotechnology
that I wish to discuss. It focuses our attention
on the industrial uses of scientific discoveries
arising from the new fields of molecular gene-
tics and molecular biology, which are now often
lumped under the heading of genetic engineer-
ing.
There are at least four ways in which
biotechnology will have an impact on the food
itiustry:
l By lowering production costs for crops
and animals that are the raw materials for
the food industry.
l By creating market-targeted commodities
rather than undifferentiated raw materi-
als.
l By creating new enzymes or sources of
enzymes which can be used in food pro-
cessing.
l By providing new ways to remove waste
products of the food processing industry.
Production of Lower Cost Crops and Animals
There is now extensive research in uni-
versities and industry directed to the creation of
genetically engineered crop plants. Perhaps the
most exciting are disease-resistant and insect-
resistant crops that will give higher yields with-
out use of expensive pesticides. These new
crops will enter our food supply chain by the
mid 1990s. Equally exciting research is under
way with animals. Our research at Granada, in
conjunction with several universities, has
resulted in the commercialization of embryo
February 89/page 41transfer. In other related phases of animal
improvement, biotechnology is being used to
create new diagnostics and vaccines for
improved animal health. There will also be the
possibility of creating disease-resistant animals
via directed genetic improvement.
Another aspect of animal research
involves using biotechnology for improving
growth rates. In dairy cattle, for example, the
administration of a bovine growth hormone has
resulted in increases of milk production of 15to
40 percent, while requiring only small increases
in feed consumption. Successful incorporation
and expression of the growth hormone gene in
laboratory mammals suggests that it may be
possible to use related techniques to increase the
efficiency of production by increasing the
growth rate of food animal species.
Creation of Market-Targeted Commodities
In the past, the food processor has had
little opportunity to select for differences in his
raw materials. There have been few ways to
make unique corn flake breakfast cereals, for
instance, since the starting grain material was
essentially generic. Processors and distributors
have had to rely on packaging, advertising and
price to influence the consumer. But with the
new tools of biotechnology, there are now
opportunities to genetically design a new type
of grain--one that might have different nutri-
tional components or even different flavoring.
It is important that we relate these scien-
tific possibilities to the food industry. It is
intriguing that food marketing trends are
rapidly changing as the new biotechnology tools
are appearing. In the 1980s, two factors have
been dominant in influencing food markets.
These are consumers’ demands for convenience,
and products good for their health. By modify-
ing food materials to create unique traits in
either area, a marketing advantage can be cre-
ated.
There now are several examples of food
marketing trends in response to consumer health
demands. The switch to lean beef immediately
comes to mind. As consumers ask for less fat
and cholesterol, the beef industry has responded
by changing animal feeding patterns and by
more extensive trimming of the carcass, Com-
ing behind this is a major push at changing the
genetics of our beef cattle to select for leaner
animals. Granada has been a leader in this area.
ties to improve production animals. For
example, Texas A&M University has a new
initiative to create an Institute for Biosciences
and Technology here in Houston. This Institute
will feature comparative animal genetics studies
to create a forefront body of knowledge in
molecular biology. A spin-off of this research
will be the technological tools needed for crea-
tion of market-targeted animals selected for
improved human nutrition.
Enzymes
The food processing industry is currently
the largest consumer of industrial enzymes,
making up about 40 percent of a $400 million
market. Enzymes are added during food pro-
cessing to control texture or appearance,
enhance nutritional value, and generate desir-
able flavors and aromas. Future application of
biotechnology will involve protein engineer-
ing--changing the primary structure of an
enzyme. Such changes may alter target speci-
ficity, acidic condition, or thermostability.
Protein engineering can be used to “tailor-make”
new proteins to function best in commercial
food processing systems. Let me give an
example. The current trend toward a more
health- and nutrition-conscious lifestyle has
encouraged the development of low calorie
foods. The non-nutritive sweetener market has
been predicted to reach $500 million by year
2000. Scientists have cloned the gene for a
small protein that tastes much sweeter than
sugar, but has few calories. This product can be
produced by fermentation, or perhaps even
directly in some plants. This will offer new
opportunities for non-calorie sweeteners. We
will also see industrial enzymes produced to
convert saturated to unsaturated fatty acids for
“heart-healthy” foods.
By-products and Waste Materials
Enzymatic treatment of food processing
waste streams could produce materials readily
metabolized by microorganisms genetically
engineered to produce antibiotics, hormones, or
peptides of interest to the pharmaceutical or
chemical industries. In the future, environ-
mental and economic concerns will necessitate
a reduction of food processing waste, more
efficient use of raw materials, and the process-
ing of food residuals to new products that have
value. This is a new area of interest for bio-
technologists, but one that will grow.
In addition, some university research is
targeting longer term biotechnology opportuni-
February 89/page 42 Journal of Food Distribution ResearchConclusion
Let me now turn to the structure of the
food industry. As Ilookatthe use of biotech-
nology, the most obvious observation is that the
industry will take on a new look. I would like
to spend a little time discussing this as it relates
to the diversification of our industry, and what
some of these changes will mean as far as the
distribution segment of the industry is con-
cerned.
First, the incorporation of biotechnology
into the food industry will bring about serious
and significant changes. As I think about the
sub-theme of this presentation--~ pplications of
New Technology- -I cannot resist the temptation
to warn that if you don’t incorporate the new
thinking portion of your overall theme, you
might not have to worry about the new markets
concept.
Journal of Food Distribution Research
Weare involved in an exciting time in our
industry. The impact of biotechnology is only
one of many parts of the changing dynamics we
face, but it is a major factor which we have a
chance to influence. Granada has taken the
opportunity to participate in research in this
area, to support academic studies that will pro-
vide new tools for biotechnology, and to
encourage educational efforts which allow broad
public understanding of this emerging field. We
must work together to expand these efforts to
maintain Texas and U.S. leadership in the food
distribution industry.
February 89/page 43

BIOTECHNOLOGY--DIVERSIFICATION, AND THE FOOD INDUSTRY

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