The food industry includes all those businesses that are managing the processes from food production to distribution. The sector includes fresh items such as dairy and processed food items like spreads. The PESTLE analysis of food industry examines the macro-environment factors and the way these factors affect the industry’s growth and profitability chances.
Background and Introduction
The food industry encompasses all aspects of food production, processing, packaging, distribution, and marketing. It is a vast and diverse sector that includes everything from agriculture and farming to restaurants and grocery stores.
The food industry is one of the largest and most important industries in the world, employing millions of people and generating trillions of dollars in revenue annually.
The history of the food industry dates back thousands of years, with early civilizations developing agriculture and domesticating animals to provide a reliable source of food. Over time, the industry has grown and evolved to meet the changing needs and demands of consumers.
Today, the food industry is highly competitive, with companies vying for market share in a crowded and complex landscape. Advances in technology and globalization have made it easier than ever to produce and distribute food on a massive scale, but these developments have also brought new challenges and risks.
Issues such as food safety, sustainability, and nutrition are at the forefront of industry discussions, as consumers increasingly demand more transparency and accountability from food companies. Despite these challenges, the food industry remains a vital part of the global economy, providing essential goods and services to people around the world.
Food Industry Information
| Aspect | Information |
|---|---|
| Scope | Encompasses all aspects of food production, processing, packaging, distribution, and marketing |
| Size | One of the largest and most important industries in the world |
| Employment | Employs millions of people globally |
| Revenue | Generates trillions of dollars in revenue annually |
| History | Dates back thousands of years, with early civilizations developing agriculture and domesticating animals |
| Current challenges | Food safety, sustainability, and nutrition are at the forefront of industry discussions |
| Technology and globalization | Have made it easier than ever to produce and distribute food on a massive scale |
| Consumer demands | Increasingly demand more transparency and accountability from food companies |
| Essential role | Provides essential goods and services to people around the world |
Food Industry – Political Factors
The industry is deemed to include multiple stakeholders that are significantly effected due to fluctuations in the political stability. Food insecurity is triggered by political crisis as seen in the case of Russia Ukraine war. Due to the intense conflict, the harvesting of crops, processing and supply has been effected. The segment of sunflower oil has also been disrupted due to the war (Emediegwu, 2022).
The food security is significantly compromised due to the political turmoil and insecurity. The food industry procures 30% of the wheat supply from Ukraine and the crisis has created major obstacles in the supply operations. Besides the disruption in the supply of the food staple, the global food industry is also facing the effects of the war in the form of price increases.
Besides the political instability, high level of corruption creates significant barriers to the functioning and growth of the food industry. It can lead to food insecurity as the food producers working on small scale find it hard to bear the pressure of exploitation and extortion. However, there are some factors that can be beneficial for the food industry.
The policies designed and implemented by the government also have an impact on the food sector as the subsidies can become a source of benefit for the food producers. In addition, the implementation of favorable tax policies drives the sector towards advancement and growth.
Food Industry – Economic Factors
The global food industry faces numerous economic pressures as the threat of declining financial stability creates a higher risk of loss for the businesses. Recession has a direct impact on the food industry as the cost of production, packaging material, and distribution are increased. The businesses have to respond to the price changes and adjust accordingly.
Labor cost increase is another factor that can raise the capital input required by the food businesses. From the small scale farmers to large scale organizations, all are effected by the higher labor price. Inflation created by the economic slowdown further creates a challenging economic dynamics for the stakeholders in the industry.
Disposable income of the people is effected by the economic condition of a country. The regions that are marked by economic stability and rising income, the households can purchase food items to fulfil their needs. On the other hand, countries that have disturbed economic situation, people experience lower disposable income and their spending reduces (Jenkins et al., 2021).
Food Industry – Social Factors
The growing population indicates a rising demand for different food items. High growth rate offers expansion opportunities to the food sector, while slower growth suggests a slower growth demand. The factor of gender equality also influences the degree of food security across the society, as women are at risk of food insecurity in regions with a patriarchal mindset.
During COVID people that were laid off or were unemployed due to business closure, their behavior changed as they reduced the amount they spent on the food items. These consumers are also more likely to opt for lower cost alternatives as a means of cost saving. Furthermore, pandemic also increased trading restrictions on food suppliers, which declined the sales volume (Macdonald, 2020).
Rise of organic and healthy food is another notable social factor that effects the food industry. Due to the pandemic, consumers have started showing preference for organic food items as it was deemed to be carrying higher nutritional value. Moreover, awareness about the negative effects of processed food has created a niche for the organic food segment.
Food Industry – Technological Factors
The technology assisted production and processing of food has made the industry to grow exponentially. The industry now includes small scale food producers to large firms that process and supply large batches of items to the distributors. All of these processes are being supported through technology such as robotics results in higher productivity (Martin, 2019).
Along with that, the use of 3D printers is seen as a novel use of technology to create food for people with specific needs and issues. Drones have also benefited the food industry helping to examine the condition of soil and identify the harvest patterns and deftly rectify the issues. Furthermore, technology has also enabled the food companies to bring improved packaging.
Food Industry – Legal Factors
The legal factors that need to be considered by the companies in the food industry involve regulations related to food quality. The expected standards need to be followed by them and the items available in the market need to adhere to the hygiene and quality criteria. Selling expired food products can lead to legal penalty as observed in case of Tesco (Reichman, 2021).
Labor and employment laws also constitute an important part of the food industry. These laws provide the businesses in the food industry with guidelines about the number of working hours, salary and other employment policies. The businesses are also required to obtain permit from the health department, which reflects the way legal factors define the industry behavior.
Food Industry – Environmental Factors
The waste material produced by the food industry comprises the water and waste, which needs to be processed and recycled to reduce the harm caused to the environment. Also, the packaging material being used by the food industry adds to the wastage, which can be damaging for the environment.
The stakeholders in the food industries are trying to lower the wastage and also to recycle it to become more eco-friendly. Companies are also investing in packaging materials that can be recycled. Another way the food industry has taken environment friendly initiative is through emphasis on achieving net zero emissions (Coyne, 2023).
Conclusion
The food industry is highly susceptible to political changes as unstable political climate not only disturbs food supply but is also damaging for the level of food security. The economic and social factors have a strong effect on the people’s buying behavior and business revenues. Technology plays a vital role in increasing the efficiency of the food industry companies.
References
- Coyne, A. (2023). The road to net zero – Big Food’s emissions pledges. Just Food. Retrieved from: https://www.just-food.com/features/the-road-to-net-zero-big-foods-emission-pledges/
- Emediegwu, L. (2022). How is the war in Ukraine affecting global food prices? Economics Observatory. Retrieved from: https://www.economicsobservatory.com/how-is-the-war-in-ukraine-affecting-global-food-prices
- Jenkins, R. H., Vamos, E. P., Taylor-Robinson, D., Millett, C., & Laverty, A. A. (2021). Impacts of the 2008 Great Recession on dietary intake: a systematic review and meta-analysis. International Journal of Behavioral Nutrition and Physical Activity, 18(1), 57.
- Macdonald, C. (2020). COVID-19: How does it affect the food industry? Global Insights. Retrieved from: https://insights.figlobal.com/health-wellness/covid-19-how-does-it-affect-food-industry
- Martin, N. (2019). How Technology Is Transforming The Food Industry. Forbes. Retrieved from: https://www.forbes.com/sites/nicolemartin1/2019/04/29/how-technology-is-transforming-the-food-industry/?sh=62a2bc620a34
- Reichman, R. (2021). Tesco fine serves as warning to food industry. New Food Magazine. Retrieved from: https://www.newfoodmagazine.com/article/148417/tesco-fine-serves-as-warning-to-food-industry/