U.S. Food Manufacturing

1
U.S. Food Manufacturing

• EconS 451 Lecture 2

• Understand what comprises the Food
  Manufacturing/Processing Industry.
• Understand the changes occurring within this
  industry and the resultant implications.
• Specifically
• Which food types receive the greatest value-added
  throughout the manufacturing process.
• Recent mergers / consolidation
• Prevalence of production contracts,
  owner-integration and marketing contracts per
  product type.
• Identify recent trends in new product offerings
  and those bearing nutritional claims.
• Understand the degree of direct foreign
  investment and recent changes to the trade
  deficit.

2
U.S. Food Manufacturing /Processing Definition

• All firms and establishments that manufacture or
  process foods or beverages for human consumption
  and
• Other related products such as manufactured ice,
  chewing gum, vegetable and animal fats/oils and
  prepared feeds for animals and fowl.

3
A Value-Added Business
4
Nominal Value of Processed Food Shipments

• Indication of a mature market

5
Where the Value Added by Manufacturers Occurred

• Value added Shipment Value - Cost of Production
  
• Ratio of Value Added 1-(Value Added / Shipment
  Value)

Ratio of Value Added

• Meat
• Dairy
• Fats / Oils

All lt 30
http//www.ams.usda.gov/mnreports/nw_ls410.txt

• Bakery Products
• Beverages

All gt 60
6
Unique Agriculture Attributes
7
(No Transcript)
8
Primary Commodities Under Contract
Production Contracts
Ownership Integrated
Marketing Contracts

• Sugar Beets
• Processed Veg.
• Broilers
• Hatch Eggs
• Potatoes
• Sugar Cane
• Market Turkeys

• Sugar Cane
• Market Eggs
• Potatoes
• Fresh Veg.
• Hatching Eggs

• Milk
• Citrus Fruits
• Other Fruits/Nuts
• Dry Beans / Peas

9
Concentration ContinuesTop Four Firm Market
Share
Processing Type Early 1980s Mid-1990s
Red Meat Packing 47 63
Steer/Heifer Slaughter 70 81
Hog Slaughter 30 57
Pasta 42 78
Malt Beverages 77 90
Dairy Co-ops 17 27
Private Dairies 39 42
10
Mergers and Acquisitions
http//www.newint.org/issue172/facts.htm
http//en.wikipedia.org/wiki/Philip_Morris
http//money.cnn.com/magazines/fortune/fortune500/
snapshots/562.html
http//www.kelloggcompany.com/kelloggco/our_compan
y/index.html
11
Number of Acquisitions / Divestures
12
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13
New Food Products Introduced into Market
14
Type of Nutritional Claims
15
Relationship between Coupon Distribution and
Redemption
16
Imports, Exports and FDI
17
Other Manufacturing Changes

• Total Employment slightly growing in food
  processing industry
• Meat Processing accounts for 30
• Fruit and Veg. Processing accounts for 13
• Bakery Products 12
• Cost of Inputs Decreases between 1997-2000
• 12 Less for crude foodstuffs
• 4 Less for intermediate materials (packaging,
  etc.)

18
Summary!

• Total U.S. Food Manufacturing accounts for about
  2 of GDP, the total food and fiber system is
  about 12 of GDP.
• Proportion of disposable income spent on food
  continues to drop while total value of all
  processed food shipments remains relatively flat.
• Concentration in the food processing sector has
  increased.
• New food products introduced into the market have
  declined since 1995.
• Those new food products that have been introduced
  focus on specific nutritional / health claims.
• Food coupon redemption rates are very low.
• Trade deficit in U.S. Food Manufacturing grows.