State of the Food Industry 2011: End of Recession Changes Everything … or Nothing

U.S. food industry faces a tough road ahead.

By Diane Toops, News & Trends Editor, and Dave Fusaro, Editor in Chief

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Focus on health and wellness is on the rise again as a point of differentiation for retailers, according to FMI. Pre-recession, the vast majority of retailers described its impact on their marketing and merchandising as profound. In 2010, 74.3 percent of retailers said it is one way they seek differentiation in the marketplace, up from 68.4 percent in 2009, but below the 84.9 percent in 2008. Perhaps that indicates retailers' efforts in health and wellness are subject to price and value in the current marketplace.

Grocers are addressing health and wellness in their stores in a number of ways, including: promoting healthy items from both fresh and dry grocery; educating consumers on nutritional values of food products; and marketing healthy products and events with a team of registered dietitians in the community and through media outlets.

China – three ways
It seems every business category is dealing with the subject of China in some way. In the food & beverage industry, it cuts both ways; three, in fact.

According to the USDA's Economic Research Service, the Chinese purchased more than $14 billion worth of U.S. food in 2009, surpassing Mexico and Japan to become the second-largest destination for American food exports behind Canada. That's a doubling of U.S. food purchases by the Chinese in just three years. There is no other country whose appetite for U.S. food exports is growing faster than China's.

On the other hand, China also is the third largest source of U.S. agricultural and seafood imports, according to the USDA's Economic Research Service. U.S. imports of Chinese agricultural and seafood products increased roughly fourfold, from $1 billion in 1997 to $4.9 billion in 2007.

In 2009, seafood imports from China accounted for 517 thousand metric tons or 22 percent of the total U.S. imports, and 25 percent of whole fish imports now come from China. In 1978, China accounted for 14 percent of frozen fish filets; just 30 years later, it accounted for 49 percent.

Produce imports from China grew from $2 million in 1998 to almost $75.4 million in 2009 and China was the second largest source of U.S. preserved vegetable imports in 2007, with a total import share valued at 20 percent.

China's capital investment in processing facilities helped to achieve its export status. A great illustration is its apple juice concentrate exports. In 1998, Chinese fruit juice exports to the U.S. were valued below $30,000; in 2009, these imports neared $357 million, making China the largest exporter of fruit juices, mainly apple. Today, two-thirds of our apple juice comes from China, wrote Supermarket Guru Phil Lempert.

China also has become a significant ingredient supplier to the U.S. As we reported in our February 2008 report, Ingredients from where?, some 80 percent of the world's ascorbic acid comes from China. So is 40 percent of the world's xanthan gum.

That cover story of ours came after several 2007 food contamination incidents that occurred or originated in China. A four-month crackdown in that country resulted in the closure of 3,191 unlicensed and substandard food and ingredient makers, the seizure of 4.9 million tons of banned pesticides, prosecution of corrupt government officials (including at least one execution) and a government pledge to spend $1 billion on food safety over the coming two to three years. China now has track and trace, and the FDA has opened offices in that country to ensure the safety of food and ingredients destined for America.

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