Food and beverages - Industry Overview
The food and beverage industry became the nation’s largest major manufacturing sector in 1992 with shipments of more than $377 billion, surpassing the transportation equipment industry. In 1993, the constant-dollar value of shipments for the total food and beverage industry (SIC 20) is expected to rise 1.5 percent, up slightly from a 1.4 percent increase in 1992.
Shipments of the 24 industries covered in this chapter increased an estimated 1.7 percent in 1992, corrected for inflation. Only dairy products, the meat and poultry group, and candy products experienced any significant growth-3 percent or more. Processed fruits and vegetables, soft drinks, and bakery products each expanded less than 2 percent.
Foreign food and beverage makers are likely to react unfavorably to proposed changes in U.S. food labeling requirements. The new labeling, which is required for all packaged foods, covers such topics as nutrition information, serving size, health messages, and descriptive terms such as “light” and “low fat.” The U.S. Food and Drug Administration (FDA) and the U.S. Department of Agriculture (USDA) share responsibility for food labeling along product lines. The USDA covers meat and poultry, and the FDA handles all other products.
Effective May 1994, new labels will be required on all packaged foods. Newly labeled products will appear on store shelves later in 1994. The new labels will feature a standardized section (yet to be made final) requiring specific, comparable treatment of key elements, such as serving size. All food products must conform to these requirements. Due to the complexity and extended coverage of the new requirements, it appears likely that most manufacturers will have to design new labels rather than modify existing ones.
The labeling requirements may prove especially difficult for many foreign food manufacturers, especially firms unaccustomed to such extensive product analysis and disclosure. Some industry observers contend that the new requirements constitute a barrier to trade and could be challenged in the General Agreement on Tariffs and Trade (GATT). In contrast, defenders of the requirements observe that all manufacturers, both domestic and foreign, must comply equally, and that the labeling rules are the result of a well-accepted need to improve U.S. health standards. These observers believe that any GATT challenge to the new regulations will be dismissed.
INTERNATIONAL COMPETITIVENESS
In 1992, for the first time since at least 1978, there was a trade surplus in processed food and beverages–an estimated $22.2 billion in exports, 5.9 percent of product shipments, compared to an estimated $21.1 billion in imports.
About 72 percent of total U.S. processed food and beverage exports are low value-added products such as fats and oils, feed ingredients, corn products, meat, poultry and fish products, while 45 percent of U.S. imports are high value-added consumer-ready products such as confections, bakery goods, alcoholic beverages, and various gourmet fruit and vegetable products. However, exports of higher value-added products grew more rapidly than lower value-added products between 1990 and 1992. This trend will continue for the foreseeable future. Total U.S. food and beverage exports grew 23 percent during the 1990-92 period. Exports of condensed and evaporated milk almost tripled. Canned and frozen specialties exports rose 75 percent. Bakery product exports rose 65 percent. Candy and beverage exports increased 48 percent and 23 percent, respectively.
The cumulative stock of foreign investment has influenced the structure of the U.S. food manufacturing industry through consolidation (Table 3). Foreign investors have especially affected the bakery and dairy industries, introduced new products, such as European-style cookies and soft-ripened cheeses, and modernized plants. With the latest comparable data from 1987, the ratio of the stock of foreign investment to the gross book value of the U.S. food manufacturing industry stood at 19.8 percent, up from 11.3 percent in 1982. The stock of investment by foreign parties in the U.S. food manufacturing sector grew 1.9 percent in 1991, to $23.4 billion. A recessionary U.S. economy slowed this growth from its average 19 percent annual rate of increase in the 1980’s.
As total red meat demand declines, the meat packing industry is undergoing retrenchment. Between 1982 and 1987, based on the 1987 Census of Manufactures, the number of companies in the red meat industry fell 10 percent to 2,562 companies. Also, the number of Federally inspected meat plants has declined 25 percent since 1987. The number of major red meat processors that also produce poultry products nearly tripled from 11 in 1982 to 32 in 1992, according to Meat & Poultry’s “Top 100 Meat and Poultry Companies” list.
Imports represented 4.6 percent of U.S. apparent consumption, which is defined as product shipments and imports, minus exports. The dollar value of red meat imports fell an estimated 1 percent from $3.09 billion in 1991 to $3.06 billion in 1992.
While imports of pork from Canada increased in 1992, imports from the EC and Eastern Europe declined. Continued strength in EC pork prices and weak U.S. prices have made it more difficult for Danish and Dutch products to compete in the United States. Also, continued restructuring of agriculture in Eastern Europe and the instability in the former Yugoslavia have resulted in substantial declines of imports from those areas.
Although beef imports were up significantly during the first half of 1992, estimated imports for the year were about the same as the previous year. Sixty-five percent of meat imports were beef products, while 32 percent were pork products.
Pork exports to Japan, accounting for an estimated 73 percent of the export market in 1992, rebounded from slumping levels of a year earlier. Future sustained growth is questionable. The United States boosted exports following the “Nagoya Connection” scandal, in which five Taiwanese companies falsified import documents to evade Japanese taxes. Japan suspended business with the Taiwanese companies. U.S. exporters picked up market share.