Product Diversification by Food Manufacturing Firms

The food processing sector of the U.S. economy is changing at a pace matched by only a few other large sectors in the economy. This segment of the economy has grown rapidly in terms of sales, employment, advertising, and assets. Consumers spent $91.3 billion on food products in 1966--almost 20 percent of total personal consumption expenditures. The labor force is over 10 times greater in food manufacturing than in petroleum refining and more than twice that of the motor vehicle and parts industry. In 1961, advertising expenditures of the food and kindred products (excluding alcoholic beverages) industries substantially exceeded those of tobacco manufactures, petroleum products industries, and the motor vehicle industry. Between 1947 and 1961 food manufacturing corporations with assets of $50 million or more increased their share of the total food industry assets from 36.6 percent to 47.6 percent. Simultaneously the number of food manufacturing companies declined from 40,000 to 32,000. Many businessmen, government officials, economists, and others have raised questions as to the causes of these trends and about their ultimate effects on competition in the food industry. A second somewhat related trend has also been underway in recent years. This is the tendency for firms engaged primarily in manufacturing food product lines to expand the number of these lines and, in many instances, to add lines in areas other than food. Conversely, some nonfood manufacturers have added food product lines in recent years. This article will describe the current product diversification changes occurring in these industries, using Census data and the limited research studies and other source materials available at this time.