Unit 1.docx

Bring about changes in consumption away from home

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bring about changes in consumption - away from home meals and snacks capture almost half of the US food dol- lar - fast food accounts for the fasting rising share of sales in the food industry - convenience is most important Allied Industries - companies that do not sell food directly but are deeply involved in the food industry - packaging industry, chemical manufacturers, food machinery and equip- ment manufacturers, monitoring and regulatory agencies - allied industries produce non-food items that are necessary for marketing food - if recent trends continue, food production may be increasingly dominated by firms exercising control over most and even all stages of food produc- tion
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- food industry firms form three basic types of vertical coordination: 1. Open production: a firm purchases a commodity form a producer at a market price determined at the time of purchase 2. Contract Production: a firm commits to purchase a commodity from a producer at a price formula established before the purchase is made 3. Vertical integration: a single firm controls the flow of a commodity across two or more stages of food production - discriminating consumers plus new technological developments are help- ing lower open production, increase contract production and vertical inte- gration International Activities - food is a global commodity because of changes in export and import laws, transportation, and processing and communication - easily recognized US food brands are so well received internationally that many consumers in other countries accept them as leading local brands - in terms of international trade, the processed-food sector surpasses agri- cultural commodities by a considerable margin - recent trends to decrease trend tariffs has stimulated international activi- ties in the food industry Responsiveness to Change - more than 10,000 new food products are introduced each year - food people eats changes for many reasons: demographic shifts, supplies of ingredients, availability and costs of energy, politics and scientific ad- vances in nutrition, health, food safety, changes in lifestyle, attitudes to- wards foods - changes in governmental regulation of food additives, food composition standards, and labelling also require the food industry to continually change - technological innovations such as ingredient modifications, new processing methods, new packaging methods, and cooking advances also force the in- dustry to respond Interrelated Operations - throughout production, manufacturing, processing, distribution, and mar- keting, costs and ingredient availabilities are carefully monitored and con- trolled - because the industry is high volume and low markup, small losses any- where along the chain can mean large losses to the food producer - firms at one stage of production exert control over the quality of output at other stages gain more control - vertical coordination caused increased concentrations in the food sector - these developments raise policy concerns: market power in the process- ing sector and environmental protection
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