How US food processors have reacted to the GFC

The food processing industry is generally thought to be recession proof because of the old adage ‘everyone has to eat’ but the global financial crisis (GFC) has affected the US food industry.

Even before the GFC US food processors were facing rising prices, shrinking margins and growing concerns over quality and reliability. Manufacturers responded by trying to make their operations as efficient as possible. Some raised their prices, some lowered their profit expectations - all tried to reduce and control their costs.

In the US, as forecast, overall sales held up fairly well but there have been major shifts in consumer behaviour that has impacted food manufacturers. Restaurant sales have decreased, fast-food sales remained static and grocery sales have increased. Private-label sales have increased at the expense of brand name items.

The companies that have been proactive in dealing with their cost structures and have focused on improving their efficiency are well positioned to benefit as market conditions improve. The companies with cash or access to credit chose to invest in process improvements, closely followed by investment in new and upgraded equipment and automation. It was also judged to be an ideal time to acquire smaller companies that would expand their capacities.

The major market force was ‘going green’. Organic and locally grown foods, sustainable agriculture, fair trade practices, energy-efficient equipment and transport and eco-friendly packaging are the leading trends. The force behind these trends has not been consumer driven; rather it has been straight-forward cost reductions, assisted in part by tax credits.