Now appears to be a time of unique opportunities in the food and beverage industry for instrument companies.

Not only have recent

headlines raised awareness about and demand for greater food safety and analysis, but new research and quality control methods

have enabled faster, more efficient analysis with higher sensitivity. A growing regulatory environment and increasingly specialized

instruments for the food industry's needs have intersected, leading the food industry to rely more than ever on analytical

instrumentation.

The food and beverage industry accounted for approximately $1.26 billion in analytical instrument sales in 2000 for lab and process

applications. Approximately 24% of instruments sold to the food and beverage industry are used for R&D applications, with the

remaining 76% used for process/on-line analysis and testing. Liquid phase chromatography and molecular spectroscopy account for

the largest percentage of instruments utilized in this industry. However, the categories of instruments experiencing the fastest

growth rate for this market are bioinstrumentation, mass spectrometry and physical property instrumentation. Not only have

advances in these techniques for life science applications been applied to the food and beverage market, but, in the case of physical

property techniques, the need for more specialized analyses have been met.

As safety concerns have resulted in an increase in testing and analysis, the industry has also capitalized on emerging biotech

techniques. Consolidation within the food industry, as well as increasing competition and development of new products, has led to

increased R&D efforts and more efficient and productive analytical methods and process techniques. These developments, in

combination with the emphasis on automation, molecular biology and more powerful instrumentation in the instrument industry, have

opened the door for new food and beverage applications.

With BSE (Mad Cow disease) and GMOs in the headlines, and the public's greater concern about health and nutrition in general,

both the food industry and government regulators worldwide have found increased analysis and testing to be a necessary step for

enhanced consumer satisfaction. Just this month the FDA announced changes to its policies on GMOs, imported foods and

unpasteurized juices. The proposed rule on GMOs would require advanced notification of the sale of foods containing GMO

ingredients and voluntary guidelines for labeling, signaling the higher scrutiny applied to GMO products. With regard to imported

foods, the FDA announced greater oversight for the safety of imported foods, including the establishment of standards for labs

testing such foods. For unpasteurized juices, the FDA instituted stricter safety measures. Although the FDA has clearly indicated a

proactive effort at food monitoring, a new administration could change this. However, if consumer concerns remain the final arbiter

in the government's regulatory role, the current direction of the regulatory environment is assured.

Already companies such as Strategic Diagnostics and Genetic ID have benefited from providing solutions for GMO testing. Genetic

ID has partnered with governmental agencies and private companies to provide its DNA-based technology for GMO testing and has

set out to establish global standards for GMO testing through its Global Laboratory Alliance. Strategic Diagnostics estimates

revenues for its fourth quarter of 2000 to grow 150% over a year ago due in large part to its StarLink test kits. Both companies

illustrate the urgent testing and verification needs of the food and beverage industry and how fast a market for such testing can take
off. GeneScan Europe and Motorla's Clinical Micro Sensors are developing a DNA detection tool for GM crops. Instrument

companies have also seen opportunities in the market. PerkinElmer has targeted the food industry with its Hypure electrophoresis-

based system.

Among other new regulations recently introduced that could result in more testing and analysis is the Dept. of Agriculture's final

standards for organic foods, which requires the chemical analysis of agricultural samples under specified circumstances. The

standards outlaw the use of synthetic pesticides and fertilizers as well as antibiotics and synthetic growth hormones in foods labeled

"organic," as well as specifies labeling requirements. Although organic foods make up only 2% of food sales, sales are growing at

over 20% a year. Likewise, nutritional labeling has gained a higher priority. For example, Australia and New Zealand recently

instituted mandatory nutritional labeling.

Indeed, the heightening concern regarding food testing and analysis and consequent growing market for it is worldwide. The Mad

Cow outbreak in Europe, which recently prompted the mandatory testing of all cattle in the EU over 30 months old, illustrates the

level of consumer anxiety and regulatory changes. Under new rules proposed by the European Commission (EC) this summer, food

operators in Europe will hold the primary responsibility for food safety. The results are expected to include greater use of the Hazard

Analysis Critical Control Point (HAACP) method and better record keeping. In addition, the EC has approved the establishment of

an agency similar to the FDA with an estimated initial budget of $34.4 million.

Both Mad Cow disease and GMOs have upped the ante in regards to food safety as well as research. The Mad Cow scare has

fueled new business for some companies. A week following Bio-Rad's announcement of an increase in sales of BSE diagnostic

tests, the company's stock rose 22%. The company estimates $2 million in revenue from the tests since November 1999. In

December 1999, Tecan announced the expedited introduction of its fully automated BSE testing platform in response to the

increase in testing. The companies' positioning themselves in relation to this market demonstrates the advantages of adapting

existing techniques to the food and beverage industry's need.

But the regulatory environment is not a one-way street; new food analysis technologies have not only enabled increased

regulations, but have shaped the form such regulations have taken. The Center for Disease Control now uses pulsed-field gel

electrophoresis as part of its PulseNet program to track and compare pathogens. In addition, the speed and accuracy of nucleic acid

amplification kits have made GMO and pathogen testing faster and more accurate, enabling stricter monitoring. In addition, utilizing

thermal cyclers, gel electrophoresis and DNA sequencing instruments, companies such as Applied Biosystems have been able to

bring new testing options to the food and beverage industry that have influenced regulatory methods.