Healthy foods growth driving optimism, says report
experience growth and increase their capacities next year,
according to a new survey from Grant Thornton.
Such optimism suggests that despite ever-tighter margins, raw material price hikes and the introduction of stringent legislation, there are new lucrative opportunities to be found within the food industry.
For example, 64 percent of respondents said that their companies will see the greatest potential for growth in the "better for you" category, including better for you products (42 percent), organic foods (15 percent), obesity-addressing (5 percent) and nutraceuticals (2 percent).
Ethnic cuisine is also considered an area of opportunity, with 24 percent seeing growth potential in that category.
The survey also found that 75 percent of food and beverage executives identify successful product development as the area offering the most opportunity for company growth, followed by successful marketing of a product (63 percent) and operating efficiencies (62 percent).
Such forward thinking means that 64 percent expect their company's employment to increase in both 2005 and 2006 compared to 2004. In addition to headcount growth, the survey also found that food and beverage companies foresee an increase in global expansion, with 82 percent expecting a rise in their company's global expansion plans for US operations.
Furthermore, 74 percent of respondents expect the level of mergers, acquisitions and restructuring in the industry to increase in 2005 compared to current levels.
"As the global economy continues to prosper, US companies are looking to other countries, as well as other companies to expand their operations and with this comes a larger workforce," said Jim Maurer, Grant Thornton's managing partner of the Consumer & Industrial Products Practice.
There are also immediate threats of course. Some 63 percent of respondents believe that competition with larger companies is a critical issue to their company, while other critical issues include food safety, with 57 percent, and fuel costs, with 39 percent. However, 56 percent reported that the weakened US dollar has not had an impact on international business or expansion plans.
As a result, nearly three quarters expect the level of mergers, acquisitions and restructuring in the industry to increase in 2005 compared to current levels. Unsurprisingly therefore, a similar percentage sees an increased need for capital in the next five years.
Half of the companies interviewed report that they will use private equity as their primary source of capital in the next two years.
The Grant Thornton 2005 Survey of US food & beverage companies was conducted during April and May 2005. More than three-fourths (77 percent) of the respondents represent food and beverage companies with gross annual sales revenues of $100 million or less; 15 percent had between $101 million and $500 million in sales revenue and 8 percent had over $501 million.
