Food and beverage manufacturing
Food and beverage manufacturing plants transform raw agricultural materials into products for intermediate or final consumption by applying labor, machinery, energy, and scientific knowledge. Some products may serve as inputs for further processing (such as syrup for manufacturing soda). In 2011, these plants accounted for 14.7 percent of the value of shipments from all U.S. manufacturing plants. Because intermediate inputs (primarily agricultural materials) account for a relatively large share of food and beverage manufacturers' costs, value added in food and beverage manufacturing represents a slightly smaller share (13.7 percent) of value added in all manufacturing.
Meat processing includes livestock and poultry slaughter, processing, and rendering, and is the largest single component of food and beverage manufacturing, with 24 percent of shipments in 2011. Other important components include dairy (13 percent), beverages (12 percent), grains and oilseeds (12 percent), fruits and vegetables (8 percent), and other food products (11 percent). Meat processing is also the largest component (17 percent) of the food sector's total value added, followed by beverage manufacturing (16 percent).
There are many food and beverage processing establishments (plants) in the U.S.—almost 30,000 owned by about 24,500 companies in 2007, according to the most recent comprehensive data in the Census Bureau's 2007 Economic Census.
These plants employed about 1.5 million workers in 2011 (about 14 percent of all U.S. manufacturing employment and just over 1 percent of all U.S. nonfarm employment). The meat processing industry employed the largest percentage of food and beverage manufacturing workers in 2011 (32 percent), followed by bakeries (17 percent), and fruits and vegetables (11 percent).
Food and beverage processing plants are located throughout the United States. According to the Census Bureau's County Business Patterns (CBP), California had the most food and beverage manufacturing plants (4,514) in 2010, while New York (2,186) and Texas (1,774) were also leading food and beverage manufacturing States. The number of processing plants for various industry segments are also reported in County Business Patterns.
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Food processing plants
Food processing plants include many small local plants and relatively few large plants. However, large plants account for the major portion of shipments. In 2007, small plants (0-19 employees) accounted for 66 percent of all plants, but only 4 percent of the total value of shipments. On the other hand, large plants (100 or more employees) accounted for 77 percent of shipment value in 2007, but only 12 percent of plants.
Consolidation is occurring in many food processing industries, where plant sizes have increased sharply and mergers have led to fewer but larger companies. In many cases, changing processing plant technologies and the emergence of new scale economies has facilitated consolidation. When market demand grows slowly, increased consolidation can lead to increased concentration (fewer competitors). ERS researchers examined the role of changing technology and demand on structural changes in nine food processing industries (see Structural Change in the Meat, Poultry, Dairy, and Grain Processing Industries).
Concentration in several processing industries raises questions about market power in the sale of agricultural products and about the effects of concentration on innovation and productive efficiency. Consolidation in beef and pork slaughter has been of special interest to policy officials given the historically high and growing rates of concentration. For example, the four largest steer and heifer slaughter firms have increased their share of slaughter to 85 percent in 2010, after remaining between 78 and 81 percent between 1998 and 2009. For a historical account of the nature and causes of consolidation in U.S. meatpacking industries and the effects of meatpacking consolidation on producer and retail prices, see Consolidation in U.S. Meatpacking.
From 1997 to 2007, the four-firm national concentration ratio in the fluid milk industry increased from 21 percent to 46 percent. In 2007, there were 21 percent fewer fluid milk processing plants than in 1997, processing 26 percent more milk per plant. Structural changes in fluid milk processing are occurring at the same time as rapid consolidation in milk production. From 1997 to 2007, 43 percent fewer farms produced over twice as much milk per farm.
Methods of vertical coordination are also changing, with a shift away from the use of spot markets toward greater reliance on contracting in some grains and in livestock (see reports in the Agricultural Contracting Update series).
Vertical Coordination in the Pork and Broiler Industries: Implications for Pork and Chicken Products traced the spread of contracting in the pork and broiler industries, related to earlier changes in broiler production, and identified reasons for the growing reliance on contracts in place of spot market purchases. ERS also examined a small sample of actual contracts used by pork processors to explore how contracts address growing concerns over pork quality (see Pork Quality and the Role of Market Organization).