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Food Industry Overview - History of Food Industry

LMSB-04-0207-018

"This document is not an official pronouncement of the law or the position of the Service and cannot be used, or cited, or relied upon as such."

2. History of Food Industry

As it exists today, the domestic food and beverage industry is a very competitive and mature industry with little domestic growth. Increases in a company’s market share usually come at the expense of a competitor’s loss of market share (cannibalization). Overall most growth comes from international expansion.  With the passage of NAFTA and GATT, many domestic companies are either entering into alliances with foreign entities, or acquiring them.  There are many reasons for this.  For example, much domestic food and beverage companies want to take advantage of existing distribution systems, or underutilized plant capacity.  Some acquisitions may be motivated by Federal income tax considerations.

From the time that agriculture began about 7,000 years ago to the present there have been many important developments that are responsible for the state of the industry as it is today.  The following events have had a major impact on where the industry is today. 

 

Event

Explanation

IRRIGATION

The use of some form of irrigation is well documented throughout the history of civilization. It has enabled food production to occur in areas previously too hostile for plants and to counter the effects of drought.

INDUSTRIAL REVOLUTION

Resulted in mass production of food products at lower cost and consistent characteristics.

FOOD PRESERVATIVES

Classified into two main groups, antioxidants that delay or prevent the deterioration of foods by oxidative materials and antimicrobial agents that inhibit the growth of spoilage and pathogenic microorganisms in food.

PACKAGING

Tinned products came to America in 1822 and allowed food to be stored for long periods of time.  Some packaging processes were developed to enable Napoleon’s armies to carry war to distant areas and remain well fed.

PASTEURIZATION

A partial sterilization accomplished by raising milk to a temperature high enough to destroy pathogenic bacteria.  This process allows milk to remain consumable for about 14 days if refrigerated in closed containers.

TRANSPORTATION

First, railroads and barges, then trucks and air transportation have enabled many food products to be enjoyed in regions where food cannot be grown.  Many locally grown food products can be consumed globally (bananas, fish, fruit, etc.).

PESTICIDES

Enabled farmers to significantly increase yield.

NUTRITION

In the 1950’s and forward, nutrition became a major concern for production/consumption.  The emphasis on eating healthy has spawned a new market segment; for example organic foods, low-fat foods and healthy foods all enjoy healthy margins and increased demand.

All of the aforementioned technological developments have played a major role in the evolution of the food and beverage industry.  There have also been some business developments that have had an impact on the current state of the industry.

 

Event

Explanation

FUTURES MARKETS

Many food manufacturers participate in the futures markets by entering into futures contracts to “hedge” against price fluctuations for their inventories of raw materials. 

GOVERNMENT AGENCIES

OSHA and the FDA, have had a dramatic effect on the meat and food processing plants. They have helped ensure safety in production and consumption.

PRODUCT BRANDING

Branding of products is accomplished by extensive advertising, in many instances this product advertising costs more than the cost of production.  Branding is partially responsible for the emergence of radio and television (soap operas).

FRANCHISING

In the 1950’s and 1960’s, the concept of franchised restaurants was promoted.  This enabled franchisers to expand with limited capital investment.

MERGERS and ACQUISITIONS

In the 1980’s there were many mergers and acquisitions of food and beverage companies.  This trend continues today.  Many companies are actively buying and selling brands like baseball teams trade players.

Chapter 1 | Table of Contents | Chapter 3

Page Last Reviewed or Updated: 05-Mar-2014