This is a great time to be in food manufacturing

by Morton Sosland
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Reading an expert’s opinion on the retail business as, "It is a great time to be Wal-Mart," the temptation is great to say the same about food manufacturing by declaring, "It is a great time to be a food manufacturer." In both instances, "great" needs qualification, since the current times provide little basis for satisfaction, much less elation, for anyone experiencing the recession-prone global economy. Yet, like the world’s largest retail chain and its marketing strategies uniquely positioned to do well in the face of a global downturn, no other industrial or agricultural sector is better situated than food manufacturing not just to weather the current troubles, but also to do well when so many other businesses are suffering setbacks that threaten their futures.

Hardly anything affirms this opinion more powerfully than the way that food manufacturing has never been seriously mentioned among the sectors needing special assistance from the federal government. As the bail-out targets seems to be broadening with each passing week, the food industry should be grateful that its underpinnings are strong enough and its margins good enough to mean that it does not even have to worry about federal intervention. That is very different from the situation ruling during the Great Depression of the 1930s, an era that is often cited as analogous to what is now occurring around the world, when the agricultural and food industry, along with banks, became the centerpiece of the economic lifeline cast by the administration of President Franklin Roosevelt.

How different that is from the current transition from President George W. Bush to President-elect Barack Obama in two weeks’ time. Indeed, it seems likely that no one in the old or new administrations is even paying much, if any, attention to food-related issues. Yet, it may even be a good guess that the new president, at his inauguration, or soon after, will point to food and agriculture as a source of bedrock strength at this particularly trying time in the American and global economy. If he has any part of the economy to be grateful for, this is it. Only about half a year earlier, soaring food prices might have been considered a highly worrying factor in sapping consumer purchasing power. Comparisons could have been made with sky-high gasoline and fuel prices as an indirect and burdensome tax on purchasing power. Those worries have faded on the food side largely because of the way that farmers, encouraged by the marketing and manufacturing sectors, responded to prices in expanding production enough to ease price pressure.

In contrast to the breakdowns, to the ill-conceived financial engineering, to the absence of skilled management that might be blamed for the severe financial turmoil, the food industry stands as a beacon of efficiency and of intelligent responses to the current travail. Thanks to their proven ability to deal with fast-moving and wildly gyrating markets, food manufacturers know that they must be prepared for unimagined events and emergencies. In reality, it could be said that no industry came face-to-face with this business downturn better prepared than the food industry, which had experienced its own sort of hell in the preceding year. The credit tightness that is a root cause of the overall economic slowdown has had its impact on the food industry, but here, too, the effect has been much less severe than endured by other businesses that were not as ready as food manufacturing for dealing with a worldwide recession.

Even while issues directly of concern to the food industry probably will not even reach the agenda of the Obama administration in its opening weeks and months, the industry needs to maintain a watch on how it will be affected by actions taken in an effort to move swiftly to reverse the course of the economy. Many issues that might seem remote or beyond the purview of food manufacturing may suddenly become matters of urgent concern as detailed plans evolve. Much needs addressing in areas of food safety and regulation, as it does in obvious areas like taxes and regulations dealing with unions and employees. Important questions are being asked about the way the new president will address global trade matters where his views expressed in the past have been among his most troubling economic stances.

Even as strong as food manufacturing is, especially in comparison to many other industries, even as optimistic as the most seasoned observer of food wants to be about how the industry will fare in the year that is just beginning, sight must not be lost of the reality of the global turmoil that is all about. Food manufacturing has an edge, perhaps a stronger position than it has ever had. This is strikingly evidenced by the relative strength of publicly-listed food companies amidst the collapse of global equity markets. Yet, the industry, having experienced earlier in 2008 searing cost advances, must now use its advantages to strengthen companies and strategies. In many ways, but mainly by acting wisely, the food industry has an excellent chance to be the leading light in helping turn and then to lead the American and global economy to a better day.

This article can also be found in the digital edition of Food Business News, January 6, 2009, starting on Page 6. Click here to search that archive.

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