source: u.s. food marketing system, 2002, ers-usda u.s. food manufacturing econs 451: lecture #2...
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Source: U.S. Food Marketing System, 2002, ERS-USDA
U.S. Food ManufacturingEconS 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.
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Source: U.S. Food Marketing System, 2002, ERS-USDA
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.
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Source: U.S. Food Marketing System, 2002, ERS-USDA
A Value-Added Business
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Source: U.S. Food Marketing System, 2002, ERS-USDA
Nominal Value of Processed Food Shipments
• Indication of a mature market
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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
• Bakery Products
• Beverages
All < 30%
All > 60%
Ratio of Value Added
http://www.ams.usda.gov/mnreports/nw_ls410.txt
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Source: U.S. Food Marketing System, 2002, ERS-USDA
Unique Agriculture Attributes
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Source: U.S. Food Marketing System, 2002, ERS-USDA
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Source: U.S. Food Marketing System, 2002, ERS-USDA
Primary Commodities Under Contract
• Sugar Cane
• Market Eggs
• Potatoes
• Fresh Veg.
• Hatching Eggs
• Sugar Beets
• Processed Veg.
• Broilers
• Hatch Eggs
• Potatoes
• Sugar Cane
• Market Turkeys
Production Contracts Ownership Integrated Marketing Contracts
• Milk
• Citrus Fruits
• Other Fruits/Nuts
• Dry Beans / Peas
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Source: U.S. Food Marketing System, 2002, ERS-USDA
Concentration Continues:Top Four Firm Market Share
Processing Type Early 1980’s Mid-1990’s
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%
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Source: U.S. Food Marketing System, 2002, ERS-USDA
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
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Source: U.S. Food Marketing System, 2002, ERS-USDA
Number of Acquisitions / Divestures
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Source: U.S. Food Marketing System, 2002, ERS-USDA
Acquisitions / Divestures
0
50
100
150
200
250
300
1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000
Year
#
Foreign Acquisitions
Total Divestures
U.S. Acquisitions
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Source: U.S. Food Marketing System, 2002, ERS-USDA
New Food Products Introduced into Market
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Source: U.S. Food Marketing System, 2002, ERS-USDA
Type of Nutritional Claims
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Source: U.S. Food Marketing System, 2002, ERS-USDA
Relationship between Coupon Distribution and Redemption
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Source: U.S. Food Marketing System, 2002, ERS-USDA
Imports, Exports and FDI
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Source: U.S. Food Marketing System, 2002, ERS-USDA
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.)
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Source: U.S. Food Marketing System, 2002, ERS-USDA
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.