Food_2006

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European

ICT and e-Business in the

Food and Beverages

Industry

ICT adoption and e-business activity in 2006

ICT and e-Business in the

Food and Beverages

Industry

ICT adoption and e-business activity in 2006

Sector Report No. 1 / 2006

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About e-Business W@tch and this report

The European Commission, Enterprise & Industry Directorate General, launched the e-Business W@tch to monitor the growing maturity of electronic business across different sectors of the economy in the enlarged European Union, EEA and Accession countries. Since January 2002, the e-Business W@tch has analysed e-business developments and impacts in manufacturing, construction, financial and service sectors. All results are available on the internet and can be accessed or ordered via the Europa server or directly at the e-Business W@tch website (http://ec.europa.eu/comm/enterprise/ict/policy/watch/index.htm, www.ebusiness-watch.org). This document is a sector study by e-Business W@tch, focusing on the Food and Beverage (F&B) industry. Its objective is to describe how companies in this industry use ICT for conducting business, to assess the impact of this development for firms and for the industry as a whole, and to indicate possible implications for policy. Analysis is based on literature, interviews, case studies and a survey among decision-makers in European enterprises from the F&B industry about the ICT use of their company.

Disclaimer

Neither the European Commission nor any person acting on behalf of the Commission is responsible for the use which might be made of the following information. The views expressed in this report are those of the authors and do not necessarily reflect those of the European Commission. Nothing in this report implies or expresses a warranty of any kind. Results from this report should only be used as guidelines as part of an overall strategy. For detailed advice on corporate planning, business processes and management, technology integration and legal or tax issues, the services of a professional should be obtained.

Acknowledgements

This report was prepared by Databank on behalf of the European Commission, Enterprise & Industry Directorate General. It is part of a deliverable in the context of e-Business W@tch, which is implemented by a team consisting of empirica GmbH (co-ordinating partner), Berlecon Research, Databank, DIW Berlin, Lios Geal Consultants, RAMBØLL Management and Salzburg Research, based on a service contract with the European Commission.

e-Business W@tch would like to thank Mr Ilias Vlachos of the Athens University, who is member of the Advisory Board in 2006, for supporting the work on this study.

Contact

For further information about this Sector Study or the e-Business W@tch, please contact:

Databank S.p.A. Via Spartaco 19 20135 Milan, Italy Fax: (39) 02 55 002 1 [email protected] e-Business W@tch c/o empirica GmbH Oxfordstr. 2, 53111 Bonn, Germany Fax: (49-228) 98530-12 [email protected] European Commission

Enterprise & Industry Directorate-General

Technology for innovation, ICT industries and e-business Fax: (32-2) 2967019

[email protected]

Rights Restrictions

Any reproduction or republication of this report as a whole or in parts without prior authorisation is strictly prohibited.

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Executive Summary

Objectives and scope of the study

This is a sector study by e-Business W@tch, focusing on the food and beverage (F&B) industry. Its objective is to describe how companies in this industry use ICT for conducting business, to assess the impact of this development for firms and for the industry as a whole, and to indicate possible implications for policy. Analysis is based on literature, interviews, case studies and a survey among decision-makers in European enterprises from the F&B industry about the ICT use of their company.

The F&B industry as defined for this study’s purpose covers the following sub-sectors of NACE Rev. 1.1 Division DA 15: DA 15.43; DA 15.5 (51, 52); DA 15.6 (61, 62); DA 15.8 (81, 82, 84, 85, 86, 87, 88, 89); DA 15.9 (91, 92, 94, 97, 98).1 These sub-sectors deal with the production of processed food, rather than with the first transformation of agricultural products (see Section 2.1 for a detailed sector definition).

Results of the e-Business Survey 2006

The e-Business Index 2006 places the F&B industry among the sectors with a comparatively low level of ICT and e-business adoption. This overall result, however, should be regarded cautiously, as it hides a varied picture; moreover, although a direct comparison of the survey results from 2005 and 2006 is not possible, some interesting trends have been recorded in this analysis.

The F&B industry has a relatively good level of development of internal process integration and supply chain-related activities. Supply Chain Management (SCM) systems, in particular, show the highest diffusion among the 10 sectors analysed, and a remarkable increase over the past years.

External pressure from distribution is increasingly driving F&B companies towards the adoption of e-business practices. The high diffusion of e-invoicing, inventory manage-ment, and linking of ICT systems with those of customers illustrate this. Medium-sized companies appear quite positive and active in their investment attitude, and are already well advanced in the adoption of solutions such as ERP (Enterprise Resource Planning), SCM and e-invoicing. While this aspect is of particular interest for future developments, it is equally important to note that the cost of software solutions still adversely affects smaller companies more than the larger ones.

1_{NACE Rev. 1.1 is a 4-digit classification of business activities. It is a revision of the ‘General}

Industrial Classification of Economic Activities within the European Communities’, known by the acronym NACE and originally published by Eurostat in 1970.

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There is new evidence that the F&B sector is reducing the gap to other sectors in basic ICT infrastructure which was evident in the e-Business W@tch Survey of 2005. Positive signals can be seen in the remote network implementation data from the e-Business Survey 2006, with figures for F&B markedly above the 10 sectors average.

The low importance apparently assigned to training and ICT skills in general within the F&B sector gives cause for concern: only 50% of large companies reported practicing regular ICT training. Outsourcing of ICT processes has grown slightly, particularly in medium-sized enterprises.

Standards and interoperability are a “hot” topic in the F&B sector, due to

regulatory impacts (such as traceability) that require improved communication among the different players of the value chain. Presently, the most diffused standard is EDI, notably among the sector’s large companies. The use of open source software clearly increases by firm size in this sector, as its lower price is balanced by the need of internal competences to develop and adapt it to the company's requirement

Survey data reveal a good diffusion of ERP in F&B industry: ERP appears to be a stepping-stone towards further evolution of e-business, and often includes procedures common to SCM and CRM software solutions. Accounting systems have an even wider diffusion, extending widely within small and micro enterprises. e-Procurement use in the F&B industry still lags behind the 10-sectors average,

probably due to the centralisation of purchasing activities in the large companies that dominate this sector. Where present, e-procurement does not seem a driver for systems evolution. SCM, on the other side, shows a remarkable growth, probably due both to regulatory constraints of food safety and traceability, as well as to the competitive advantages linked to a better management of the supply chain.

e-Marketing and sales are focused mainly on the distribution chain and are, therefore, usually considered as part of the SCM or ERP systems. CRM systems are used mainly by large companies in a B2B environment, while a more B2C-oriented approach is typical of this sector’s micro-enterprises and SMEs.

Innovation through ICT solutions is mainly perceived as a process innovation, with an interesting accent on customer services and on the creation of customer communities. Meeting customer expectations joins competitive advantage and regulatory constraints as the main drivers of ICT and e-business adoption in this industry.

Company size and cost are the main barriers to e-business adoption reported in F&B. Companies that do not practice e-business said that they feel that they are "too small" for doing e-business, and/or that they cannot afford the required technologies. Other barriers (e.g. security concerns, the complexity of technology) are perceived as less relevant.

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Current e-business trends and implications

e-Business W@tch looks at how ICT and e-business can support F&B firms in dealing

with relevant competitive challenges in this industry, such as integration with business partners and quality assurance. This study focuses on the following topics:

Internal processes automation in the F&B industry. Compliance with food safety regulations, together with increased competition and the request for cost-efficiency drive the trend toward integration of internal processes in the F&B industry. The integration of production line control, administration, sales and logistics helps companies to manage food safety risks, to increase asset efficiency, and to improve their margins, while achieving continuous product and service innovation, and better corporate accountability. The introduction of systems for internal process automation is also fostered by the possibility of better exploitation of internal assets, which, in the case of the F&B industry, are often represented by recipes or by particular production processes.

Supply Chain Management (SCM) and Customer Relationship Management (CRM). Through the application of SCM, food manufacturers and grocery retailers are trying to radically reduce costs and inventory levels. SCM facilitates the development of integrated relationships, real-time information transfers and moving towards a ‘pull’ rather than ‘push’ distribution system. The focus is on increasing the flexibility amongst upstream suppliers, in response to the strategic power of the dominant supermarket chains, through the closer integration of external enterprise relations. Inter-enterprise integration, represented by SCM, is strongly related with, and dependent upon, the effective implementation of intra-enterprise integration (mainly represented by ERP). These software systems represent complementary approaches for addressing related strategic challenges.

Mobile applications and RFID. Mobile applications and Wi-Fi systems2, together with RFID3_{applications, are inextricably connected with supply chain management} and quality assurance issues. Currently, these systems are mostly used by large enterprises. SMEs, on the other hand, use strategies such as sales force decentralisation (e.g. working from mobile/home offices) to increase their flexibility and to shorten supply chain processes. The usage of RFID is limited to only 1% of the F&B firms. This figure does not reflect the high emphasis that media and ICT suppliers are placing on RFID usage and its potential benefits. Nevertheless, the experiences analysed in the e-Business W@tch case studies illustrate that potential benefits are remarkable and that the pioneering adoption of RFID may lead to relevant competitive advantages.

2_{"Wi-Fi" is short for wireless fidelity, a popular term for a high-frequency wireless local area}

network (W-LAN). Wi-Fi technology is rapidly gaining acceptance as an alternative or complementary infrastructure to a wired LAN.

3_{"RFID" is short for Radio Frequency Identification. RFID is an automatic identification method,}

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Business impact

The use of ICT and e-business in the F&B industry has its main impact in areas related to production and logistics. As regards marketing and sales, the potential of e-business is not fully exploited for the benefit of manufacturers. Large retailers exert their power in this area and tend to maximise the advantage of their direct control over customers. In general, the powerful ICT systems and e-business solutions of large companies enable more advanced practices, which can yield greater achievements in terms of

savings and efficiency. Nevertheless, there are areas – traceability being the most

important among them – where SMEs are adopting ICT and e-business on a relatively large scale, and where a significant impact can already be observed.

Policy implications

At a general level, policies to promote ICT adoption among F&B companies, notably the smaller ones, should aim at improving the development of infrastructure (including skills and standards) and the legal and regulatory environment, as well as at creating a

favourable business environment. The analysis of findings from the survey, the case

studies and desk research conducted for this report point at the following issues which could be relevant for policy-making:

Improve e-skills, especially among SMEs. ICT and e-business are changing the way business is conducted in the F&B industry. There is evidence that many small companies face difficulties in coping with these changes. A lack of e-skills, i.e. a proper understanding of e-business, is one of the reasons.4 Measures in this area could aim at promoting entrepreneurial and managerial understanding of

e-business applications. Providing more information about e-business in a way

which is adequate for small firms could support their decision-making. The development of skills in change management, for example how reorganise work processes with support of e-technologies, could be encouraged.

Facilitate F&B compliance with quality and safety criteria. An important application area for ICT in the F&B industry is to ensure compliance with quality and safety regulations. Therefore, firms could be supported by measures such as the provision of relevant information and training in how to use ICT in this field. Promote a favourable environment for innovation. F&B firms need to

continuously innovate. e-Business policies aiming at a favourable environment for innovation could include the promotion of value chain co-operation, the sharing of good practices among F&B firms and the participation of SMEs in business net-works.

Standardisation. Policy measures in the area of standardisation should focus both at the sector and at the cross-sector level. They could include supportive actions to stimulate increased participation of SMEs in standardisation initiatives.

4_See

e-Business W@tch Sector Study on the F&B, Industry, July 2005, page 27. Available at www.ebusiness-watch.org (‘resources’) and case study La Bella Easo in Section 3.3 of this Report.

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1 Introduction

1.1 About

e-Business W@tch

Policy background

The European Commission launched e-Business W@tch in late 2001 to monitor the adoption, development and impact of electronic business practices in different sectors of the economy in the European Union.

The initiative is rooted in the eEurope Action Plans of 2002 and 2005. The eEurope 2005 Action Plan defined the goal "to promote take-up of e-business with the aim of

increasing the competitiveness of European enterprises and raising productivity and growth through investment in information and communication technologies, human resources (notably e-skills) and new business models".5 e-Business W@tch has been an

important instrument for the European Commission to assess the developments and progress in this field.

The i2010 policy6, a follow-up to eEurope, also stresses the critical role of ICT for productivity and innovation, stating that "… the adoption and skilful application of ICT is

one of the largest contributors to productivity and growth throughout the economy, leading to business innovations in key sectors" (p. 6). The Communication anticipates "a new era of e-business solutions", based on integrated ICT systems and tools, which will lead to an increased business use of ICT. However, it also warns that businesses "still

face a lack of interoperability, reliability and security", which could hamper the realisation of productivity gains (p. 7).

In 2005, in consideration of globalisation and intense international competition, the European Commission launched a new industrial policy7_{to create better framework}

conditions for manufacturing industries in the coming years. Some of the policy strands described have direct links to ICT and e-business developments. One of the new sector-specific initiatives covered by the policy is the taskforce on information and communication technologies (ICT) competitiveness. The taskforce with stakeholders representatives focuses on identifying and proposing measures to remove obstacles that inhibit ICT take-up among enterprises. Another initiative is to conduct a series of competitiveness studies, to include for ICT, food, and fashion and design industries, in order to analyse trends affecting the competitiveness of these industrial sectors.

These policy considerations constitute the background and raison d'être of e-Business

W@tch as an observatory of related issues and a core theme for the analysis. Within this

5_{"eEurope 2005: An information society for all". Communication from the Commission,}

COM(2002) 263 final, 28 May 2002, chapter 3.1.2

6_{"i2010 – A European Information Society for growth and employment." Communication from the}

Commission, COM(2005) 229 final.

7_{"Implementing the Community Lisbon Programme: A Policy Framework to Strengthen EU}

Manufacturing - towards a more integrated approach for Industrial Policy." Communication from the Commission, COM(2005) 474 final, 5.10.2005

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broader policy context, two further important facets regarding the mission of the initiative are relevant. First, e-Business W@tch studies focus on sectors (and not on countries). Second, special emphasis is placed on developments and implications for small and medium-sized enterprises (SMEs).

e-Business W@tch is one of several policy instruments used by DG Enterprise and

Industry in the field ICT industries and e-business. Other instruments include

the e-Business Support Network (eBSN – a European network of e-business policy makers and business support organisations),

the eSkills Forum (a task force established in 2003 to assess the demand and

supply of ICT and e-business skills and to develop policy recommendations), the ICT Task Force, a group whose work is to draw together and integrate various

activities aiming to strengthen Europe's ICT sector, and

activities in the areas of ICT standardisation, as part of the general standardisation activities of the Commission.8

Focus and scope

Since its launch, e-Business W@tch has published e-Business Sector Studies on more than 20 sectors of the European economy, four comprehensive synthesis reports about the state-of-play in e-business in the European Union, statistical pocketbooks and various other resources, such as newsletters and special issue reports. All publications are available at www.ebusiness-watch.org ('resources').

e-Business W@tch presents a 'wide-angle' perspective on the adoption and use of ICT

in the sectors studied. The topic is not restricted to the measurement of e-commerce transactions (the volume of goods and services traded online), but also comprises an assessment of the degree to which business processes, including intra-firm processes, are electronically linked to each other and have become digitally integrated.

In essence, e-Business W@tch studies cover the whole field of what could be described as collaborative commerce (see following chapter). However, it becomes practically impossible to cover in detail all areas and facets of e-business in a single sector study. Therefore, each study focuses on a few specific issues, thus allowing the reader to zoom into these topics in more detail.

In addition to the analysis of e-business developments, the studies also provide some

background information on the respective sectors. Readers, however, should not

mistakenly consider this part of each report as the main topic of the analysis. An

e-Business W@tch sector report is not a piece of economic research on the sector itself,

but a study which focuses on the use of ICT and e-business in that particular sector. The introduction to the sector is neither intended, nor could it be a substitute for more detailed industrial analysis.

8_{The 2006 ICT Standardisation Work Programme complements the Commission's "Action Plan}

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Methodology

e-Business W@tch combines quantitative and qualitative research elements. The

quantitative analysis of ICT and e-business adoption by firms is based to a large extent on representative surveys among decision-makers in European enterprises ("e-Business Survey"). Interviews are conducted by telephone, based on a standardised and computer supported questionnaire (CATI9 method). In total, more than 25,000 enterprises were interviewed in the surveys of 2002, 2003 and 2005. The most recent survey (conducted in April/May 2006) covered more than 14,000 enterprises from 10 sectors in all EU Member States and most EEA and Candidate Countries.10

The e-Business W@tch Surveys have won recognition by the international research community as a useful instrument for piloting new e-business metrics. The experience gained from this piloting is used, for example, by Eurostat for planning and developing their own survey of ICT use by businesses.

e-Business W@tch complements the statistical picture by a more detailed presentation of

concrete e-business activity in individual enterprises from the sectors covered, mainly in the form of brief case studies. About 75 case studies are conducted in 2006 adding to more than 100 case studies conducted in previous years. Evidence from the survey and case studies is backed up by desk research and interviews with industry representatives and e-business experts.

The importance of networking and debate

Since its first implementation in late 2001, e-Business W@tch has increasingly developed from a market observatory into a think-tank and intermediary, stimulating debate among stakeholders at an international level about the economic and policy implications of e-business. The positive feed-back and large uptake for the various publications and statistics provided by the e-Business W@tch, for example their exploitation by various research institutions, reflects the demand for sectoral e-business analysis and discussion on related issues.

e-Business W@tch uses several mechanisms for debate and networking with stake-holders. An important platform for this is the website (www.ebusiness-watch.org), where all reports and survey data are published. Furthermore, results are presented and discussed with industry at workshops, within and via the Advisory Board, and, lastly, through the participation of study team members in other events, such as conferences, workshops and working groups organised by third parties.

9_{Computer Assisted Telephone Interviews, a widely used method in representative household or}

decision-maker surveys.

10_{The EEA (European Economic Area) includes, in addition to EU Member States, Iceland,}

Liechtenstein and Norway. Candidate Countries, which are candidates for accession into the EU, are (as of May 2006) Bulgaria, Croatia, Romania and Turkey.

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The mission of e-Business W@tch is to monitor, analyse and compare the development and impact of e-business in different sectors of the European economy – not the sectors themselves.

Its objective is to provide reliable results, based on commonly accepted methodologies, which are not readily available from other sources and will trigger the interest of policy-makers, researchers, and other e-business stakeholders for more in depth analyses or statistical surveys.

e-Business W@tch has adopted a “wide-angle” perspective in its approach. The necessary trade-offs are transparently depicted in each of its deliver-ables.

The definition of sectors and the adequate level of aggregation

Economic sectors constitute the main level of analysis for e-Business W@tch. The 2006 studies cover sub-sets of ten different sectors whose configuration and definition are based on the NACE Rev. 1.1 classification of business activities.11

Over the years since its initial implementation in late 2001, e-Business W@tch followed a roll-out plan in the coverage of different sectors.12_{In each new period, some new sectors} (not covered in previous years) were added.

The rather broad aggregation of various business activities into sectors in earlier implem-entation periods (2002-2004) made it possible to cover a broad spectrum of the economy, but also caused challenges for the analysis of e-business developments. In cases where rather heterogeneous sub-sectors were aggregated, it was sometimes difficult to make general observations or draw conclusions for "the sector" at stake. It also turned out that industry has a clear preference for comparatively narrow sector definitions.

The approach for selecting and defining sectors which was used in 2005 and 2006 reflects these concerns. Many of the sectors studied since 2005 are sub-sectors that had been part of larger aggregations in 2002-2004. A further argument for "zooming in" on former sub-sectors is that the broad picture for whole sectors is already available from earlier e-Business W@tch studies.

The selection of sectors in 2006 has been made on the basis of the following considerations:

The roll-out plan of 2003.

Policy relevance of the sector from the Commission’s perspective.

Interest articulated by the industry in previous years on studies of this type. The current dynamics of e-business in the sector and the impact of ICT and

electronic business, as derived from earlier e-Business W@tch sector studies.

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The 10 sectors studied in 2006

The 10 sectors which are monitored and studied in 2006 include six manufacturing sectors, construction and three service sectors. The pulp and paper manufacturing industry is a 'new' sector, i.e. it had not been covered by the e-Business W@tch in any earlier period of implementation; the other nine sectors have been covered in previous years, mostly as parts of aggregated sectors (see Exhibit 1-1).

Exhibit 1-1: Sectors studied by e-Business W@tch in 2006

No. NACE Rev. 1.1 Sector Reference to earlier (most

recent) coverage

1 DA 15

(selected groups)

Food and beverages 2005

2 DC 19.3 Footwear 2003/04 (as part of the textile

and footwear industry) 3 DE 21 Pulp, paper and paper products --

4 DL 30, 32.1+2 ICT manufacturing 2004 (as part of electrical

machinery and electronics) 5 DL 32.3 Consumer electronics 2004 (as part of electrical

machinery and electronics) 6 DM 35.11 Shipbuilding and repair 2004 (as part of transport

equipment manufacturing) 7 F 45.2+3

(selected classes)

Construction 2005 (in a broader aggregation,

including F 45 in total) 8 H 55.1/3, I 63.3,

O 92.33/52

Tourism 2005

9 I 64.2 Telecommunication services 2004 (as part of ICT services) 10 N 85.11 Hospital activities 2004 (as part of health and

social services)

1.2 "e-Business" – the conceptual framework

Fresh momentum after the 2001 odyssey

Although the 'new economy' revolution has not taken place as it seemed for a short moment in history it might, the evolutionary development of electronic business does not seem to have come to an end. On the contrary, the maturity of e-business has substantially increased across sectors and regions over the past five years. It has been a quiet revolution this time, but as a result, a new picture of the digital economy is beginning to emerge. ICT and e-business do matter in the global economy – probably even more than during the hype of the late 1990s.

The overall economic situation and market conditions for business innovation and invest-ment have been difficult for European companies during the last few years. Nevertheless, e-business shows a dynamic development in the European Union. Drivers are new technological developments (wireless access technologies, for example) and the increasing competitive pressure on companies in a global economy. Firms are in

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constant search for opportunities to cut costs. This has probably been the most important promise of electronic business: cutting costs by increasing the efficiency of business

processes, internally and between trading partners in the value chain.

From e-Commerce to e-Business

As part of this maturing process, electronic business has progressed from a rather specific to a very broad topic over the past 10 years. Initially, however, particularly in the mid 1990s, the policy and research focus was very much on e-Commerce, which can be defined as online commercial transactions.

The term 'transactions' refers to exchanges between a company and its suppliers or customers. These can be other companies ("B2B" – business-to-business), consumers ("B2C" – business-to-consumers), or governments ("B2G" – business-to-government). In the broad sense, transactions include commercial as well as other exchanges, such as sending tax return forms to the tax authorities. In the context of this study on e-business, transactions are predominantly commercial business transactions (see boxes for definitions).

Glossary

Definitions by standardisation groups (ISO, ebXML)

The term "business transaction" is a key concept underlying the development of e-standards for B2B exchanges. Therefore, definitions have been developed by the various standards communities as an underpinning for their practical work. Examples are:

Business: "a series of processes, each having a clearly understood purpose, involving more than one party, realized through the exchange of information and directed towards some mutually agreed upon goal, extending over a period of time [ISO/IEC 14662:2004]

Business transaction: "a predefined set of activities and/or processes of

parties which is initiated by a party to accomplish an explicitly shared business goal and terminated upon recognition of one of the agreed conclusions by all the involved parties even though some of the recognition may be implicit" [ISO/IEC 14662:2004]

e-Business transaction: "a logical unit of business conducted by two or

more parties that generates a computable success or failure state [ebXML Glossary]

If transactions are conducted electronically ('transactions'), this constitutes e-Commerce. Transactions can be broken down into different phases and related

business processes, each of which can be relevant for e-Commerce. The pre-sale (or pre-purchase) phase includes the presentation of (or request for) information about the offer, and the negotiation about the price. The sale / purchase phase covers the ordering, invoicing, payment and delivery processes. Finally, the after sale / purchase phase covers all processes after the product or service has been delivered to the buyer, such as after sales customer services (e.g. repair, updates).

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Exhibit 1-2: Process components of transactions

Pre-sale / pre-purchase phase

Sale / purchase phase After sale / purchase

phase

Information about offer Price comparisons Negotiations between

seller and buyer

Placing an order Invoicing Payment Delivery Customer service Guarantee management Credit administration Handling returns

Practically each step in a transaction can either be pursued electronically (online) or non-electronically (offline), and all combinations of electronic and non-electronic implement-ation are possible. It is therefore difficult to decide which components actually have to be conducted online in order to call a transaction (as a whole) ‘electronic’.

In this context, during 2000 the OECD proposed broad and narrow definitions of electronic commerce both of which are still valid and useful:13 While the narrow definition focuses on 'internet transactions' only, the broad definition defines e-Commerce as "the

sale or purchase of goods or services, whether between businesses, house-holds, individuals, governments, and other public or private organisations, conducted over

computer-mediated networks. The goods and services are ordered over those

networks, but the payment and the ultimate delivery of the goods or service may be conducted on- or offline" (OECD, 2001).

Glossary

Definition of key terms for this study

e-Transactions: Commercial exchanges between a company and its suppliers or customers which are conducted electronically. Participants can be other companies ("B2B" – business-to-business), consumers ("B2C"), or governments ("B2G"). This includes processes during the pre-sale or pre-purchase phase, the pre-sale or purchase phase, and the after-sale / purchase phase.

e-Commerce: Electronic Commerce. The sale or purchase of goods or

services, whether between businesses, house-holds, individuals, govern-ments, and other public or private organisations, conducted over computer-mediated networks. (OECD)

e-Business: Electronic Business. Automated business processes (both intra- and inter-firm) over computer mediated networks. (OECD)

e-Interactions: Electronic Interactions include the full range of

e-Trans-actions, and in addition collaborative business processes (e.g. collabor-ative design) which are not directly transaction focused.

13_{In 1999, the OECD Working Party on Indicators for the Information Society (WPIIS) established}

an Expert Group on Defining and Measuring Electronic Commerce, in order to compile definitions of electronic commerce which are policy relevant and statistically feasible. By 2000, work of the Group had resulted in definitions for electronic commerce transactions.

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The addendum regarding payment and delivery is an important part of the definition, but can be debated. The difficult question is which processes along the different transaction phases constitute e-Commerce and which do not (see Exhibit 1-2). The OECD definition excludes the pre-sale or purchase phase and focuses on a specific part of the sale / purchase phase, namely the ordering process. e-Business W@tch follows the OECD position on this issue.14

e-Commerce, defined in this way, is a key component of e-business, but not the only one. In recent years, it has been increasingly acknowledged among policy and research communities that the focus on e-commerce transactions may be too narrow to capture the full implications of e-business. A wider, business process oriented focus has been widely recognised. Reflecting this development, the OECD WPIIS15_{proposed a (broader)} definition of 'e-business' as "automated business processes (both intra-and inter-firm)

over computer mediated networks" (OECD, 2004, p. 6). In addition, the OECD proposed

that e-business processes should integrate tasks and extend beyond a stand-alone or individual application.

This definition reflects an understanding of business that encompasses more than e-commerce transactions. The broad concept of e-business also includes the digitisation of

internal business processes, as well as cooperative or collaborative processes

between companies which are not necessarily transaction-focused. Collaborative e-design processes between business partners are a typical example from industrial engineering. The OECD definition implicitly indicates that the focus and main objective of electronic business is to be found in business process automation and integration, and the impacts thereof.

To bridge the gap between 'e-Commerce' and 'e-Business', it was proposed in earlier years (mainly around 2000) to use the term 'c-Commerce' (collaborative commerce). Although this concept was rather abandoned when the new economy bubble burst, it has some value as it stresses the role of ICT for cooperation among enterprises. If web service and other emerging technologies (e.g. RFID, mobile applications) hold their promise, the digital integration of B2B trading processes could be taken to a new level, possibly with a considerable impact on industry structure. If so, it could be worth revisiting the former 'c-Commerce' concept.

e-Business and the company's value chain

Given the broad concept of e-Business applied for this study, which concentrates on business processes and a company's interactions with its environment, some further structuring and mapping of processes is necessary. Michael Porter's framework of the company value chain and value system between companies (Porter, 1985) is still valid and useful in this context, although dating back 20 years to the pre-e-business era.

14_{This is reflected in the updated wording of the respective survey questions in 2006, when for}

"placing / accepting online orders" was asked instead for "purchasing / selling online".

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A value chain logically presents the main functional areas ('value activities') of a company and differentiates between primary and support activities. However, these are "not a collection of independent activities but a system of interdependent activities", which are "related by linkages within the value chain" (p. 48). These linkages can lead to comp-etitive advantage through optimisation and coordination. In fact, it is exactly here that ICT have a major impact, as they are a key instrument to optimise linkages and thus increase the efficiency of processes.

The value system expands this concept by extending the perspective beyond the single company. The firm's value chain is linked to the value chains of (upstream) suppliers and (downstream) buyers, resulting in a larger set of processes – the value system. e-Commerce, i.e. electronic transactions, occurs within this value system.

Exhibit 1-3: Value chain framework of a company by Michael Porter

Operations Outbound_Logistics _{and sales}Marketing Service Inbound

Logistics

Primary activities

Procurement Technology development Human Resources ManagementFirm infrastructure

Support activities

Operations Outbound_Logistics _{and sales}Marketing Service Inbound

Logistics

Primary activities

Procurement Technology development Human Resources ManagementFirm infrastructure

Support activities

Source: Adapted from M.E. Porter (1985) – simplified presentation

Key dimensions of this framework (notably inbound and outbound logistics, operations, and the value system) are reflected in the Supply Chain Management (SCM) concept. Here, the focus is on optimising the procurement-production-delivery processes, not only between a company and its direct suppliers and customers, but also aiming at a full vertical integration of the entire supply chain (Tier 1, Tier 2, Tier n suppliers). In this concept, each basic supply chain is a chain of sourcing, production, and delivery processes with the respective process interfaces within and between companies.16_The analysis of the digital integration of supply chains in various industries has been an important theme in sectors studies previously prepared by e-Business W@tch.

16_{cf. SCOR Supply-Chain Council: Supply-Chain Operations Reference-model. SCOR Version}

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e-Business and innovation

A very important aspect for e-Business W@tch studies is the link between ICT and innovation. The European Commission places great emphasis on the critical role of

innovation for European businesses in order to stay competitive in the global economy.17

On the other hand, a strong competitive pressure provides powerful incentives for companies to continuously engage in innovation and R&D. Thus, innovation, competition and competitiveness are closely intertwined.

ICT have been identified and widely recognised as a major enabler of innovation, in particular for process innovation. According to the e-Business W@tch survey 2006, 75% of those companies that had introduced new business processes in 2005 reported that this innovation was directly related to or enabled by ICT.

In many cases, the implementation of e-business processes in a company will const-itute a process innovation in itself. In manufacturing sectors, e-business has triggered significant innovation inside the companies, notably in supply chain and delivery proc-esses, such as automatic stock replenishing and improved logistics. In service sectors such as tourism, the innovative element is more evident in the way that external trans-actions are accomplished. For example, if a company starts to sell its services online, this can imply innovation in the service delivery process and in customer communication. In some sectors, particularly in ICT manufacturing, consumer electronics and telecommunications, ICT are also highly relevant for product innovation.

However, as more companies strive to exploit the innovation potential of ICT, it becomes more difficult for the individual company to directly gain competitive advantage from this technology. e-Business is becoming a necessity rather than a means to differentiate from competitors.18 In addition, the introduction of innovation can cause substantial costs in the short and medium term, as it may take time before the investments pay off. This causes challenges in particular for small and medium-sized companies. It is one of the reasons why e-Business W@tch focuses on such challenges in its sector studies (see also ‘Policy Background’ in chapter 1.1).

17_{See, for example, "An innovation-friendly, modern Europe". Communication from the}

Commission, COM(2006) 589, 12 October 2006.

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2 Context and Background

2.1 Sector definition – scope of the study

This sector study on F&B by e-Business W@tch focuses on those sub-sectors which deal with the production of processed food (versus first transformation of agricultural products). The following table shows the detailed business activities covered by the analysis.

Exhibit 2-1: Business activities covered by the construction industry (NACE Rev. 1.1)19

NACE Rev. 1.1

Group(s) Class(es) Business activities

DA 15 Manufacture of food products and beverages 15.43 Manufacture of margarine and similar edible fats

15.5 Manufacture of dairy products

15.51 Operation of dairies and cheese making 15.52 Manufacture of ice cream

15.6 Manufacture of grain mill products, starches and starch products 15.61 Manufacture of grain mill products

15.62 Manufacture of starches and starch products 15.8 Manufacture of other food products

15.81 Manufacture of bread; manufacture of fresh pastry goods and cakes 15.82 Manufacture of rusks and biscuits; manufacture of preserved pastry

goods and cakes

15.84 Manufacture of cocoa; chocolate and sugar confectionery 15.85 Manufacture of macaroni, noodles, couscous and similar

farinaceous products 15.86 Processing of tea and coffee

15.87 Manufacture of condiments and seasonings

15.88 Manufacture of homogenized food preparations and dietetic food 15.89 Manufacture of other food products n.e.c.

15.9 Manufacture of beverages

15.91 Manufacture of distilled potable alcoholic beverages 15.92 Production of ethyl alcohol from fermented materials 15.94 Manufacture of cider and other fruit wines

15.97 Manufacture of malt

15.98 Production of mineral waters and soft drinks

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Scope of the analysis

The selected sub-sectors broadly correspond to the so-called “non Annex I goods”. The term Annex I refers to the first Annex of the EC Treaty of Amsterdam, which is the legal basis for the Common Agriculture Policy and lists all agricultural products which are subject to a Common Market Organisation in the framework of the Common Agricultural Policy. Agricultural products are therefore called Annex I products.

In contrast, what is commonly referred to as “non Annex I goods”, are the so-called

Processed Agricultural Products. They are made from agricultural products, but are not

subject to the Common Agriculture Policy. They encompass products such as processed dairy food, prepared food, sweet drinks, biscuits and bakery products and other preparations. In a way, processed foods can be regarded as “value-added products": raw commodities (e.g. fruit, vegetables) are transformed into processed products by using materials, labour and technology, to be finally marketed to consumers.

Analysis presented in this report focuses, to a large extent, on companies from the downstream part of the agri-food value chain. However, setting a clear border between the various activities of food transformation along the value chain and between companies themselves is not possible in all cases.

Business activities

The F&B industry presents some unique characteristics, the most important of which are the complex value chain and the heterogeneous nature of the different players (e.g. farmers, input suppliers, manufacturers, packagers, transporters, exporters, wholesalers, retailers and final customers). The need for coordination and synchronization of such different entities is hindered by their different business interests, cultural attitude and size. Generally speaking, production is organised in small batch processes implying a very complex organisation and coordination of different activities. The characteristics of many food products as perishable goods largely affect the way products are managed and delivered along the value chain.

2.2 Industry background

2.2.1 Size of the EU food and beverage industry

In 2004, the EU-25 food and beverage industry as a whole (i.e. the entire NACE Division DA 15) had a turnover of 815 billion euros, transforming over 70% of EU’s agricultural raw materials and employing about 3.9 million people, of whom the majority works in SMEs.

France, Germany, Italy, the UK and Spain are the largest EU-25 producers with more than 70% of total EU turnover. Among the EU Member States, the leading country by turnover in 2004 was France with 138 billion euros, followed by Germany with 130 billion.

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Germany was the country with the highest employment in this industry (about 520,000 workers), followed by Spain (430,000) and France (418,500).

In total, turnover of F&B companies in the EU increased by 2% in 2004 (compared to 2003), while the workforce decreased by nearly 5% in the same period.

Exhibit 2-2: The F&B industry in the EU-25

2001 2002 2003 2004 2004/2003

Turnover € billion 785 791 799 815 +2.0%

Employees million 4.4 4.2 4.1 3.9 -4.9%

Source: Eurostat, CIAA (2005)

There are about 282,000 companies in this sector. The structure is very diversified, ranging from small enterprises, often family-owned, to major multinationals. About 95.5% of companies are micro and small enterprises.

Exhibit 2-3: Structure profile of the F&B industry according to the size of companies (%)

Micro comp. Small companies Medium companies Large companies 1 to 9 10 to 19 20 to 49 50 to 99 100 to 249 250 to 499 500 to 999 1000+ Turnover 7.3 5.1 9.8 9.5 16.8 15.4 14.0 22.1 Value added 8.8 6.2 8.9 8.3 15.0 13.8 14.5 24.6 Employees 16.4 9.6 11.1 9.3 15.1 12.1 10.8 15.9 Companies 78.9 11.0 5.6 2.1 1.5 0.6 0.2 0.1 Source: Eurostat (2001) Industry structure

SMEs account for about 62% of the workforce employed in the F&B industry and for about 49% of the sector's turnover. This indicates that the productivity is higher among larger enterprises. In fact, labour productivity in micro enterprises, measured by the value added per employee, is only about one third of the productivity in large firms. In 2001, the average productivity was about € 40,000 per employee.

Despite its numerous small firms, the industry is dominated by a small number of very big players. Exhibit 2-4 lists the leading European companies that operate in F&B industry.

Turnover by sub-sector

The group of “other food products” (NACE 15.8), which includes bakery, pastry, chocolate, pasta, baby food and confectionery products, is the leading sub-sector within the F&B industry. It accounts for 26% of total turnover and 42% of the workforce. The key branches of this category are “bread, fresh pastry goods and cakes” (31%) and “chocolate and sugar confectionery” (18%). Exhibit 2-5 shows the distribution of turnover and value added for some of the sub-sectors, depending on the size of companies.

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Exhibit 2-4: Ranking of F&B companies by sales, 2004-2005 Name Head-quarter European F&B sales € billion F&B Employees (in 1000) Main sectors Nestlé CH 23.4 95.0 multi-product

Unilever NL/UK 17.9 - multi-product

Cadbury Schweppes UK 9.9 24.5 beverages, confectionery

Danone FR 9.4 22.5 multi-product

Associated British Foods

UK 8.2 25.8 sugar, starches, prepared foods Scottish & Newcastle UK 7.3 15.2 alcoholic beverages

Heineken NL 7.1 - beer

Diageo UK 5.7 - alcoholic beverages

Carlsberg DK 4.8 - beer

Südzucker DE 4.8 17.5 sugar, prepared foods

Allied Domecq UK 4.7 12.0 alcoholic beverages

InBev BE 4.7 - beer

Tate & Lyle UK 4.7 6.7 sweetener, starches

Ferrero IT 4.6 16.6 confectionery

Bongrain FR 4.6 16.0 dairy

Kerry Group IR 4.1 21.7 multi-product, ingredients

Nutreco NL 4.1 12.6 meat

Pernod Ricard FR 3.8 12.2 alcoholic beverages

Campina NL 3.6 7.1 dairy

Oetker-Gruppe DE 3.5 15.1 multi-product

Vanisco DK 3.4 9.2 ingredients

Ebro Puleva ES 2.2 6.7 rice, sugar, dairy

Wessanen NL 2.1 8.4 prepared foods

Sab Miller UK 2.1 10.2 beer

Parmalat IT 1.9 6.5 dairy, snacks, beverages

Source: CIAA (2005)

Exhibit 2-5: Distribution of the EU-25 turnover value added and employment in the F&B industry, according to the size of companies ( %)

Turnover Value Added

Number of employees 1 to 9 10 to 249 +250 1 to 9 10 to 249 +250

Processed fruit and vegetables 5.0 46.9 48.1 3.5 43.4 53.1

Oils and fats 7.8 35.1 57.1 9.6 35.1 55.3

Dairy products 3.0 34.8 62.2 3.3 29.4 67.3

Flour and starch products 8.5 52.3 39.2 6.3 47.0 46.7

Animal feed 6.2 59.3 34.5 5.3 54.8 39.9

Various food products 12.2 34.4 53.4 14.5 35.8 49.7

Beverages 4.9 36.2 58.9 3.0 32.1 64.9

F&B industry20 7.3 41.2 51.5 8.8 38.4 52.8

Source: Eurostat (2001)

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International trade

Exports outside the EU-25 account for 5.5% of total turnover. The main destination market was USA, followed by Japan and Russia. “Beverages” and “various food products” sectors account for 55% of total exports.

Exhibit 2-6: EU-25 key trade figures in the F&B industry (€ million)

_{2002 2003 2004}_2004/2003

Export 45.0 43.5 45.1 3.7

Import 38.0 37.6 40.7 8.2

Balance 7.0 5.9 4.4 -25.4

Source: Eurostat (2005)

Although from 2003 to 2004 exports increased by 3.7%, the trade balance shows an overall negative trend over the past three years. In these years, European producers suffered from high oil prices and the rise in value of the euro against other currencies. From 2003 to 2004, EU-25 imports grew by 8.2%, with Brazil, Argentina and USA being the main trading partners.

Exhibit 2-7: Origin and destination of the EU-25 F&B products (€ million)

Destination Countries €M Origin Countries €M

USA 10.1 Brazil 4.7

Japan 3.6 Argentina 3.8

Russia 3.5 USA 3.0

Switzerland 3.0 China 1.7

Canada 1.5 Switzerland 1.5

Norway 1.3 New Zealand 1.4

Australia 0.9 Turkey 1.4

South Korea 0.9 Norway 1.2

Algeria 0.6 Australia 1.2

Croatia 0.6 Chile 0.9

Rest of the world 19.1 Rest of the world 19.9

Total 45.1 Total 40.7

Source: Eurostat (2005)

2.2.2 Trends and challenges

The F&B industry is one of the major pillars of the European economy, accounting for about 13% of total manufacturing. At the international level, the competition from low labour cost countries outside Europe is increasing, due in part to the high price of domestic agricultural raw materials. On the other side, the gradual deregulation of access to world markets, and increasing demand for processed food products in Asian countries, also create new opportunities for European companies.

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In the domestic markets, the competitive scenario of this industry is rapidly changing. Pressure of regulation is getting increasingly stringent, driven by consumers’ awareness of quality and safety issues, along with the unfortunate occurrence of food safety crises across Europe and world-wide.

There is, then, the growth of private label products which menaces the share of major brands. Major manufacturers need to respond to the growth of private labels by increasing product innovation and by increasing their own brand equity.

Currently, the main factors that have an important impact on the EU industrial compet-itiveness and drive e-business technology challenges can be summarised as follows.

Changing relations with distribution and price-led competition

Food manufacturers are facing the increasing bargaining power of the distribution system. Major distributors have tended to concentrate and to internationalise orders and are demanding improved quality and services as measured by shorter order-to-delivery cycles. Changes in supplier-retailer relationship are also putting pressure on prices, and manufacturers, in turn, are demanding reduced prices from their suppliers.

This penalises SMEs and favours industry concentration into a few sophisticated suppliers that support the requests of the modern distribution system and its more demanding industry value chain. This scenario pushes small and medium sized enterprises to increase collaboration with larger companies, to reach the market or to position their product to niche markets such as is very typical in the case of the food industry.

These trends are reshaping the scenario of the food industry. Manufacturers are being forced to become more efficient in order to cut costs, and to cooperate more closely with their business partners.

Development and control over brands

While large manufacturers have been developing mega-brands (products available throughout all Europe) in order to achieve dominant market positions and to exploit economies of scale in marketing and sales, large retailers have invested on developing their private labels. This has led to a paradoxical situation: presently, large retail distribution chains are often the main competitors of their large suppliers. Private labels tend to be comparable in terms of quality, and they often imitate leading products, but can be offered at lower prices. They have also gained consumers’ trust, as retailers have direct contact with customers and can invest in loyalty building. The growth of private labels has reduced the equity of major suppliers’ brands.

Food manufacturers can only respond by investing in research and innovation. Another strategy, which is increasingly being used, is the rationalisation of the product portfolio, which leads to concentration on a few "cash cows", i.e. a limited number of the most profitable products. A supportive ICT application in this field is PLM (Product Lifecycle Management) which is discussed in Section 4.1.

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Evolving consumers’ needs and requirements

Consumers’ tastes and requirements are evolving and are shaping food suppliers’ strategies. Concerns are rising over health issues, animal treatments, and workers’ welfare in less developed countries. New requirements are the results of changing demographics: older consumers with special needs; single people and two-income families requiring quick-to-prepare food; health-conscious consumers demanding functional food, such as nutraceutical.21

The food safety issue and the regulatory pressure

Food safety is a major focus in the EU. Consumers’ awareness about food safety and quality has increased dramatically over the past years. This is the result of general changes in consumers’ attitude towards health as well as the result of a series of food crises across Europe and world-wide.

ICT, and particularly the internet, play an important role in this context, as they have substantially increased information transparency. Public authorities and consumer protection organisations can easily publish information related to food safety and specific products (e.g. test results) on the internet, which greatly empowers consumers.

This development is gaining momentum; countries are considering or have already implemented (see the Danish example in the box) various schemes for indicating to what extent shops and restaurants comply with recommendations and stipulations regarding quality and safety; indirectly, this has of course important implications for food producers, since the quality of the products they deliver to shops or restaurants is a precondition for meeting the requirements.

As a result, consumer needs are rapidly evolving with respect to innovative products, safety and quality; this does not compromise, however, the demand for product diversity and convenience at the best prices.

Impacts of safety incidents are disruptive not only at individual company level but also at industry and even at country level. These trends have driven this industry to invest in control and accountability within the supply chain, including the setting up of systems for traceability, and labelling, such as RFID tagging.

21_{A nutraceutical is any substance that is a food or a part of a food and provides medical or health}

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Policy example

"Smileys" - The Danes' guide to shops and restaurants

The Danes have introduced "Smileys" as a simple system to help consumers choose where to shop for food or to dine. The Smileys tell consumers how well shops and restaurants comply with the food regulations.

The Danish Veterinary and Food Administration (DVFA), which is part of the Ministry of Family and Consumer Affairs, is responsible for the inspections and the resulting award of Smileys. DVFA deals with food safety and health from farm to fork.

The Smiley-scheme, which was launched in 2001, has become highly popular among consumers as well as enterprises, and has proved effective in raising food safety. The Smileys appear at the top of the official food inspection reports that must be displayed visibly near the entrance in all food shops and restaurants. The Smileys are also easily found on the internet. 81% of the consumers say they would reject a restaurant with a bad Smiley. Of the relatively few respondents who have actually encountered a bad Smiley, 56% chose to eat somewhere else. 83% of the enterprises agree that the scheme is 'a good or very good idea'.

Source: DVFA (www.uk.foedevarestyrelsen.dk/Forside.htm)

Public Authorities are responding to food safety concerns by imposing tougher legislation. Since January 2005, firms are required to provide ”one back-one forward” traceability and to make information available to the authorities if required. On January 1st 2006, the so called hygiene package came into force. This legislation was adopted in 2004 to set down stricter, clearer and more harmonised rules on the hygiene of foodstuffs, specific hygiene rules for food of animal origin, and specific rules for controls on products of animal origin intended for human consumption.

Under the food hygiene legislation, the onus is placed on food operators to ensure that food reaching EU consumers is safe. The operators have to apply compulsory self-checking programmes and follow the Hazard Analysis and Critical Control Point (HACCP) principles in all sectors of the food industry. Presently, in order to comply with safety requirements, the main challenge for F&B companies is the ability to integrate their information systems with track and trace technologies like RFID.

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Exhibit 2-8: Overview of competitive trends and related challenges in the F&B industry

Competitive trends Challenges Relevant e-business

applications

Changing relations with distribution and price-led competition

Cost effective supply chain; integration of the supply chain

CRM, SCM, ERP, mobile applications

Development of mega brands and private labels

Investments in innovation and rationalisation of the product portfolio

PLM (Product Lifecycle Management), CRM Food safety concerns,

regulatory pressure

Traceability along the value chain ERP, SCM, RFID Changing demand patterns Innovation, supplier-retailer

co-operation to exploit consumption data, demand forecasting

CRM

Source: Databank (2006)

2.3 Review of earlier sector studies

The e-Business Survey 2005 results highlighted the polarisation that existed between large and small and medium enterprises, relative to their differing adoption rates of e-business tools. These differences accentuated and were attributed to the structural organisation of the F&B industry. However, growing competition, the retail power and legislative requirements, such as those linked to traceability of products, were highlighted as important drivers for the organisational and technological developments of firms in the sector over the following years.

The report concluded that firms’ operational excellence was increasingly linked to the use of e-business, aiming at process integration and digitisation of relations with suppliers and customers. On the one hand, companies were found to be aware of the need to align corporate organisation and culture with technological change. ICT vendors were aware of the industry’s need and created suitable programmes to respond to this need.

It was also concluded, however, that an important trend was to work not only on internal processes (production, logistics and finance), but increasingly towards provider and customer network integration. Relevant ICT systems in this context were found to be extranet, middleware, SCM (Supply Chain Management) and CRM (Customer Relation-ship Management), taking into account the emphasis on business networks in which companies find themselves, rather than in traditional chains.

ICT and e-business

The e-Business Survey 2005 results confirmed the inadequacy of basic infrastructure for the majority of micro and small firms, their limited awareness for ICT issues, and a general lack of ICT skills within the industry.

The inadequacy of their ICT infrastructures contributed to the weak competitive market position of SMEs. This situation could be attributed to several factors, such as requests for scaled technological investments and the relatively low level of specific training and

Food_2006

ICT and e-Business in the

Food and Beverages

Industry

ICT adoption and e-business activity in 2006

ICT and e-Business in the

Food and Beverages

Industry

ICT adoption and e-business activity in 2006

Sector Report No. 1 / 2006

Table of Contents

Executive Summary

1

Introduction

1.1

About

e-Business W@tch

1.2 "e-Business" – the conceptual framework

2

Context and Background

2.1

Sector definition – scope of the study

2.2

Industry background

2.2.1

Size of the EU food and beverage industry

2.2.2

Trends and challenges

2.3

Review of earlier sector studies