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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

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u s food manufacturing

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.

U.S. Food Manufacturing

EconS 451: Lecture #2

Source: U.S. Food Marketing System, 2002, ERS-USDA

u s food manufacturing processing definition
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.

Source: U.S. Food Marketing System, 2002, ERS-USDA

a value added business
A Value-Added Business

Source: U.S. Food Marketing System, 2002, ERS-USDA

nominal value of processed food shipments
Nominal Value of Processed Food Shipments
  • Indication of a mature market

Source: U.S. Food Marketing System, 2002, ERS-USDA

where the value added by manufacturers occurred
Value added = Shipment Value - Cost of Production

Ratio of Value Added = 1-(Value Added / Shipment Value)

Meat

Dairy

Fats / Oils

Where the Value Added by Manufacturers Occurred

Ratio of Value Added

All < 30%

http://www.ams.usda.gov/mnreports/nw_ls410.txt

  • Bakery Products
  • Beverages

All > 60%

Source: U.S. Food Marketing System, 2002, ERS-USDA

unique agriculture attributes
Unique Agriculture Attributes

Source: U.S. Food Marketing System, 2002, ERS-USDA

primary commodities under contract
Primary Commodities Under Contract
  • Sugar Cane
  • Market Eggs
  • Potatoes
  • Fresh Veg.
  • Hatching Eggs

Production Contracts

Ownership Integrated

Marketing Contracts

  • Sugar Beets
  • Processed Veg.
  • Broilers
  • Hatch Eggs
  • Potatoes
  • Sugar Cane
  • Market Turkeys
  • Milk
  • Citrus Fruits
  • Other Fruits/Nuts
  • Dry Beans / Peas

Source: U.S. Food Marketing System, 2002, ERS-USDA

concentration continues top four firm market share
Concentration Continues:Top Four Firm Market Share

Source: U.S. Food Marketing System, 2002, ERS-USDA

mergers and acquisitions
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_company/index.html

Source: U.S. Food Marketing System, 2002, ERS-USDA

number of acquisitions divestures
Number of Acquisitions / Divestures

Source: U.S. Food Marketing System, 2002, ERS-USDA

new food products introduced into market
New Food Products Introduced into Market

Source: U.S. Food Marketing System, 2002, ERS-USDA

type of nutritional claims
Type of Nutritional Claims

Source: U.S. Food Marketing System, 2002, ERS-USDA

relationship between coupon distribution and redemption
Relationship between Coupon Distribution and Redemption

Source: U.S. Food Marketing System, 2002, ERS-USDA

imports exports and fdi
Imports, Exports and FDI

Source: U.S. Food Marketing System, 2002, ERS-USDA

other manufacturing changes
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.)

Source: U.S. Food Marketing System, 2002, ERS-USDA

summary
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.

Source: U.S. Food Marketing System, 2002, ERS-USDA

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