The food and beverage industry is an essential part of the US economy. Between agriculture, manufacturing, retail, and food service, the sector makes up roughly 5% of the country’s GDP and 10% of employment. Its sales total $1.4 trillion.
According to a report by the US Committee for Economic Development, the food and beverage industry consists of close to 27,000 organizations and employs almost 1.5 million people. While growth is relatively low, the market has been more stable than other US manufacturing industries, as demand for food remains steady. The price of agricultural commodities has also stayed low and consistent, contributing to this stability.
While food and beverage profit margins are traditionally small, they are not expected to shrink further in the coming years. There is a considerable amount of price competition in the industry, which contributes to the narrow profit margins as companies compete to offer the most appealing deals in order to gain market share. Because of the competitive nature of the market, there have been many mergers and acquisitions in recent years. This is expected to continue and even accelerate as companies look for ways to sustain themselves in the highly competitive environment.
Food and beverage industry trends
American food preferences are shifting. The population is becoming more health-conscious, demanding more natural and organic products and consuming less packaged and heavily processed food. Consumers are eating less meat, fat, and sugar. Despite this increased focus on healthy diets, however, demand for fruits and vegetables has not risen. The focus has been more on the type and source of the produce rather than the quantity.
US consumers are also concerned with sustainability, and are becoming increasingly willing to pay more for products from environmentally friendly and socially responsible companies. Green packaging, locally and responsibly sourced materials, and water and energy efficiency are all factors that are gaining more attention and demand. While these can be expensive to implement, the market will bear higher prices for them, and they can provide an edge by which to increase market share.
E-commerce and delivery are also growing in popularity. With such high internet penetration and growing demand for convenience, consumers are increasingly ordering groceries and other food products online. Services such as Amazon Fresh are growing in number, allowing consumers to shop for fresh produce without leaving the house. Subscription services are another popular fad, with everything from snacks to specialty products to meal kits that come with everything needed to cook a meal from scratch.
Upcoming challenges
Consumer confidence in food safety in the US has fallen, with over two-thirds of Americans being concerned about safe production and roughly 40% changing their diets because of these concerns, according to a recent survey by the International Food Information Council Foundation. The CDC estimates that produce causes almost half of contamination incidents in the country, while beef and poultry are responsible for almost a third of food-related deaths. Industry players must combat both public perception and actual safety issues in order to compete.
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