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Despite challenges, food industry remains strong

October 1, 2006
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The American food and beverage industry continues to be an economic powerhouse, accounting for $500 billion in US gross output, according to Grant Thornton LLP's new white paper "Appetite for Change: Trends and transitions in the US food and beverage industry."





The white paper says food and beverage manufacturers face the same challenges as other industries, including the effect of rising gas prices on transportation costs, the necessity to reduce operating expenditures, and the need to manage industry-wide consolidation.

The paper identifies three trends that should help drive industry growth: renewed focus on product development and innovation; continued demand for "good for you" and ethnic foods; and opportunities with foreign markets.

Approximately 85 percent of respondents indicated no one retailer accounted for more than 10 percent of their revenues-a dramatic confirmation that retailers are carrying fewer product lines and brands and are catering to customers with limited financial resources. This offers opportunities for no frills and private label products, says Grant Thornton.

Expansion in the food and beverage is likely to come from industry consolidation. Roughly three-fourths of food and beverage firms report that they anticipate an increase in merger and acquisition in 2006.

While food and beverage manufacturers expect to face price pressures from upstream supply chain providers, a study early in spring 2005 found that nearly all food and beverage plants (95 percent) paid more for raw materials and components than in the past year. Yet, just 65 percent indicated that the prices they charge their customers had increased. For more information, visit www.grantthornton.com.

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