By Jim Damicis, Senior Vice President, and Angela Hallowell, Analyst, Camoin Associates
The food manufacturing sector plays an important role in every economy, providing goods for institutions such as schools and hospitals as well as restaurants and grocery stores for everyday consumers. There is not a state, region, or locality in the United States where food manufacturing and processing do not have a presence, either directly through a company and associated jobs, or as part of the value-chain for the overall food economy, including agriculture, warehousing, and distribution.
In this article we focus on food manufacturing and processing as defined by the North American Industry Classification System (NAICS) 3111. We provide an overview of economic trends in the industry, examine recent issues, and provide insight for business expansion and attraction for regional economic development.
Growth is Creating Opportunities
In 2022 there were 1.7 million jobs in food manufacturing across the US, representing just over one percent of all jobs in the nation. Economic output as measured by Gross Regional Product (GRP) in 2022 for food manufacturing was $181 billion, also representing just over one percent of economic output for all industries. Though a relatively small sector, food manufacturing is growing faster than the economy as a whole. Between 2017 and 2022 food manufacturing jobs grew 6.6 percent in the U.S. compared to 3.8 percent for all sectors, with an additional 8.0 percennt projected growth from 2022-2027, again outpacing the overall economy.
Looking at Food Manufacturing subsectors, Animal Slaughtering and Processing and Bakeries/Tortilla manufacturing together accounted for just over 50 percent of all jobs.
Jobs in the food manufacturing sector in the U.S. are most concentrated in the Midwest States as well as Alaska. For example, food manufacturing employment is 3.5 times more concentrated in Nebraska than in the nation overall. Notably, states with high concentrations of food manufacturing also have strong activity in other parts of the food value chain. For example, the Midwestern states have strong concentrations in agriculture, while Alaska’s economy has relatively high shares of employment in fishing. The combination of multiple food sector activities and value chain assets creates an environment for food manufacturing to flourish.
Examples of recent investments in these states include:
- Walmart’s twin investments in a beef processing, with a minority stake in Sustainable Beef’s $325 million beef processing facility in North Platte, NE2 as well as a $257 million beef processing and packaging facility in Olathe, Kansas, intended to package and distribute products from the North Platte facility3
- Pet food manufacturer Royal Canin USA’s (subsidiary of Mars) investment of $185 million into new production lines for its facility in North Sioux City, South Dakota, supported by a $3.95 million Reinvestment Payment Program grant from the Governor’s Office of Economic Development4
- Meat products producer Fair Oaks Food’s investment in a $134 million, 154,000-square-foot automated facility to produce fully cooked bacon in Davenport, Iowa5
While critical and growing in importance to the U.S. economy, food manufacturing jobs provide relatively low earnings at about $70K on average per job in 2022 compared to $80K for the economy average. While providing entry level jobs (those that require little to no education or training) is meaningful, these low wages create challenges for attracting and retaining workers in a highly-competitive labor environment.
Recent Industry Trends
Food manufacturing is being influenced by multiple recent trends and factors including workforce, supply chain, demographics, changing consumer demand, technology, and climate. The following is an overview of three of these and their relationship to the food manufacturing industry.
Infrastructure and supply chains: Food manufacturing and processing is one component of a complex system that makes up the food economy. Economic performance and opportunities in food manufacturing depends significantly on costs and prices in each of the other supply and value chain components as well as policies, practices, and market changes. Over the past five years, we have seen multiple factors impact the food supply chain, each creating knock-on impacts for the food manufacturing sector. These include COVID-19, geopolitical events and disruption such as the war in Ukraine, climate change and major climate events (floods, fires, hurricanes, etc.), labor disruptions including strikes, and more. Further growth and stability in the sector will continue to require major investment for items such ranging upkeep, improvements, and expansion to the underlying infrastructure that supports supply chains and logistics—including roads, rails, ports, canals, and airports. This is required to keep supply chains functioning and to create long-term resiliency to external factors.
Consumer preferences, demographics, and diversity: Each of these factors is creating change in the food economy. In the U.S., the population is becoming more ethnically diverse, which creates new and expanded markets for global ingredients, palettes, and preferences. Meanwhile, Millennials are now the largest generation, creating further change in market preferences. Other trends such as preferences for convenient food options including grab-n-go, healthy alternatives, plant-based proteins, and local food movements are all creating new opportunities for entrepreneurs and existing companies to satisfy this changing demand.
Technology: Digital technology is transforming all industries including food manufacturing. Ecommerce infrastructure and use is creating new opportunities for food manufacturers including direct to consumer ability. This is particularly beneficial to medium and small food manufacturers. Additionally, the rise of social media use and channels is further fueling this and allowing companies to build “consumer communities.” Finally, technology in the form of automation and robotics combined with software and sensors is transforming how food is manufactured, tracked, and delivered.
Recommendations and Resources
Based on these recent trends and issues, there are several key takeaways to help economic and business developers grow the local and regional food manufacturing industry.
Support networks and communities of entrepreneurship and innovation specifically within the food economy: Rapid change and technology require new learning and approaches. Larger companies have access to innovation, R&D, and commercialization that small companies are typically lacking. Entrepreneurial networks and related programs and initiatives can provide shared support for capacity building for entrepreneurs seeking to enter the market along with smaller companies already participating in the market.
Provide data analytics and market intelligence to food manufacturing companies and stakeholders within your state or region: There has been a significant increase in data and analytics applicable to the food industry in the past five years. This includes demographic and consumer trends; data on sales, trade, and logistics that provide important intelligence for focusing on new geographic markets; and digital intelligence of marketing, social media, and branding. Again, all of this is commonly accessible to large corporations but typically out of reach for smaller companies and entrepreneurs, though networks and alliances can help aggregate capacity to provide information and related services.
Provide support for small and mid-sized industries in accessing and preparing for trade shows. Trade shows are beneficial both for learning about issues arising within the industry as well as finding new opportunities for penetrating the market through B2B sales and partnerships. The following is a list of some of the prominent trade shows relevant to food manufacturing.
About the Authors:
Jim has more than 25 years of experience using research and analysis to preparing professionals, communities, regions, states, and public and private organizations prepare for an emerging economic future. He is affiliated with Communities of the Future and the World Future Society and takes a holistic and innovative approach to economic development.
Angela is new to Camoin Associates and brings knowledge of economics, public policy, and demographic analysis. She is excited to apply her background to a diverse range of clients and to help clients make their communities stronger.
1 Industries in the food manufacturing subsector transform livestock and agricultural products into products for intermediate or final consumption. The industry groups are distinguished by the raw materials (generally of animal or vegetable origin) processed into food products. The food products manufactured in these establishments are typically sold to wholesalers or retailers for distribution to consumers, but establishments primarily engaged in retailing bakery and candy products made on the premises not for immediate consumption are included. www.census.gov/naics/
2 “Walmart announces investment in North Platte beef processing facility.” The Nebraska Examiner. August 31, 2022. https://nebraskaexaminer.com/briefs/walmart-announces-investment-in-north-platte-beef-processing-facility/
3 “Retailer confirms it will open $257 million beef processing center in Olathe, create 600 jobs.” Kansas City Business Journal. June 13, 2023. https://www.bizjournals.com/kansascity/news/2023/06/13/walmart-olathe-beef-processing-project-sandhills.html
4 “Royal Canin Expands North Sioux City, South Dakota, Facility.” Area Development. February 16, 2022. https://www.areadevelopment.com/newsitems/2-16-2022/royal-canin-north-sioux-city-south-dakota.shtml
5 “Fair Oaks Food breaks ground on automated bacon facility.” KWQC.com. September 1, 2022. https://www.kwqc.com/2022/09/02/fair-oaks-food-breaks-ground-on-automated-bacon-facility/