Food And Beverages Industry

The food and beverages industry is all companies involved in processing raw food materials, packaging, and distributing them. This includes fresh, prepared foods as well as packaged foods, and alcoholic and nonalcoholic beverages. Any product meant for human consumption, aside from pharmaceuticals, passes through this industry. The industry is fragmented. The production in this industry is divided among a few different companies, however, no single firm has large enough share of the market to be able to influence the industry's direction or price levels.

The primary demand drivers of the industry includes demographic shift (particularly trends in population and age, household size, and disposable income) and consumer tastes while profitability drivers includes good product mix, efficient operations, superior service and effective marketing. It is highly labour intensive with low use of capital.

The industry is divided into two major segments. Those two segments are production and distribution of edible goods. Production includes the processing of meats and cheeses and the creating of soft drinks, alcoholic beverages, packaged foods, and other modified foods. The production segment of this industry excludes foods that were directly produced via farming and other forms of agriculture, as those are encompassed by our definition of the agriculture industry. Distribution involves transporting the finished food product into the hands of consumers. The industry is much more focused on technology and mechanical manipulation of raw foods to create more value-added food products than the agricultural industry.

In the distribution segment of this industry; SYSCO, US Foodservice, and McLane Company are the major companies. In the processing segment; diversification and expansion has led to companies being involved in many different markets. PepsiCo is a major part of the beverage and, with their Frito-Lay brand, food processing segment. Nestle is the world’s largest food conglomerate and Kraft and its subsidiaries are very involved as well. In addition to PepsiCo, the nonalcoholic beverage is dominated by Coca-Cola and Dr. Pepper-Snapple. The big companies in the alcoholic beverage market are Anheuser-Busch InBev, MillerCoors, and Diageo.

Due to the recent economic meltdown, consumers are looking to save as much money as possible. One major way that consumers are doing so is by purchasing more  generic foods  and making their own meals, not going out to eat. This is causing food processing companies to become more innovative to decrease the cost of goods sold, attract more customers, and increase profit margins.

The large amount of obesity in the world has a major effect on the food and beverage industry. There has been an increase in demand for health foods and more informative nutritional labeling. Both of these trends have caused companies to release lower calorie foods and to better control how their brand is viewed. Companies want to be viewed as a healthy brand and are promoting activities, such as youth sports, that show this healthy image. There also is mention of a tax on foods known to lead to obesity in order to curb consumers’ usage of them.

The food and beverage industry has seen their profit margins decrease recently. However, due to the falling cost of commodities, these margins should increase in the coming years. Food is a necessary part of life and will always be needed. Those are some reasons why this industry has an above average outlook.

For further information check 

http://globaledge.msu.edu/industries/food-and-beverage