There is no question that a lot of people have left (or fled?) the food industry.  I discussed with one of my large processors in Philadelphia how few meat processors are left in the city. Six years ago we counted less than ten and the market has continued to shrink.  Today we will look at the major factors that have organizations throwing in the towel.


Who Will Survive?

The ability to maintain margins is critical to survival.  There are a lot of reasons for this but one crucial measure is to generate enough revenue/margin to keep pace with required investments.

Automation and the labor factor.
There is lots of talk today about how robots will be taking jobs in the future. Although replacing wage workers can be a positive for employers many object to the investment it takes to get the automation. One of my processors that does a ton of bacon pays over $100,000 for a good bacon slicer. According to the LA Times last week:

A White House report released in December says 83% of U.S. jobs in which people make less than $20 per hour are now, or soon will be, subject to automation. Additionally, thanks to the new marvel of driverless vehicles, all the underemployed folks who have found a slot driving for Uber and Lyft may soon find themselves redundant. And not just them. Driverless long-haul trucks are rolling into view, too. The White House study projects that as many as 3.1 million drivers of all kinds — cabbies, truckers, chauffeurs, bus drivers — could be made obsolete by the technological revolution in just a few years.

At the margins a lot of guys earn these investments are too much to make, but go into a Tyson plant and tell me what you see.

Squeezed Out by the Big Guys
The big guys continue to get bigger.  We have talked about the consolidation tactics companies like Hormel and Tyson use. You saw what happened when SYSCO tried to buy US Foods, that was stopped by the Government. Smaller guys that don’t find their niche will continue to be squeezed out of the market.

Differentiation is key to survival. The specialty food market continues to grow. Just recently announced is the expansion of the pork processor in New York State Deft Blue LLC just got a block grant from the state to help them grow. They provide pork products to Blue Apron and Applegate Farms and Wegmans Markets Northeast stores. A great example of being different than the other guys. You have got to find ways to be different and get bigger.

SURVIVE BY BEING DIFFERENT AND MAKING THOSE REQUIRED INVESTMENTS



Issue 586 - Where have all the people gone?

Sunday, at the Fancy Food Show for opening day, as I was going through the booths I mentioned to my companion, “The show seems quiet, but it is opening day.” In today’s newsletter we’ll discuss that phenomena and what it might mean for the food industry at large.

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