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The American Food Processing Industry
The American food industry generates approximately one trillion dollars a year in sales. Though the industry exercises a high level of financial, political and cultural power in the United States, it is at the same time extremely sensitive to public opinion. Major food industries have, for example, successfully lobbied for years against what they consider onerous nutritional labeling requirements. At the same time, many of the larger operators, seeing an excellent potential market in health-oriented foods, have themselves acquired or even started up their own “natural” foods subsidiaries. Forward-looking marketers have been adroit in turning challenges into opportunities.
A case in point involves baking-giant Nabisco, producer of Oreo sandwich cookies, a product so well known and well-loved in America that it even frequently appears on crossword puzzles. The trans-fats used to manufacture Oreos added greatly to the cookie’s distinctive taste, consistency and ease of manufacture. When trans-fats became the focus of health issues, and after litigation and public pressure on the subject, scientists at Nabisco’s parent company Kraft were faced with the task of eliminating the trans-fats from Oreos and other products without altering the taste and feel of this culturally important food item.
The Kraft team undoubtedly had the example of Coca-Cola’s disastrous introduction of “New Coke” in 1985 in mind; public outcry then against the new taste of the product led to a quick re-introduction of the beverage’s original formula as “Coke Classic.” Kraft’s size and its ability to invest 100,000 people hours in the project, led to a successful reintroduction of an Oreo with no trans-fats. Tasting panels could taste hardly any difference; American children gave no complaints. Turning pressure into profit, Kraft’s elimination of trans-fats from its Triscuit crackers, also with no diminution in taste and consistency of the product, led to a significant increase in Triscuit sales. The new requirements that trans-fat content be conspicuously displayed on food labels turned a threat into an advertising opportunity.
Ironically, the new Oreos have the same level of calories and calories from fat as the old Oreos. They are still “fattening,” on anyone’s diet. In the general battle against obesity, the number one public health problem in the United States, the food industry cannot be expected to take a leadership role (except in the production of diet foods, whose effect on the public health is speculative at best). The numbers are simple: the more people eat, the more food the companies sell. Nevertheless, industry leaders have started to give way to the inevitable need to accommodate the issue, initially on the school nutrition front. In October 2006, The Alliance for a Healthier Generation, a major initiative of the William J. Clinton Foundation and the American Heart Association (spearheaded by former-President Bill Clinton), announced a voluntary agreement by five major snack food manufacturers (Campbell Soup Company, Dannon, Kraft Foods, Mars and PepsiCo) to set certain standards for snack foods sold in schools, by vending machines or other means. The guidelines coordinate with education efforts, all with the aim of getting school children to eat lower calorie, more nutrition-rich foods and to have more balanced diets overall.
Free-market and libertarian theorists may argue that the public can pick and choose among a wide variety of foods; if the public is fat, that is the public’s concern. Food industry critics maintain that at least in the case of the nation’s children, the food industry has the responsibility to lead them into healthier gustatory directions. Food industry lobbyists are adroit at influencing federal and state agencies and legislatures, yet public concerns, needs, and pressure can have surprising results, as in the trans-fats and school nutrition cases. The industry and its critics (with the government caught in between) will undoubtedly battle it out for years over the issues of genetically modified organisms (GMO), sodium content of foods, nutritional labeling disclosure, governmental nutritional guidelines, additives, truth in advertising, and food security.
Issues of food safety can affect the food industry in a dramatic way; the American meat industry lost billions as a result of the discovery a handful of “mad cow” animals; E. coli contamination of the country’s spinach led to millions of dollars of losses in only a few short weeks. Commodity supply issues can also affect major production food companies; the increasing use of both sugar cane and grains for the production of E85 ethanol motor fuel has sent cost ripples through the industry. Drought and climate and well as energy supply issues come into play. The major players in the American food industry are finding it more and more difficult to maintain sales and earnings growth.
The true weak point of the American food industry in relation to its ability to control patterns of public consumption is its dependence on recognized brand names for foods both processed and fresh. Providers of private-label products, including the supermarket chains, mega-retailer Wal-Mart, and warehouse chains such as Costco, have over the years cut into the dominance of brand-name products. The growing market for artisanal foods has allowed small players often to compete on the basis of quality rather than on price and brand saturation. Brands—and there are too many of them—do not have the pull and marketing clout they once had.
The top American food company in 2005 was Tyson Foods, originally a chicken processor that branched out into beef, pork and a wide range of prepared food products. Tyson’s 2005 food sales (though down from 2004) reached nearly 24 billion dollars.
Close behind Tyson stood American food icon Kraft Foods, many of whose brands are true household names in the United States: Chips Ahoy cookies, Louis Rich meats, Maxwell House coffee, Cracker Barrel cheese, Oscar Mayer meats, Planters nuts, Good Seasons salad dressings, Oreos, Nabisco, Grey Poupon mustard, Velveeta spread, Jell-O, Kool-Aid, Sanka coffee, Shake ‘N Bake, Ritz crackers, Minute Rice, Miracle Whip and dozens more.
PepsiCo, with brands like Pepsi, Aunt Jemima pancakes, Lipton Iced Tea, Frito-Lay snacks, Mountain Dew, Tropicana orange juice, and Rice-A- Roni, nosed up an aggressive third on the list, exceeding 20 billion dollars in sales.
Nestle, producers of Baby Ruth, Stouffer’s Lean Cuisine, Chase & Sanborn and Hills Bros. coffee brands, Carnation milk, Contadina tomato products, Coffee Mate, Ortega Mexican-style foods, and many more, ranked fourth (counting its American business alone; Nestle is an international food giant).
Dairy conglomerate Dean Foods, whose brands include Sealtest, Aunt Jane’s, Dairy Ease, Hoffman House, Coburg, and Horizon Organic, ranked fifth.
General Mills, known for such brands as Betty Crocker, Pillsbury, Progresso Italian foods, Biscuick, Old El Paso Mexican-style foods, and numerous breakfast cereals including Cheerios, Kix, Trix, Chex, Wheaties, Raisin Bran, Lucky Charms, Total, Cocoa Puffs and Golden Grahams, ranked sixth.
Other major food conglomerates—all giants—include Smithfield Foods (pork processors), Con
Agra Foods (Healthy Choice, Chef Boyardee, Orville Redenbacher’s popcorn), Swift
(meats), Campbell Soup, Sara Lee Corp (Ballpark Franks, Jimmy Dean meats, Hillshire Farm
meats, Sara Lee baked goods), Kellogg (cereals), Coca-Cola, Dole (fruits), Pilgrim’s Pride
(poultry), Cargill (grains, meats and prepared foods), Hormel (meats), Mars (candy and
confections), Hershey Foods (chocolate), and H.J. Heinz (canned foods and condiments).
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