TMFDI/1998: Technology and employment in the food and drink industries

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Technology and employment in the food and drink industries

Report for discussion at the, Technology and Employment in the Food and Drink Industries

Geneva, 18 - 22 May 1998

International Labour Office Geneva

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Foreword

This report has been prepared by the International Labour Office as the basis for discussions at the Tripartite Meeting on Technology and Employment in the Food and Drink Industries. It examines recent developments in the food and drink industries and new technology that has been adopted in these industries with a view to illustrating their impact on employment and working conditions.

Background to the Meeting

The Meeting is part of the ILO's Sectoral Activities Programme, the purpose of which is to facilitate the exchange of information between constituents on labour and social developments relevant to particular economic sectors, complemented by practically oriented research on topical sectoral issues. This objective has traditionally been pursued by the holding of international tripartite sectoral meetings for the exchange of views and experience with a view to: fostering a broader understanding of sector-specific issues and problems; promoting an international tripartite consensus on sectoral concerns and providing guidance for national and international policies and measures to deal with the related issues and problems; promoting the harmonization of all ILO activities of a sectoral character and acting as the focal point between the Office and its constituents; and providing technical advice, practical assistance and concrete support to ILO constituents in order to facilitate the application of international labour standards in the various economic sectors.

At its 267th Session (November 1996), the Governing Body of the ILO decided that a tripartite meeting on technology and employment in the food and drink industries would be included in the programme of sectoral meetings for 1998-99. At its 268th Session (March 1997), the Governing Body further decided that the governments of the following 20 countries should be invited to be represented at the Meeting: Burundi, Chile, China, Egypt, France, Ghana, India, Italy, Japan, Lebanon, Mexico, Morocco, Nicaragua, Nigeria, Portugal, Thailand, Turkey, United Kingdom, United States and Uruguay. A number of countries were included in a reserve list from which further invitees would be drawn in the event that a government in the first list did not accept the invitation. The Governing Body decided that the 20 Employer and 20 Worker participants in the Meeting would be appointed on the basis of nominations made by the respective groups of the Governing Body. They will not necessarily come from the above list of countries.

Background to the report

The food industry presents many facets, from the traditional labour-intensive activities often found in developing countries to the capital-intensive industrial processes common in the industrialized world. It includes slaughtering, preparing and preserving meat; milling grains and manufacturing bakery products; canning and preserving fish products, fruits and vegetables; manufacturing vegetable and animal oils and fats and animal feeds; and processing sugar, coffee, tea, etc. In addition to first-stage processing, the food industry today is increasingly engaged in the manufacturing of higher-stage processed products such as convenient and ready-to-eat frozen foods. The drink industry covers such activities as distilling and blending spirits; and processing malt, malt liquors, wine, soft drinks, fruit juice, milk, mineral water and so on.

The ILO's Sectoral Activities Programme covers the food and drink industries in countries at all stages of development. Inevitably, however, most of the data readily available on the topic of the Meeting come from industrialized countries. Because of this necessity, and not by choice, the report underemphasizes the experience of FD industries in developing countries, although it does demonstrate that it is in these countries that FD output and employment are growing most rapidly. While some information on developing countries has been included, it mostly concerns large enterprises.

The report was prepared by Shizue Tomoda, Food and Drink Industries Specialist. It incorporates excerpts from case-studies prepared by J.A. Burns with Marian Garcia, Todd Cherkasky, Anselmo García, Andrés Hernandez and Leonard Mertens, Judit Kiss, Naoki Kuriyama and Veena Nabar. Information has also been provided by employers' and workers' organizations affiliated with the International Organization of Employers (IOE) and the International Union of Food, Agricultural, Hotel, Restaurant, Catering, Tobacco and Allied Workers' Associations (IUF). The rest has been collected from a variety of sources by the author with the assistance of ILO offices and also through the author's own research work. All help is gratefully acknowledged.

The report is published under the authority of the International Labour Office. It is hoped that the information and analysis provided herein will serve as a useful basis for discussion during the Meeting.

Contents

Foreword

1. Recent trends in the food and drink industries

Production

Volume
Value
Value added
Geographical distribution of production

Consumption

Product trends

Trade
Structure of the food and drink industries
Investment

2. Recent technological changes in the food and drink industries

Microelectronics and computer technology
Fish and poultry processing
Food technology
Other technologies relevant to the food and drink industries

3. Impacts of new technology on employment

Employment trends

Industrialized countries
Developing countries

Changes in labour productivity
Employment flexibility and women workers
Changing work organization and new skill requirements

4. Impact of new technology and structural change on working conditions

Hours of work and earnings
Occupational safety and health

5. Coping with the effects of technological and structural change

Technological change and industrial relations

Adjustment measures
Training for new skill requirements and better work environment

6. Environmental issues

New technology and the environment
Environmental regulations and their impact on the FD industries
Employment implications of environmental issues

7. Summary and points for discussion

Summary

Recent trends
Technological change
Impact of new technology on employment
Impact of new technology on working conditions
Coping with the effects of change
Environmental issues

Suggested points for discussion

Technology and productivity
Employment flexibility and new work organization
Working conditions
Environmental management
Role of the ILO

Tables

1.1 Index numbers for the industrial production of food products (ISIC 311), 1985-95

1.2 Index numbers for the industrial production of beverages (ISIC 313), 1985-95

1.3 Output in food products as a percentage of total manufacturing output, 1985-95

1.4 Output in beverages as a percentage of total manufacturing output, 1985-95

1.5 Total manufacturing value added (MVA), total value added in the FD industries (FDVA) and the proportion of FDVA as a percentage of MVA in the G7 member countries in 1980 and 1994

1.6 Total manufacturing value added (MVA), total value added in the FD industries (FDVA) and the proportion of FDVA as a percentage of MVA in some ASEAN countries in 1980 and 1994

1.7 Distribution of world value added in the food and drink industries, 1980-93

1.8 Distribution of value added in the food and drink industries among developing regions, 1985 and 1992

1.9 Leading food producers among developing countries, 1985 and 1994

1.10 United States: Personal consumption expenditure on food and drink products in 1997 and 1993, and projected 2005

1.11 Index numbers of global food export and import value, by region, 1988-95

1.12 Australian exports and imports of food and drink products and their proportion of total manufacturing exports and imports, 1989-95

1.13 European Union: Exports and imports of food, drink and tobacco products to and from the countries outside the European Union, 1985-95

1.14 Value of Japanese exports and imports of foodstuffs and their proportion of total exports and imports, 1980-95

1.15 United States: Exports and imports of food and kindred products, by value and proportion of total manufacturing exports and imports, 1985-95

1.16 Hungary's foreign trade in food, beverages and tobacco products, 1993-95

1.17 Germany (former FRG): Gross capital investment per worker in the food industry and in manufacturing, 1988-92

1.18 Investment distribution in Hungarian food and drink industry investments, 1990-95

1.19 India: Capital intensity in the food-processing industry

1.20 United Kingdom: Net capital expenditure and gross value added per head in the food and drink industries as compared with the tobacco industry, 1986-93

1.21 United Kingdom: R & D expenditure in food and drink companies, 1995

1.22 United States: Total investment in new plants and equipment in the food industry (SIC Code 20), 1987-95

3.1 Employment in food products (ISIC 311), 1985-95

3.2 Employment in beverages (ISIC 313), 1985-95

3.3 Employment in food products as a percentage of employment in total manufacturing, 1985-95

3.4 Employment in beverages as a percentage of employment in total manufacturing, 1985-95

3.5 European Union: Employment in the FD branches in 1995 and changes since 1988

3.6 Germany: Employment trends in the food and drink industries, 1985-95

3.7 United Kingdom: Employment in the food industry, 1980 and 1992 (Census of production groups: SIC 1980)

3.8 Employment in Hungarian food and drink industries, 1992-95

3.9 United States: Total employment and the proportion of production workers in the food, beverages and tobacco industries, by subsector, 1991-95

3.10 India: Employment in the food and drink industries by branch

3.11 Nigeria: Employment and number of establishments in the food and drink industries, 1992-96

3.12 Germany: Per capita productivity index in the food industry and total manufacturing, by category of workers, 1988-93

3.13 Hungary: Productivity index in the food and drink industries, by branch, 1994-95

3.14 Malaysia: Fixed assets and added value per employee in the food industry and manufacturing, 1985-92

3.15 United Kingdom: Production, employment and output per worker in total manufacturing and in the food, drink and tobacco industries, 1989-96

3.16 United States: Index numbers of hourly output, by sector, 1988-95

3.17 Japan: Number of employees and the proportion of part-time workers in food-processing industries, by sex and size of establishment, 1992-96

3.18 United Kingdom: Employment in the food, drink and tobacco industries, by sex, category of worker and percentage change, 1993-96

3.19 Belgium: Employment in the food and drink industries, by sex and category of worker, 1991-95

3.20 United States: Employment trends in the food industry, 1990-96

4.1 Wages per worker in food products as a percentage of wagesper worker in total manufacturing, 1986-95

4.2 Wages per worker in beverages as a percentage of wages per worker in total manufacturing, 1985-95

4.3 Women's average weekly hours of work as a percentage of men's in total manufacturing and in the food and drink industries, 1985-95

4.4 Women's average hourly earnings as a percentage of men's in total manufacturing and in the food and drink industries, 1985-95

4.5 Australia: Average per capita annual earnings in the food and drink industries and in total manufacturing, 1989-93

4.6 France: Average hourly wages in the cooperative sector of the meat and poultry industries, by category of worker, 1991-94

4.7 Germany: Annual hours of work per worker in the food and drink industries and in total manufacturing, 1988-93

4.8 Germany (former FRG): Gross value added per worker and gross hourly wages in the food and drink industries and in total manufacturing, 1988-93

4.9 Monthly average per capita net earnings in the Hungarian food, drink and tobacco industries, by branch, 1992-95

4.10 Monthly average earnings of manual and non-manual workers in the Hungarian food, drink and tobacco industries, by branch, 1995

4.11 Monthly earnings per worker in the Indian food-processing industry

4.12 Japan: Average monthly hours of work and earnings in the food-processing industries, by sex and size of establishment, 1992-96

4.13 Great Britain: Average weekly hours of work in the food, drink and tobacco industries and in total manufacturing, 1988-95

4.14 Great Britain: Average hourly earnings in the food, drink and tobacco industries and in total manufacturing, 1988-95

4.15 Great Britain: Average annual earnings per head in the food, drink and tobacco industries, 1988-93

4.16 United States: Average weekly hours of work and earnings of production or non-supervisory workers in the food, beverages and tobacco industries by subsector, 1991-95

4.17 Belgium: Number of cases of occupational accidents and diseases reported and cost of compensation in the food and drink industries, 1990-93

4.18 France: Occupational accidents in selected sectors, 1993-94

4.19 Germany: Number of cases of occupational diseases reported in the food, drink and catering sectors, 1990-96

4.20 United Kingdom: Number of cases of injury to FDT and manufacturing workers, 1992-95

4.21 United States: Incidence rates of occupational injury and illness, by industry, 1985-94

List of recurring abbreviations

	AFBTE	Association of Food, Beverage and Tobacco Employers
	BCTWIU	Bakery, Confectionery and Tobacco Workers' International Union
	BOD	Biochemical oxygen demand
	BSE	Bovine spongiform encephalopathy
	BST	Bovine somatotrophin
	CAD	Computer-aided design
	CAM	Computer-aided manufacture
	CFC	Chlorofluorocarbon
	CIM	Computer-integrated manufacturing
	CIP	Cleaning-in-place
	COD	Chemical oxygen demand
	CRS	Continuous rotating shift
	CRT	Cathode-ray tube
	DITO	Dairy Industry Training Organization
	DSD	Duales System Deutschland
	ECR	Effective consumer response
	EPOG	Electronic process operating guidelines
	ERRA	European Recovery and Recycling Association
	EWC	European Works Council
	FD industries	Food and drink industries
	FDA	Food and Drug Administration
	FDC	Food, drink and catering
	FDI	Foreign direct investment
	FDT	Food, drink and tobacco
	GDP	Gross domestic product
	GM	Genetically modified
	HACCP	Hazard Analysis and Critical Control Point
	HPG	High performance group
	ISIC	International Standard Industrial Classification
	ISO	International Standard Organization
	IUF	International Union of Food, Agricultural, Hotel, Restaurant, Catering, Tobacco and Allied Workers' Associations
	MRP	Manufacturing resource planning
	NEDC	National Economic Development Council
	NIC	National Industrial Classification
	OECD	Organization of Economic Cooperation and Development
	PCB	Polychlorinated biphenyl
	PET	Polyethylene terphathalate
	PLCs	Programmable logic controllers
	QA	Quality assurance
	QAT	Quality action team
	QCC	Quality control circle
	SIC	Standard Industrial Classification
	TQM	Total quality management
	UNEP	United Nations Environment Programme
	VDU	Visual display unit

Exchange rates

The exchange rates for the following currencies against US$1 for the period 1980-95 are given here for ease of reference.


Country	Currency	1980	1985	1990	1995

Australia	A$	0.92	1.22	1.25	1.35
China	Yuan (RMB)	1.58	2.82	4.71	8.41
European Union	Ecu	-	1.411¹	0.830	0.802
Germany	DM	1.76	3.10	1.70	1.51
Hungary	Forint (Ft.)	23.12	51.07	65.50	112
India	Rupee (Rs.)	7.85	12.20	16.80	36.26²
Japan	Yen (Y)	240	248	141	97
New Zealand	NZ$	1.05	2.08	1.72	1.56
United Kingdom	£	0.449	0.855	0.517	0.630
¹ 1986 rate. ² 1997 rate.

1. Recent trends in the food and
drink industries

World population is projected to be 6.1 billion by the year 2000, of which approximately 80 per cent will be found in developing countries.⁽¹⁾ While millions of people in many developing countries, particularly those beset by disaster or war, are still undernourished, the number of such people is estimated to have declined from approximately 920 million in 1969-71 to about 840million in 1990-92.⁽²⁾ Considering that estimated world population grew from 3.7 billion in 1970⁽³⁾ to 5.4 billion in 1992,⁽⁴⁾ the world has been successful in feeding an increasing number of people over the past few decades. The FD industries have contributed significantly to improving global food security over the years through better processing and preservation techniques, more reliable packaging materials and improved distribution systems.

Production

Volume

Owing mainly to improved agricultural technology, per capita food production in developing countries increased by 23 per cent between 1980 and 1993, though it declined by 3 per cent in industrialized countries in the same period. Global per capita production increased by 18 per cent⁽⁵⁾and livestock production and fishery catches grew. By way of example, world beef and veal production increased from 49.7 million tonnes in 1987 to 52.2 million tonnes in 1993. Poultry production climbed from 31.2 million tonnes to 40 million tonnes during the same period.⁽⁶⁾Despite some fluctuation, global nominal fishery catches rose from 100.7 million tonnes in 1989 to 112.9 million tonnes in 1995. The declining rate of growth for the catches in marine areas is increasingly being offset by catches in inland waters, which rose from 13.8 million tonnes in 1989 to 21 million tonnes in 1995.⁽⁷⁾

Table 1.1 presents index numbers for the volume of food production for 1985-95, with 1990 production constituting 100. The rate of increase for the entire period was relatively small in most OECD countries, with the exception of Ireland. This is largely due to the fact that the market in those countries was relatively mature by the mid-1980s. The stagnation and decline in Japanese production in recent years is probably a reflection of domestic food manufacturers being placed under increasing pressure from cheaper imported products as a result of increased trade liberalization.

Table 1.1. Index numbers for the industrial production of food products (ISIC 311), 1985-95 (1990 = 100)


Country/territory	1985	1986	1987	1988	1989	1990	1991	1992	1993	1994	1995

High-income non-OECD
Cyprus	80	83	89	93	98	100	98	104	110	117	121
Germany (former GDR)¹	167	171	171	173	174	100
Hong Kong²	66	70	76	86	89	100	104	109	112	113	113
Israel	79	90	101	101	99	100	101	104	113	119
Kuwait	116	115	114	117	121	100	84	71
Singapore	83	90	91	99	102	100	105	108	112	112	113
United Arab Emirates	72	70	94	93	105	100	102	104
High income OECD
Australia	89	91	96	97	98	100	103	111	119
Austria	83	85	85	88	92	100	106	107	108	112	113
Belgium	82	85	88	90	97	100	103	105	106	105	110
Canada	102	102	102	102	98	100	102	104	104	108	109
Denmark	93	97	95	97	97	100	109	107	107
Finland	93	95	97	99	100	100	99	100	103	106	109
France	90	89	92	95	96	100	102	104	105	106
Germany (former FRG)³	81	83	84	87	91	100	107	106	106	105
Iceland	93	95	95	97	96	100	82
Ireland	76	79	90	94	96	100	104	114	120	129	143
Italy	89	91	94	98	99	100	101	103	103
Japan	94	95	94	97	99	100	103	103	103	100	100
Luxembourg	92	92	91	90	96	100	100	97	101	96
Netherlands	85	90	90	93	97	100	102	105	106	103	105
New Zealand	85	87	81	100	107	100	111	115
Norway	103	102	103	101	102	100	104	105	106	116	118
Spain	88	87	94	97	95	100	103	99	100	104	102
Sweden	98	97	96	98	100	100	97	93	97	100
Switzerland	91	93	94	95	98	100	102	102	103	106	106
United Kingdom	93	93	96	99	98	100	100	101	102	103	104
United States	91	93	96	98	99	100	102	103	106	109	111
Low-income
Bangladesh	56	70	74	72	96	100	94	91	102	113
Benin	93	95	96	97	100	100	97
Bhutan						100
Burkina Faso	64	53	95	118	91	100	116	101
Burundi	76	86	87	97	92	100	96	101	101
Cambodia	77	79	89	93	96	100	102	107
Central African Republic	74	75	87	89	91	100	102	103
Chad	72	77	77	78	99	100	82	88
Egypt	113	129	109	106	127	100	101	103	124	132
Ethiopia and Eritrea	130	125	125	132	128	100	92	96
Gambia	81	81	108	66	101	100
Ghana	73	71	88	94	84	100
Guyana	185	187	168	128	126	100	123	187	187	195	192
Haiti	143	110	128	133	103	100	65	46	39	39	39
Honduras	61	59	60	74	77	100	125	133	147
India	75	79	82	89	89	100	105	106	99
Indonesia	56	61	66	87	86	100	108	113	152	201
Kenya	80	85	93	99	99	100	101	97	97
Lao People's Democratic Republic	94	98	102	106	95	100	107	117
Lesotho	97	97	97	100	100	100	104	100
Liberia	96	96	108	108	108	100	104
Madagascar	79	79	86	98	103	100	82	83	89
Malawi	74	79	80	78	94	100	92	98	100	92	96
Mali	106	97	72	85	83	100	87	105	93	122
Mauritania	64	83	81	87	92	100	95	95
Mozambique	96	89	85	81	93	100	96	77
Myanmar	116	120	113	94	96	100	93	130
Nepal	69	79	86	91	105	100	109	117
Nicaragua	100	96	95	96	102	100	103	104
Niger	65	79	86	83	103	100	100	103
Nigeria	122	88	99	89	97	100	106	132
Pakistan	102	90	107	111	124	100	114	116	134	131	139
Rwanda	119	102	107	130	100	100	100	130
Sierra Leone	88	88	88	88	97	100	103
Somalia	114	97	117	121	126	100	69	31
Sri Lanka	84	101	89	81	96	100	102	98	117	125	141
Sudan	85	80	90	91	90	100	106	116
Tanzania, United Republic of	116	103	100	114	123	100	120	111	95
Togo	69	72	92	95	98	100
Uganda	54	49	57	73	88	100	130	140	141	177	207
Yemen	96	99	99	100	100	100	101	103
Zaire	79	82	85	94	102	100	105	87
Zambia	82	80	83	90	86	100	102	127
Zimbabwe	79	88	91	90	92	100	102	104	85	90	99
Middle-income (lower)
Algeria	84	92	95	97	99	100	99	94	99	95	88
Angola	199	199	119	119	100	100	119	100	80
Belize	102	93	82	81	91	100	102	100	100	105	105
Bolivia	83	92	97	99	98	100	111	110	117	121	128
Bulgaria	102	105	104	107	110	100	72
Cameroon	86	85	101	103	106	100	98	90
Chile	89	97	93	97	104	100	101	119	123	137	143
Colombia	87	88	90	90	90	100	93	101	105	103	106
Congo	140	106	79	94	106	100	59	82	85
Costa Rica	80	85	91	94	96	100
Cuba	94	89	85	96	90	100	85	85	50
Czechoslovakia (former)	97	99	99	100	103	100	79	69
Côte d'Ivoire	88	103	105	97	107	100	106	138	167	144	111
Dominican Republic	111	113	128	132	118	100	99	104
Ecuador	86	88	93	92	95	100	109	109	108
El Salvador	90	91	93	96	98	100	106
Fiji	77	102	94	90	103	100	103	107	106	116	111
Guatemala	86	75	80	91	95	100	98	99
Iran, Islamic Republic of	112	98	96	89	88	100	110	125
Iraq	106	101	109	95	119	100	77	91
Jamaica	108	99	90	112	97	100	108	102	98	100
Jordan	120	83	86	99	95	100	84	137	123	114
Lebanon	83	84	80	75	78	100	125	124
Malaysia	68	74	79	82	95	100	96	102	112	119	125
Mauritius	104	114	111	102	91	100	98	103	91	80	94
Mongolia	99	102	104	106	109	100	109
Morocco	108	113	94	99	98	100	104	104	115	120	119
Namibia	70	76	87	88	93	100	109	102
Panama	98	96	103	90	96	100	105	111	116	125	136
Papua New Guinea	93	102	108	109	104	100	100	105
Paraguay	72	75	79	71	98	100	71	81	69	80
Peru	99	111	125	118	99	100	97	101	101	117	124
Philippines	65	64	70	83	92	100	114	123	128	147	158
Poland	149	155	158	163	145	100	97	107	124
Romania	102	107	114	114	114	100	83	69	59	67	69
Senegal	61	51	84	109	97	100	58	82	81	92	106
Slovenia	98	101	105	103	99	100	96	78	76	79	80
Swaziland	73	98	85	86	95	100	93	98
Syrian Arab Republic	109	111	97	90	91	100	109	111	105	111
Thailand	96	98	92	89	103	100	84	99	97	90	103
Tunisia	85	90	90	97	98	100	102	107	107	112	113
Turkey	80	80	90	91	95	100	107	105	113	115	115
Middle-income (upper)
Argentina	90	97	99	100	98	100	109
Barbados	88	95	100	95	94	100	108	103	104	107	111
Botswana	84	87	79	100	106	100	94	93
Brazil	92	93	99	97	98	100	104	104	104	106	115
Gabon	74	77	76	84	89	100	101	87
Greece	106	97	92	101	112	100	110	118	117	116	118
Hungary	100	102	105	102	103	100	97	85	82	85	88
Korea, Republic of	64	70	78	88	94	100	109	111	113	122	123
Libyan Arab Jamahiriya	93	86	90	98	104	100	118	121
Malta	89	94	99	98	106	100	104	112	116
Mexico	90	91	92	92	97	100	104	105	106	104	105
Oman	74	78	85	89	96	100	100	104
Portugal	78	80	83	90	93	100	100	93	96	94	97
Puerto Rico	159	141	141	151	133	100	108	97	95	74
Saudi Arabia	88	90	86	93	96	100	100	102
South Africa	93	92	88	87	89	100	99	100	98	94	94
Suriname	156	139	54	68	96	100	67	69
Trinidad and Tobago	98	102	101	99	101	100	103	107	100	106	108
USSR (former)	88	90	93	96	99	100
Uruguay	96	95	93	99	102	100	101	104	100	108	110
Venezuela	25	29	36	44	82	100
Yugoslavia (former)	101	102	105	101	71	100	80
Others
Taiwan, China	91	91	96	98	94	100	104	109	111	117
¹ Former GDR = the Länder of the former German Democratic Republic. ² This report deals with the period up to 30 June 1997, during which Hong Kong was a non-metropolitan territory of the United Kingdom. On 1 July 1997 China resumed the exercise of sovereignty over Hong Kong, which became a Special Administrative Region of the People's Republic of China. ³ Former FRG = the Länder of the former Federal Republic of Germany. Source: UNIDO: Industrial Statistics, 1997.

On the other hand, many low-income countries have shown little, if any, increase since 1985. Indonesia and Uganda, where production increased continuously and impressively over the ten-year period, are major exceptions. Solid, but more modest, increases were seen in other countries such as Bangladesh, Pakistan and Sri Lanka. The situation is similar in low middle-income countries. While more countries in this group show a steady increase for the entire period, the growth rate is much more modest than that of Indonesia and Uganda in the previous group. The food industry in Chile, Malaysia and the Philippines achieved greater expansion than in the other countries in the group. Of the upper middle-income countries, Brazil, the Republic of Korea and Mexico managed to increase their production over the same period. With the exception of the Republic of Korea, however, the rate of growth in these countries was relatively low.

Table 1.2 presents index numbers for the volume of beverage production for 1985-95. In comparison with food production, more countries in the high-income OECD group saw their production stagnate or decline after 1990. Several countries managed to increase production modestly over the entire period. Many low- and middle-income countries saw their production fluctuate, sometimes erratically, or decline during the period. Many of the countries that recorded a steady or impressive growth in food production showed a growth in beverage production as well, particularly after 1990.

Table 1.2. Index numbers for the industrial production of beverages (ISIC 313), 1985-95 (1990 = 100)


Country/territory	1985	1986	1987	1988	1989	1990	1991	1992	1993	1994	1995

High-income non-OECD
Cyprus	75	73	69	73	87	100	95	98	84	101	97
Germany (former GDR)	167	171	171	173	174	100
Hong Kong	66	70	76	86	89	100	104	109	112	113	113
Israel	79	90	101	101	99	100	101	104	113	119
Singapore	68	71	85	96	92	100	101	113	112	114	114
High-income OECD
Australia	89	91	96	97	98	100	103	111	119
Austria	83	85	85	88	92	100	106	107	108	112	113
Belgium	97	97	98	97	94	100	95	97	90	83	85
Canada	104	98	100	103	104	100	90	100	104	106	106
Denmark	94	96	95	101	97	100	104	107	106
Finland	78	84	86	95	99	100	101	102	107	97	96
France	84	87	90	94	100	100	95	93	95	98
Germany (former FRG)	84	86	85	87	88	100	108	108	103	104
Iceland	80	85	102	126	109	100
Ireland	80	82	81	88	99	100	104	103	104	112	117
Italy	77	86	88	96	101	100	99	98	97
Japan	94	95	98	100	99	100	100	100	98	100	93
Luxembourg	96	101	98	96	98	100	104	108	102	111
Netherlands	83	89	87	82	88	100	111	122	122	129	129
New Zealand	94	86	86	88	101	100	102	101
Norway	89	94	95	98	99	100	101	100	96	100	102
Spain	88	87	94	97	95	100	103	99	100	104	102
Sweden	85	92	97	98	103	100	104	106	110	126
Switzerland	91	93	94	95	98	100	102	102	103	106	106
United Kingdom	92	96	98	97	102	100	95	93	95	97	106
United States	92	94	96	100	99	100	101	105	108	112	113
Low-income
Bangladesh	49	52	59	89	140	100	118	118	139	145
Burkina Faso	146	122	114	120	112	100	102
Burundi	81	88	88	87	90	100	96	101	109
Central African Republic	86	88	93	90	102	100	87	87	62	77
Chad	131	101	92	94	99	100	121	116
Egypt	111	117	122	120	111	100	86	79	79	78
Ethiopia and Eritrea	124	133	132	125	110	100
Ghana	71	90	100	105	104	100
Guyana	93	89	96	104	97	100	95	123	138	131
Haiti	68	103	98	129	85	100	67	73	60	52	52
Honduras	88	99	94	95	86	100	137	197	232
India	112	106	83	88	101	100	109	106	123
Indonesia	61	70	84	86	87	100	119	105	129	149
Kenya	68	80	94	97	97	100	97	111	111
Liberia	64	70	89	104	102	100
Madagascar	81	85	80	67	78	100	79	76
Malawi	74	79	80	78	94	100	92	98	100	92	96
Mali	106	97	72	85	83	100	87	105	93	122
Mozambique	91	94	71	103	97	100	91
Myanmar	237	208	71	41	88	100	125	79
Nepal	70	55	83	91	105	100
Nicaragua	105	102	101	101	105	100
Niger	140	138	136	127	101	100
Nigeria	102	129	85	114	104	100	103	145	214	305
Pakistan	123	125	123	111	100	100	89	100	97	103	123
Sierra Leone	145	76	121	97	97	100
Sri Lanka	84	101	89	81	96	100	102	98	117	125	141
Sudan	85	80	90	91	90	100	106	116
Tanzania, United Republic of	118	105	98	98	97	100	100	107	116
Uganda	55	53	65	90	93	100	114	100	110	147	199
Zaire	95	98	105	109	108	100
Zambia	82	80	83	90	86	100	102	127
Zimbabwe	73	74	83	90	88	100	103	103	97	98	92
Middle-income (lower)
Algeria	84	92	95	97	99	100	99	94	99	95	88
Angola	167	150	120	120	100	100	120	100	80
Belize	77	77	75	73	84	100	108	112	143	152	152
Bolivia	83	92	97	99	98	100	111	110	117	121	128
Bulgaria	105	99	99	106	104	100
Cameroon	105	125	132	119	108	100	103	82	80	74	54
Chile	70	71	69	83	100	100	98	108	115	110	122
Colombia	90	93	100	97	98	100	99	95	105	109	118
Congo	150	136	106	104	104	100	120	129
Costa Rica	77	85	89	88	92	100
Cuba	76	81	91	92	92	100
Czechoslovakia (former)	95	92	95	96	97	100	114	108
Côte d'Ivoire	117	115	125	125	120	100	89	86	81	79	99
Dominican Republic	72	70	93	100	93	100	91	95
Ecuador	88	88	86	95	95	100	113	114	104
El Salvador	86	89	93	96	97	100	104
Fiji	77	102	94	90	103	100	103	107	106	116	111
Guatemala	115	108	126	96	103	100	99	103
Iran, Islamic Republic of	129	109	64	78	80	100	107	108
Iraq	106	101	109	95	119	100	77	91
Jamaica	66	72	78	90	93	100	87	92	95	93
Jordan	92	80	85	92	95	100	116	133	171	178	245
Lebanon	50	50	50	50	110	100	110
Malaysia	68	68	71	80	87	100	102	107	95	110	116
Mauritius	66	68	87	94	93	100	106	107	106	112	110
Morocco	62	65	75	88	95	100	118	116	100	107	117
Panama	77	86	91	80	88	100	107	109	118	125	127
Paraguay	84	85	87	87	90	100	94	90	100	97
Peru	97	144	177	140	99	100	129	123	123	140	144
Philippines	51	52	67	80	88	100	119	127	124	137	159
Poland	117	120	117	118	114	100	108	103	109
Romania	102	107	114	114	114	100	83	69	59	67	69
Senegal	98	66	94	101	99	100	91	96	91	85	103
Slovenia	96	101	99	96	89	100	96	86	82	81	78
Swaziland	73	98	85	86	95	100	93	98
Syrian Arab Republic	109	111	97	90	91	100	109	111	105	111
Thailand	40	33	37	50	68	100	108	124
Tunisia	85	90	90	97	98	100	102	107	107	112	113
Turkey	71	72	71	67	78	100	97	89	102	99	115
Middle-income (upper)
Argentina	109	124	118	96	91	100	134
Barbados	76	76	82	85	88	100	102	98	108	116	118
Botswana	55	58	64	74	83	100	101	109
Brazil	70	87	84	85	98	100	118	99	107	118	138
Gabon	106	112	110	104	95	100	103	98
Greece	87	97	87	94	100	100	101	105	108	116	121
Hungary	100	102	105	102	103	100	97	85	82	85	88
Korea, Republic of	64	70	78	88	94	100	109	111	113	122	123
Libyan Arab Jamahiriya	93	86	89	98	104	100	118	120
Malta	64	65	79	94	96	100	104	109	119
Mexico	90	91	92	92	97	100	104	105	106	104	105
Portugal	60	63	74	81	94	100	102	98	99	92	89
Puerto Rico	41	38	48	67	92	100	92	77	54	54
South Africa	80	86	85	91	99	100	96	98	86	88	93
Suriname	117	93	102	81	96	100	100
Trinidad and Tobago	72	73	85	73	91	100	96	89	84	89	85
USSR (former)	106	79	84	93	101	100
Uruguay	82	93	101	97	100	100	99	106	108	108	84
Venezuela	27	32	43	55	89	100
Yugoslavia (former)	89	96	96	94	89	100	92
Others
Taiwan, China	91	91	96	98	94	100	104	109	111	117
Source: UNIDO: Industrial Statistics, 1997.

Value

Global output of food and drink products, in US dollar terms, is hard to estimate because data for many countries are missing. However, food production in the United States alone increased from $262.8 billion in 1985 to $394.8 billion in 1995, while drink production rose from $38.4 billion to $55.9 billion in the same period. Even in Japan, where the volume of production has declined in recent years, the value of output climbed sharply, going from $98.3 billion in 1985 to $180 billion in 1990 and $289.6 billion in 1995 for food production, and from $17.6 billion in 1985 to $48 billion in 1995 for drink production.⁽⁸⁾ The total output of the food, drink and tobacco (FDT) products of the European Union's (EU) Member States increased from Ecu 337.6 billion to Ecu 521 billion during the 1985-95 period and is expected to reach about Ecu 590 billion by 1998.⁽⁹⁾ The combined output of the 100 largest multinationals of FDT products in the world increased almost sixfold (in current US dollar terms) between 1974 and 1994, going from $143.5 billion to $826.4 billion.⁽¹⁰⁾

Being one of the first industries to develop from the primary sector, the food industry is the major manufacturing industry in many developing countries. It is also one of the most important industries in a number of industrialized countries. Table 1.3 presents the output of the food industry as a percentage of total manufacturing output for 1985-95. With some exceptions, the food industry in low- and middle-income countries tends to claim a greater share of manufacturing output than that in high-income countries. In some countries food production accounts for nearly one-third or more of manufacturing production. The share of the output of this industry usually declines as other industries catering to less basic needs expand. This is well reflected in the trend observed for Singapore, Ireland, Malaysia, the Republic of Korea and Taiwan, China.

Table 1.3. Output in food products as a percentage of total manufacturing output, 1985-95 (1990 = 100)


Country/territory	1985	1986	1987	1988	1989	1990	1991	1992	1993	1994	1995

High-income non-OECD
Cyprus	16.98	18.55	17.25	16.40	15.70	15.40	15.62	16.33	17.47	18.50	18.87
Germany (former GDR)	12.07	13.21	13.09	13.17	13.47
Hong Kong	2.93	2.47	2.28	2.44	2.51	2.97	3.11	3.37	3.58
Israel	18.59	19.51	18.35	20.26	18.49	17.22	15.84	15.82	15.30	15.65
Kuwait	3.59	5.29	4.14	4.39	3.33	3.14	9.03	5.61	5.24	6.62	6.62
Qatar			7.46	5.42		4.37	4.10	4.10	4.04	5.01
Singapore	5.98	5.89	4.08	3.72	3.50	2.87	2.82	2.77	2.58	2.46	2.35
High-income OECD
Australia	17.81	17.86	17.70	17.23	16.66	16.56	16.77	17.57
Austria	12.29	12.67	12.59	12.29	11.49	11.29	11.33	11.71	12.39	11.47	11.12
Canada	13.55	13.83	13.51	12.73	12.63	13.35	14.06	14.04	13.25	12.25	12.11
Denmark	31.36	30.53	30.58	30.02	30.26	29.82	28.66	27.76
Finland	16.55	17.77	16.82	16.34	15.27	15.71	17.35	16.72	15.71	13.81	13.29
France	15.54	15.68	15.19	14.73	14.32	14.08	14.24	14.57	14.91	14.39	14.07
Germany							8.74		9.31	9.13
Germany (former FRG)	8.82	8.95	8.59	8.40	8.28	8.30	8.40	8.53
Iceland	56.38	56.27	53.92	51.25	51.21	53.40	54.66	56.79	56.92
Ireland	33.21	34.68	34.77	33.27	31.80	31.81	32.18	32.22	32.33	31.23	29.41
Italy	10.50	10.52	10.55	9.88	9.93	10.41	11.08	11.47	11.78
Japan	8.82	9.25	9.20	8.73	8.30	8.02	7.99	8.56	8.99	8.67	8.43
Luxembourg	5.71	5.70	6.11	5.56	5.08	5.31	6.37	6.42	6.57	6.01
Netherlands	23.61	24.22	23.37	22.05	21.55	20.85	21.54	22.35	24.24	22.62	22.32
New Zealand	25.92	24.81	27.09	28.69	29.43	32.08	30.11	30.11
Norway	19.07	20.19	20.20	20.00	20.16	20.51	21.90	22.59	22.34	22.85	23.01
Spain	17.51	18.14	17.54	17.74	17.25	17.10	17.51	17.65	18.21	17.91	17.00
Sweden	12.44	12.86	12.27	12.14	11.86	11.88	12.24	12.78	12.25	10.78
Switzerland		15.27	15.25	13.90	13.45	13.34	13.88	13.88	14.15	13.67
United Kingdom	13.20	13.70	13.09	12.50	12.12	12.46	13.28	12.82	12.78	12.40	12.28
United States	11.59	11.94	11.65	11.48	11.48	11.78	12.03	11.90	11.92	11.35	11.20
Low-income
Bangladesh	12.53	11.56	13.58	14.50	21.83	23.27	21.66	20.41
Benin					154.54	151.63	161.33	165.54	158.26
Burundi		38.41	37.63	37.51	38.38	42.78	41.68
Central African Republic	14.04	17.06	19.96	19.17	16.93	17.60	21.21	23.04
China	8.67	8.78	8.40	8.53	8.36	8.31	8.23	7.51	6.66	7.32
Egypt	18.37	19.71	18.20	20.72	20.40	22.37	18.46	18.86	21.97	22.82
Ethiopia and Eritrea	19.06	19.97	18.67	18.84	22.07
Ghana	13.16	10.54	13.85						10.63	10.63
Honduras	34.51	36.75	34.64	35.10	35.38	35.43	36.66	37.51	39.15	38.22
India	13.76	14.30	15.07	14.70	15.71	14.91	16.05	15.13	13.85
Indonesia	16.35	16.28	16.28	15.86	14.93	14.74	14.03	15.01	19.32	13.12	15.81
Kenya	37.08	37.77	38.17	36.80	37.04	39.74	40.15	41.08	44.01
Madagascar	25.63	21.14	25.98	25.98
Malawi	34.24	34.10	33.29	24.78	42.40
Mozambique		20.53	16.78				31.24		27.36	29.14
Myanmar	59.12	60.77	62.90	63.02
Nepal		49.44	22.06	20.73	21.54	21.56	22.13		23.31
Niger						43.34	44.71	46.26	44.45	42.17
Nigeria	15.73				18.37	14.70
Pakistan	19.32	19.37	18.29	18.97	17.83	16.60	17.95	17.95
Sri Lanka	22.49	24.10	24.06	23.87	28.92	24.87	19.95	21.01	19.54
Tanzania, United Republic of	22.85	17.44	15.41	14.30
Yemen				53.68	54.05	53.58	52.20	54.87	55.73	64.03
Zambia						24.32				26.43
Zimbabwe	21.71	18.62	23.15	20.08	18.70	18.27	19.12	23.80	22.94	22.22	24.61
Middle-income (lower)
Algeria	20.91	22.16	23.95	26.51	24.21	17.37	16.32	19.01	17.57	17.57
Armenia		12.28	12.21	12.13	12.38	11.27	16.35	10.85	13.94
Azerbaijan						14.89	13.80	11.37	17.93	21.42
Belize					50.61	52.78	49.87	49.34
Bolivia	41.79	26.99	26.93	30.37	29.96	30.50	30.26	31.67	31.26	31.75
Bulgaria	19.70	19.67	18.55	18.39	17.15	18.84	15.45	16.57	17.15	13.47
Cameroon					15.05	11.91	14.44	14.13	12.17	13.88
Chile	20.09	21.90	21.11	20.18	19.15	19.19	21.12	21.23	21.42	23.23	22.96
Colombia	24.24	26.68	22.87	21.72	22.56	23.70	22.93	25.37	24.90	23.63	23.81
Congo	11.38	12.70	13.16	13.53
Costa Rica	41.96	43.87	40.36	41.60	40.21	39.37	40.46	36.44	38.07	37.55
Cuba	36.70	36.44	36.80	37.81	36.51
Czechoslovakia (former)	15.77	15.90	15.77	15.47	18.77	14.77	19.27
Dominican Republic
Ecuador	33.36	31.76	32.57	31.47	31.88	31.39	32.54	31.90	30.05	26.85
El Salvador	18.46						25.07		18.79	29.97
Fiji	50.48	58.33	64.14	58.13	58.93	51.75	49.85	52.09	50.21	51.03
Guatemala	33.62	31.97	36.13	30.06					38.41
Iran, Islamic Republic of	15.19	19.63	18.45	17.68	17.19	14.07	15.14	14.49	16.50
Iraq	18.10	15.95	17.88				25.80	5.88
Jamaica	28.37	29.94	28.91	28.52	28.03	29.61	30.90	31.49
Jordan	10.74	12.33	9.69	11.01	11.27	11.87	11.95	10.96	11.63	13.91
Kyrgyzstan					23.39	22.11	21.48	15.73	18.15	16.08
Latvia		25.20	25.43	25.59	25.56	24.90	25.54	33.84	34.77	34.14
Malaysia	26.17	23.05	22.55	23.51	20.98	16.71	14.77	14.42	12.92	11.87	10.83
Mauritius	42.13	38.42	34.34	31.20	29.94	29.72	28.70	29.43	27.43
Moldova, Republic of		27.69	27.11	27.29	27.88	28.70	30.29	37.03	45.88	47.90
Mongolia						25.52	30.20	30.64	28.24	32.04
Morocco	12.19	12.74	13.61	11.93	12.01	11.56	12.38	12.17	12.87	12.19
Panama	35.15	35.10	35.06	39.79	40.07	36.99	36.88	35.72	35.17	35.51	39.00
Papua New Guinea	46.74	44.40	44.47	45.21	45.21
Peru	16.66	17.41	17.15	16.87	16.94	18.08	19.90	19.80
Philippines	21.87	24.19	23.42	21.65	21.58	24.69	22.07	20.16	19.67	20.67	19.82
Poland					17.11	15.38	17.42	18.52	17.18
Romania	8.48	8.26	8.78	8.60	14.63	15.96	15.85	17.76	20.11
Senegal	45.96		46.03	46.36	49.78	51.46
Slovenia			8.45	7.95	9.91	11.42	12.73	13.41	9.27	8.54
Swaziland	53.32	51.31	46.01	37.39	40.93	40.91
Syrian Arab Republic	17.64	20.14	24.52	26.94	24.36	28.31	27.26	25.26
Thailand		16.77		27.58	15.93	12.01	9.46
Tonga	57.23	51.26	41.67	44.18	39.58	37.25	39.41	38.95	39.35	45.08
Tunisia					16.65	17.86	18.59	20.49	18.96
Turkey	12.92	12.69	11.83	11.64	12.49	12.18	13.39	13.43	13.20	14.92
Middle-income (upper)
Argentina	21.52	20.37	20.55	21.30	22.84	24.51			21.34
Barbados	26.48	27.60	27.22	26.88	31.38	30.45	22.63	19.13	27.33	26.40	27.11
Botswana	37.96	38.48	36.85	28.52				37.09	38.58
Brazil	15.96					14.10		17.24
Greece	16.57	17.77	18.40	17.84	18.91	18.82	19.29	20.40	20.63	20.03	19.80
Hungary	17.16	16.99	17.20	17.48	18.05	20.79	21.48	22.22	21.87	20.41	19.55
Korea, Republic of	8.31	8.00	7.20	6.98	7.16	6.82	6.90	6.97	6.89	6.48	5.95
Malta	14.08	15.54	15.25	14.13	12.74	11.17	10.36	9.42	9.31
Mexico	12.94	13.48	11.62	11.51	12.00	12.28	12.45	12.85	13.00	13.07	13.95
Oman					11.93	3.52	16.31	29.42	27.54	56.61
Portugal	17.59	18.34	18.00	17.03	17.12	15.49	15.66	15.76	15.14	15.39	16.52
Puerto Rico					9.25	8.43	8.16		7.56
Russian Federation							17.21	14.32	17.72	18.53
Slovakia							13.42	14.64	14.72	14.21
South Africa	15.37	15.36	15.23	13.89	13.24	13.69	13.93	14.67	14.43	13.50	12.72
Suriname	50.43	49.68	54.22	39.42	46.76	39.95	36.90	33.39	34.48
Trinidad and Tobago	19.17	22.37	23.72		22.30	20.96	23.48	22.57	22.42
USSR (former)	17.08	17.31	16.83	17.54	17.83	18.54
Uruguay	29.53	26.85	24.00	26.49	29.23	26.84	27.99	27.76	30.31	29.52	31.03
Venezuela	18.73	19.01	17.10	16.93	16.84	16.36	17.73	18.33	17.67
Yugoslavia					17.18	18.70	20.14	23.69		24.86
Yugoslavia (former)	11.43	12.35	12.82	12.41	13.65
Others
Croatia		13.81	14.42	14.55	14.99	17.83	19.20	19.16
Czech Republic	13.50	14.79	14.52	14.20	14.56
The former Yugoslav Republic of Macedonia			8.68	7.54	6.21	8.10	12.00	13.29	15.95	17.06
Taiwan, China	11.04	9.58	8.80	8.31	8.27	8.30	7.95	8.26	7.65	7.95	7.95
Ukraine			25.64	24.82	24.92	26.02	29.72	17.67	25.70	24.27
Source: UNIDO: Industrial Statistics, 1997.

In comparison to the food industry, the drink industry accounts for a much smaller share of manufacturing, as shown in table 1.4. With some exceptions, in low- and middle-income countries, this industry tends to occupy a more important position in manufacturing than it does in high-income countries. When the trends in the shares of the output of the FD industries among high-income OECD countries over the years are compared, the drink industry shows a slight increase in its manufacturing share in a number of these countries, although this still remains substantially smaller than that of the food industry. Nevertheless, when the FD industries are combined, they claim a considerable share of manufacturing output in many countries.

Table 1.4. Output in beverages as a percentage of total manufacturing output, 1985-95


Country/territory	1985	1986	1987	1988	1989	1990	1991	1992	1993	1994	1995

High-income non-OECD
Bahamas		18.05	25.13		46.37	49.11	53.40
Cyprus	5.76	6.23	6.20	6.20	7.00	7.08	6.65	7.20	7.29	7.97	7.80
Germany (former GDR)	2.72	2.97	2.94	2.97	3.02
Hong Kong	1.16	1.00	0.83	0.94	1.05	1.17	1.15	1.13	1.29
Israel	1.02	1.33	1.50	1.54	1.41	1.51	1.64	1.50	1.75	1.63
Kuwait	0.97	1.28	1.11	1.15	1.01	1.00	0.79	1.56	1.73	1.36	1.36
Qatar			1.44	1.25		1.25	1.22	1.06	1.43	1.51
Singapore	0.83	0.98	0.89	0.84	0.85	0.72	0.70	0.72	0.64	0.55	0.52
High-income OECD
Australia	2.96	3.01	3.04	3.01	3.09	2.90	3.24	3.29
Austria	2.44	2.52	2.63	2.60	2.41	2.53	2.62	3.00	3.13	3.14	3.04
Belgium
Canada	1.99	2.04	1.95	2.01	1.80	1.73	1.90	2.02	1.90	1.69	1.66
Denmark	2.54	2.50	2.59	2.55	2.39	2.39	2.66	2.70
Finland	1.19	1.53	1.52	1.53	1.56	1.68	2.02	1.86	1.53	1.35	1.25
France	1.64	1.80	1.77	1.77	1.80	1.94	2.06	1.96	2.14	2.00	1.94
Germany							2.10		2.32	2.20
Germany (former FRG)	1.91	1.99	2.00	1.95	1.87	2.02	2.05	2.08
Iceland	1.36	1.55	1.72	1.91	2.16	2.43	2.61	2.31	2.21
Ireland	3.66	3.81	3.67	3.70	3.61	3.80	4.26	3.85	3.71	3.59	3.19
Italy	1.51	1.56	1.46	1.57	1.41	1.64	1.60	1.61	1.63
Japan	1.58	1.69	1.74	1.69	1.52	1.44	1.38	1.44	1.53	1.55	1.40
Luxembourg	2.43	2.64	2.91	2.72	2.56	2.82	2.99	3.15	3.14	3.29
Netherlands	1.83	2.03	1.96	1.89	1.91	2.03	2.14	2.25	2.43	2.46	2.38
New Zealand	2.49	2.54	2.55	2.61	2.64	2.90	2.72	2.72
Norway	1.63	1.80	1.92	1.92	1.89	1.96	2.13	3.54	3.56	3.55	3.51
Spain	3.72	4.16	4.28	3.92	3.79	3.88	3.78	3.93	4.05	3.98	3.78
Sweden	0.91	1.05	1.08	1.09	1.13	1.25	1.40	1.52	1.38	1.41
United Kingdom	2.58	2.94	2.66	2.67	2.66	2.67	2.79	3.27	3.30	3.23	3.47
United States	1.69	1.81	1.73	1.68	1.63	1.64	1.74	1.71	1.68	1.62	1.59
Low-income
Afghanistan	1.91	1.93	2.12	1.91
Bangladesh	0.40	0.38	0.37	0.24	0.34	0.15	0.12	0.32
Benin					25.12	27.57	30.37	35.61	29.67
Burundi		14.67	14.38	14.33	14.66	16.34	15.92
Central African Republic	7.00	8.51	9.96	9.56	8.44	8.78	10.58	11.49
China	2.00	1.99	2.24	2.32	2.21	2.30	2.34	2.28	2.17	2.22
Egypt	3.06	3.06	2.78	2.40	1.52	1.13	1.44	1.39	1.35	1.30
Ethiopia and Eritrea	14.36	14.33	14.48	15.32	15.54
Ghana	8.78	9.70	8.21						7.10	7.10
Honduras	9.46	10.10	9.92	9.72	9.27	8.16	9.14	9.90	10.24	10.83
India	0.72	0.79	0.77	0.80	0.71	0.77	0.83	0.78	0.89
Indonesia	1.02	1.00	0.93	0.94	0.80	0.64	0.65	0.73	0.68	0.84	0.75
Kenya	3.68	4.11	3.54	3.35	3.28	2.51	2.45	2.68	2.57
Madagascar	10.32	10.92	9.63	9.63
Malawi	9.74	12.11	12.68	13.33	9.72
Mozambique		6.15	6.35				8.32		12.32	16.98
Myanmar	8.83	9.08	9.39	9.41
Nepal		2.09	5.92	3.87	3.61	4.83	3.49		4.61
Nigeria	9.40				59.59	51.88
Pakistan	1.23	1.34	0.96	1.03	0.93	0.82	0.94	0.94
Sri Lanka	4.76	6.00	6.17	5.21	5.28	5.19	5.08	5.06	5.71
Tanzania, United Republic of	6.12	4.72	4.41	4.25
Yemen (northern part)		7.01	5.67	4.96
Yemen (southern part)	14.39	13.67
Zimbabwe	8.46	9.05	8.03	7.88	7.35	8.22	8.21	7.07	8.07	7.46	7.05
Middle-income (lower)
Algeria	4.32	4.58	4.95	5.47	5.00	3.59	3.37	3.93	3.63	3.63
Armenia		5.85	5.50	5.68	5.16	3.99	9.39	6.08	4.22
Azerbaijan						12.33	14.31	5.97	1.97	1.60
Belize					11.22	9.39	10.78	10.04
Bolivia	7.23	9.94	12.49	9.68	10.64	7.64	9.07	9.66	8.51	8.70
Bulgaria	3.20	3.19	3.00	2.99	2.78	3.03	3.18	3.82	4.16	4.56
Cameroon					21.54	20.99	21.27	24.03	20.84	14.13
Cape Verde	0.00	0.00	0.00	0.01	0.02	0.02
Chile	3.08	3.41	3.34	3.24	3.12	3.62	4.01	4.32	4.27	3.98	4.18
Colombia	9.16	8.21	8.02	7.67	7.84	7.65	8.04	7.10	7.41	7.44	7.88
Congo	28.10	31.37	32.51	33.41
Costa Rica	6.79	6.66	6.82	6.51	6.85	7.50	8.25	8.32	7.83	8.35
Cuba	2.69	2.66	2.62	2.66	2.82
Czechoslovakia (former)	1.71	1.61	1.61	1.59	1.90	1.74	3.17
Ecuador	4.09	3.53	3.62	3.06	3.21	3.49	4.55	4.12	5.07	3.30
Fiji	11.82	10.31	9.57	10.72	8.38	9.47	9.09	9.12	9.28	9.17
Guatemala	6.12	7.45	8.07	5.43					12.87
Iran, Islamic Republic of	2.01	2.39	2.03	2.06	1.68	1.47	1.11	1.32	1.59
Iraq	3.16	3.02	4.36				7.04	2.69
Jamaica	8.18	9.43	9.07	9.45	8.95	9.51	8.40	8.34
Jordan	2.37	1.97	2.92	2.69	2.51	2.66	2.74	2.02	2.80	3.29
Kyrgyzstan					1.04	0.97	1.31	1.47	0.94	1.20
Latvia		0.98	0.89	0.96	0.94	0.89	1.44	2.51	3.63	5.15
Malaysia	1.29	1.34	1.18	1.00	0.91	1.06	0.84	0.74	0.61	0.61	0.56
Mauritius	4.47	4.30	4.33	4.72	4.85	5.00	5.20	5.20	5.18
Moldova, Republic of		10.80	11.55	11.57	11.22	10.57	9.93	6.97	8.50	9.92
Mongolia						5.62	7.66	7.91	5.57	2.65
Morocco	5.25	5.56	6.88	6.71	6.96	5.77	2.70	3.09	3.19	6.52
Panama	6.92	7.43	7.93	8.38	8.60	8.07	8.17	7.62	7.78	7.72	7.92
Papua New Guinea	11.23	9.39	9.02	9.88	9.88
Peru	5.80	6.72	8.12	6.14	6.95	5.77	7.40	8.43
Philippines	6.27	6.42	6.58	6.54	6.78	5.64	5.83	5.79	5.30	5.36	5.54
Poland					5.43	4.82	6.90	7.63	7.04
Romania	4.36	4.24	4.51	4.42	2.76	3.57	4.10	4.77	5.18
Senegal					2.04	2.14
Slovenia			1.14	1.10					1.91	1.90
Swaziland	4.94	3.61	8.58	22.30	21.93	23.12
Thailand		7.88		3.41	3.95	4.54	1.83
Tonga	4.18	3.74	3.04	3.22	2.89	2.72	2.87
Tunisia					1.81	1.85	1.99	1.96	2.17
Turkey	1.49	1.39	1.52	1.63	1.83	2.01	2.46	2.18	2.19	2.37
Middle-income (upper)
Argentina	3.41	3.86	4.19	3.61	3.60	3.22			5.35
Barbados	10.65	11.10	11.58	11.20	9.77	9.49	11.08	15.42	13.79	13.90	14.01
Botswana	20.33	18.56	15.29	13.92				15.27	13.23
Brazil	1.06					1.40		1.77
Greece	3.56	4.02	4.10	4.44	4.19	4.27	4.44	4.99	5.23	5.50	5.58
Hungary	2.17	2.30	2.21	2.02	2.19	2.66	3.05	3.05	3.66	3.41	3.27
Korea, Republic of	1.78	1.66	1.59	1.58	1.57	1.55	1.48	1.42	1.30	1.42	1.30
Malta	5.53	5.11	5.82	5.98	5.10	4.89	4.53	4.11	4.31
Mexico	6.30	7.34	6.65	6.59	6.80	7.12	7.84	8.38	8.87	9.29	9.92
Portugal	1.59	1.75	1.81	1.87	2.12	2.81	2.82	2.95	3.06	3.09	3.11
Puerto Rico					9.92	10.18	10.88		10.19
Russian Federation							1.31	1.06	1.05	1.08
Slovakia							1.96	2.33	2.65	2.79
South Africa	4.18	4.19	4.81	4.67	4.78	4.85	4.96	5.62	4.95	4.94	4.92
Suriname	15.24	15.86	14.72	24.03	20.20	19.72	19.39	22.26	19.40
Trinidad and Tobago	4.88	6.32	5.90		5.01	4.98	4.84	5.28	5.55
USSR (former)	2.15	1.53	1.46	1.57	1.61	1.51
Uruguay	4.88	5.81	5.87	5.56	5.20	5.79	6.62	7.86	9.13	8.23	6.61
Venezuela	4.61	4.80	4.48	4.55	4.08	3.94	4.44	4.94	5.62
Yugoslavia					1.82	2.61	2.94	3.24		4.61
Yugoslavia (former)	1.64	1.91	1.71	1.62	1.78
Others
Croatia		1.96	1.75	1.69	1.84	2.42	3.47	3.58
Czech Republic	1.48	1.46	1.46	1.48	1.51
The former Yugoslav Republic of Macedonia			1.90	2.15	2.30	2.81	2.62	2.69	2.97	6.98
Taiwan, China	1.56	1.53	1.49	1.44	1.50	1.63	1.59	1.70	1.65	1.64	1.64
Ukraine			1.60	1.65	1.75	1.75	2.85	1.34	1.78	1.76
Source: UNIDO: Industrial Statistics, 1997.

Value added

In order to compete successfully in a saturated market, manufacturers must be able to market the kinds of products that consumers want. In order to increase turnover in a slow growing market, they must be able to add more value to their products. The key to their growth is how much extra value can be added through product innovation or new products.

Table 1.5 compares the value added in total manufacturing, the value added in the FD industries and the proportion of the value added in the FD industries within that of total manufacturing for the G7 member countries for 1980 and 1994. The proportion of the FD industries in the value added in total manufacturing increased slightly over the period for all the countries, except the former FRG. The small percentage changes indicate that the FD industries in these countries were already quite mature by 1980.

Table 1.5. Total manufacturing value added (MVA), total value added in the FD industries (FDVA) and the proportion of FDVA as a percentage of MVA in the G7 member countries in 1980 and 1994 (US$ million)


Country	1980			1994
Country	MVA	FDVA	%	MVA	FDVA	%

United States	769 899	75 270	9.8	1 611 763	177 796	11.0
Japan	339 234	30 904	9.1	1 257 761	123 886	9.8
Germany (former FRG)	265 588	25 022	9.4	583 069	49 416	8.5
France	161 552	19 438	12.0	268 611	38 850	14.5
United Kingdom	163 790	20 163	12.3	243 653	32 361	13.3
Canada	59 803	7 802	13.0	100 322	14 871	14.8
Italy	97 032	8 034	8.3	128 486	12 072	9.4
Total	1 856 898	186 633	10.1	4 193 665	449 252	10.7
Source: UNIDO: Industrial development, Global report 1996.

Although the share of the FD industries in total manufacturing increased only slightly in most of these countries, the actual amount of FD value added increased significantly. For example, it more than quadrupled in Japan, more than doubled in the United States, almost doubled in the former FRG, France and Canada, and increased by over 50 per cent in the United Kingdom and Italy.

Table 1.6 presents data for the same parameters as above for some ASEAN countries, known for their remarkable industrial development in the last decade. In terms of value added, the FD industries dominated the manufacturing sector in Malaysia, the Philippines and Thailand in 1980, but became much less important in Malaysia and Thailand by 1994 as other industries expanded more rapidly. The importance of the FD industries is likely to diminish further as other industries grow in this region in the coming years. The considerable growth in the proportion of the FD industries within manufacturing in Indonesia indicates that country's late start in economic development compared to the other countries in the table. The low and declining figures for Singapore are an indicator of its relatively advanced economic development. Despite the reduction in the FD industries' share of value added in manufacturing for some countries, the actual value added in the FD industries more than doubled in Malaysia, more than tripled in Thailand and more than quadrupled in Singapore. In Indonesia it grew nearly ninefold. Since these countries still offer much room for expansion, the FD industries there are likely to show healthy growth in the coming years.

Table 1.6. Total manufacturing value added (MVA), total value added in the FD industries (FDVA) and the proportion of FDVA as a percentage of MVA in some ASEAN countries in 1980 and 1994 (US$ million)


Country	1980			1994
Country	MVA	FDVA	%	MVA	FDVA	%

Thailand	9 028	2 721	30.1	47 461	8 627	18.2
Indonesia	4 371	427	9.8	28 605	3 738	13.1
Philippines	4 861	1 164	23.9	12 694	3 302	26.0
Malaysia	3 623	774	21.4	18 560	1 650	8.9
Singapore	4 004	173	4.3	20 593	712	3.5
Total	25 887	5 259	20.3	127 913	18 029	14.1
Source: UNIDO: Industrial development, Global report 1996.

Geographical distribution of production

Although the FD industries in many developing countries have recorded a strong gain in recent years, table 1.7 shows that in 1993 more than three-quarters of the value in the food industry and almost three-quarters of that in the drink industry throughout the world was added in industrialized countries. The share of world value added in food manufacturing for industrialized countries declined from 82 per cent to 77.5 per cent in 13 years, with that in drink manufacturing declining from 82 to 74 per cent in the same period. The sharp decline in Eastern Europe in both the food and drink industries in recent years due to the slowdown caused by major economic reform was offset mostly by a gain by the EU and the North American countries, as well as by some of the fast growing developing countries.

Table 1.7. Distribution of world value added in the food and drink industries, 1980-93¹ (percentages)


Industry (ISIC)	Year	Industrialized countries							Developing countries			World
		All countries	Eastern Europe + former USSR	Western Europe		Japan	North America	Others	All countries	NICs	Others
		All countries	Eastern Europe + former USSR	EU²	Others	Japan	North America	Others	All countries	NICs	Others

Food (311/2)	1980	81.7	27.8	26.1	3.3	7.4	14.7	2.4	18.3	9.4	8.9	100.0
	1985	80.9	28.4	25.3	3.2	6.9	14.8	2.3	19.1	9.6	9.5	100.0
	1990	80.4	27.3	26.1	3.1	6.6	14.9	2.4	19.6	9.8	9.8	100.0
	1993	77.5	18.6	29.7	3.4	7.1	15.8	2.9	22.5	11.1	11.4	100.0
Drink (313)	1980	82.4	29.9	27.4	2.6	7.5	13.0	2.0	17.6	7.2	10.4	100.0
	1985	80.9	26.1	28.8	2.7	7.3	13.6	2.4	19.1	7.8	11.3	100.0
	1990	78.8	21.5	31.0	2.8	7.1	13.9	2.5	21.2	8.4	12.8	100.0
	1993	74.4	16.8	31.5	3.0	6.9	13.5	2.7	25.6	9.1	16.5	100.0
¹ At constant 1980 prices. ² In 1993, including estimates for the eastern part of Germany. Source: UNIDO: International Yearbook of Industrial Statistics 1996 (Vienna, 1996).

Table 1.8 presents the distribution of value added in the FD industries among developing countries. Latin America has been the major producing region of both food and drink products, its share of value added in the food sector constituting nearly half of the developing world total and that in the drink sector over half of the developing world total. However, its share in both industries declined slightly during the period shown, the same being true for most other developing regions. South and East Asia was the only region which increased its share of value added in both industries, reflecting the economic trend in the area in the last decade.

Table 1.8. Distribution of value added in the food and drink industries among developing regions, 1985 and 1992¹ (percentages)


Industry (ISIC)	Year	Developing regions
		Africa	Latin America	South and East Asia	West Asia and Europe	All countries

Food (311/2)	1985	10.7	55.7	23.7	9.9	100.0
Food (311/2)	1992	10.0	54.5	27.0	8.5	100.0
Drink (313)	1985	18.6	55.8	18.0	7.6	100.0
Drink (313)	1992	16.1 ²	54.0 ²	22.4 ²	7.5 ²	100.0
¹ At constant 1980 prices. ² Refers to 1991. Source: UNIDO: International Yearbook of Industrial Statistics 1996 (Vienna, 1996).

Table 1.9 presents 15 leading food producers among developing countries in 1985 and 1994. Brazil, Argentina and Mexico were the major producers in both years, their shares totalling about 30 per cent. The combined share of the Latin American countries on the list was 36.7 per cent in both 1985 and 1994. On the other hand, the combined share of the Asian countries on the list increased from 23.4 to 30.2 per cent. This is another illustration of the development of the food industry in Asia in recent years.

Table 1.9. Leading food producers among developing countries, 1985 and 1994


1985		1994
Country/area	Percentage of world total	Country/area	Percentage of world total

Brazil	14.1	Brazil	12.6
Argentina	9.1	Argentina	11.2
Mexico	7.1	Korea, Republic of	6.6
Yugoslavia (former)	5.5	Mexico	6.3
India	5.3	India	5.6
Korea, Republic of	4.5	Indonesia	5.0
Thailand	4.3	Philippines	4.2
Taiwan, China	4.1	Taiwan, China	4.1
Turkey	3.6	Turkey	4.0
Philippines	3.4	Thailand	3.1
Chile	2.4	Chile	2.9
Peru	2.2	Peru	2.0
Egypt	1.9	Egypt	1.7
Colombia	1.8	Colombia	1.7
Indonesia	1.8	Pakistan	1.6
Total	71.2	Total	72.6
Source: UNIDO: International Yearbook of Industrial Statistics 1997 (Vienna, 1997).

Consumption

The poorer the family, the higher the ratio of its spending on food items to total household consumption. This ratio, commonly known as Engel's coefficient, can also be applied at national level. As the per capita income in a country rises, the coefficient tends to decline despite an increase in actual expenditures on food. This can be observed in table 1.10 for the United States where actual expenditure on food and drink products is projected to increase by 14 per cent from 1993 to 2005, as opposed to the 2 per cent decline projected in Engel's coefficient.

Table 1.10. United States: Personal consumption expenditure on food and drinkproducts in 1977 and 1993, and projected 2005


Year	Billions of 1987 dollars	Percentage of total personal consumption

1977	441 500	19.2
1993	524 000	15.2
2005	596 700	13.1
Source: J. Pfleeger: "US consumers: Which jobs are they creating?", in Monthly Labour Review (Washington, DC, Bureau of Labor Statistics of the US, Department of Labor), Vol. 119, No. 6, June 1996, p. 11.

Between 1970 and 1988 in the 12 Member States of the European Economic Community, the average ratio of food and drink prices to household expenditure declined from 30 to 21 per cent. It dropped from 39 to 23 per cent in Italy and from 45 to 41 per cent in Ireland.⁽¹¹⁾ The United Kingdom has one of the lowest ratios in the world; in 1993 it was just over 11 per cent, as opposed to over 30 per cent for Portugal.⁽¹²⁾ Its ratio dropped from 17 per cent in 1980 to 11 per cent in 1995.⁽¹³⁾

In accordance with Engel's law, in recent years the growth rate for food and drink consumption has been low and falling in many industrialized countries. In France, for example, food consumption grew by 3.4 per cent per year between 1950 and 1970, and then declined to 2.1 per cent per year during the following decade, further dropping to 0.5 per cent per year between 1991 and 1995.⁽¹⁴⁾ For the EU as a whole the consumption of food, drink and tobacco products increased by 3.1 per cent per year between 1985 and 1990 and by 1.6 per cent per year between 1990 and 1994.⁽¹⁵⁾ This trend has also been observed in Japan, where the food consumption level fell by 3.3 per cent in 1995 from the previous year.⁽¹⁶⁾

One apparent reason for this declining growth rate is that the FD market, particularly in industrialized countries, is already saturated. Another is that consumption has slowed down due to diminishing purchasing power linked to macroeconomic conditions. Another possible reason is changes in lifestyles, leading to different needs for FD products and different eating habits.

Product trends

What many consumers, particularly in industrialized countries, now look for in FD products are convenience and healthiness. Some look for FD products containing certain nutritional values (e.g. fortified multiple vitamins, protein, etc.), while others look for products with low calorie, salt, cholesterol or caffeine content depending on their needs. Given the increasing number of women in regular employment, they have little time to prepare meals and as a result tend to buy convenience foods. Value-added food items have become increasingly affordable to many households with double incomes. The fact that the proportion of single-person households is increasing -- due to lower birth rates, late marriages, higher divorce rates and increased life expectancy -- has also pushed up the demand for convenience foods. Convenience food for pets is another subsector that has expanded with the increase in the number of single-person households. A further factor now being sought in FD products is variety, with ethnic foods becoming increasingly popular among consumers as a result of education and travel.

Hygiene is an essential factor in processed foods today, particularly in developing countries. Consumers have no fear of adulteration and contamination in well-sealed products such as packaged flour. Having the name of the producer clearly indicated on the package is also the surest way to gain the confidence of consumers who will repeatedly return to the same product if it gives satisfaction. To take an example, the current penetration rate of packaged flour in India is less than 1 per cent of the population, but it is expected to be consumed by 140 million people by 2005.⁽¹⁷⁾

The factors that induce more demand for certain FD products than others, as discussed above, relate mostly to industrialized countries. However, they already apply to some population segments in developing countries where, for example, the number of women in paid employment is growing fast, particularly in large urban areas. Rapid urbanization and economic development in such countries will create favourable conditions for FD industries to grow.

Consumers' changing preferences and habits are well reflected in the turnovers of different subsectors of the FD industries. The subsectors producing frozen foods, health foods, snacks, ready-to-eat meals, poultry, fish and non-alcoholic drinks have made a healthy gain over the years, particularly in industrialized countries. Some of these subsectors, such as poultry, fish and non-alcoholic drinks, also grew in developing countries. On the other hand, the consumption of canned fruits and vegetables, red meats, oils and fats, sugar and alcoholic drinks either grew very little, stagnated or declined in industrialized countries, though in some cases continued to grow in developing countries.

The frozen foods sector, with its images of healthier and more convenient food, has grown sharply in many industrialized countries. As freezing technology advances, the sector offers a greater variety of products, including fruits, vegetables, fish, shellfish, meat, poultry, dairy and bakery products and a wide range of desserts that have undergone more than first-stage processing and are often ready to eat. The total value of all frozen foods in the United States, for example, climbed from $7.9 billion in 1970 to $59 billion in 1995.⁽¹⁸⁾ This remarkable expansion was possible as a result of the increased capacity of refrigerated warehouses at below 0^oF. The US national capacity rose from a total of 812 million cubic feet in 1971 to 1.9 billion cubic feet in 1995.⁽¹⁹⁾

In France, since 1982 the growth rate in the frozen foods subsector has been more than double that of the food industry as a whole. This has no doubt been helped by the increased proportion of households with deep-freezes (up 10 per cent from 1990-95) and microwave ovens (up 20 per cent).⁽²⁰⁾ In some European countries total consumption of frozen foods jumped impressively in 1995 over the previous year; it was over 13 per cent in Norway, and over 10 per cent in both Finland and the United Kingdom. Belgium and Italy also recorded a growth rate of almost 10 per cent. The trend is also found in other regions.⁽²¹⁾

The changing preferences of food and drink consumers are also illustrated in the growth of the "natural food" industry, total sales of which rose to $7.6 billion in 1994 in the United States alone. The growth rate accelerated from 7 per cent in 1990 to 10 per cent in 1991, 14 per cent in 1992 and 18 per cent in 1993. In 1995 alone, 889 new organic food products were introduced into the market, 35 per cent more than in 1994. American consumers are reported to be willing to pay from 30 to 200 per cent more for organic products which they consider to be healthy.⁽²²⁾

In regions such as North America and Western Europe where per capita consumption of red meat has traditionally been relatively high, meat consumption has declined in recent years. One of the reasons is that red meat contains more cholesterol and is thus considered as less healthy than, for example, poultry and fish products. To make matters worse for the beef industry, the bovine spongiform encephalopathy (BSE) epidemic in recent years in Europe has seriously affected consumer confidence in its products. In Switzerland, beef prices fell by over 10 per cent in 1996 compared to the previous year. Pork prices increased by nearly 25 per cent, however.⁽²³⁾ In the United Kingdom, the meat processing and preserving sector, with the exception of poultry, declined by 15 per cent in 1996.⁽²⁴⁾ In Australia, too, per capita beef and veal consumption decreased from 41 kg in 1988-89 to 36.5 kg in 1992-93.⁽²⁵⁾

However, the average consumption of protein of animal origin usually rises as per capita income increases. Thus, beef consumption is still rising in developing countries. In India, the combined production of beef and buffalo meat increased from 1.6 million tonnes in 1990 to almost 2.5 million tonnes in 1993. Production is projected to rise to 3.4 million tonnes by 2001-02.⁽²⁶⁾ The consumption of beef increased slowly in recent years in some transitional economies as well. In Hungary, for example, per capita beef consumption had dropped from 9.6 kg in 1980 to 6.5 kg in 1990, mainly due to general economic conditions. It is recovering slowly, however, as it increased to 7.4 kg in 1992 and 8.1 kg by 1994.⁽²⁷⁾ Despite health concerns and the BSE scare in industrialized countries over red meat, there is still considerable scope for demand to rise, particularly in developing countries.

As opposed to the stagnant consumption rate of red meat in many industrialized countries, the popularity of poultry is growing fast throughout the world for health and convenience reasons. While most consumers in the past used to buy a whole chicken, they are now given many choices from first-stage processed products to ready-to-eat frozen meals of many varieties that are of high value added. In the United States, per capita poultry consumption climbed from 28 pounds in 1960 to 72 pounds in 1996.⁽²⁸⁾ In Hungary, per capita consumption increased from 18.1 kg in 1980 to 23.1 kg in 1994.⁽²⁹⁾ National production in India rose from 334,000 tonnes in 1990 to 406,000 tonnes in 1993, and is expected to climb to 1 million tonnes by 2001-02.⁽³⁰⁾ People in developing countries are also beginning to enjoy ready-to-eat chicken products served, for example, in fast food restaurants, the number of which is increasing in urban areas.

The consumption of fish products has also been rising at the expense of meat products, as a result of their lower cholesterol content. World per capita consumption of fish and seafood in 1990-92 was 13 kg, which was a 39 per cent rise from 1980-82. For developing countries as a whole, it was only 9 kg, but this represented a 44 per cent rise from the 1980-82 level.⁽³¹⁾ Consumption in the EU increased from Ecu 6.85 million in 1985 to Ecu 11.94 million in 1994, an average annual growth rate of 5.5 per cent for 1985-94.⁽³²⁾ Production in India increased from 3.84 million tonnes in 1990-91 to 4.75 million tonnes in 1993-94 and is projected to reach 6.5 million tonnes by 2001-02, although only 0.8 million tonnes of this is expected to be sold as processed fish products.⁽³³⁾ Nevertheless, a higher demand for processed fish is expected in the near future as more people in India begin to seek convenience foods.

Another growth area is convenience snacks, particularly in industrialized countries. This is despite the declining trend seen in sugar consumption in recent years, as many people now opt for sugarless products for health reasons. The development of artificial sweeteners that can replace sugar might have contributed partly to the growth of the confectionery subsector. Per capita sugar consumption in the United Kingdom fell from 42 kg in 1986-87 to 38 kg in 1992-93, while that in Germany declined from 35 kg in 1985-86 to 33 kg in 1994-95. In the EU as a whole it decreased from 33.3 kg in 1985-86 to 31.5 kg in 1992-93. On the other hand, the consumption of confectionery products for the entire EU climbed from Ecu 17 billion in 1985 to Ecu 23.6 billion in 1994, and it is expected to exceed Ecu 27.6 billion by 1998.⁽³⁴⁾ In the United States, non-chocolate confectionery production rose from $2 billion in 1987 to $3 billion in 1992, while per capita candy consumption rose from $32.3 to $40.4 for the same period.⁽³⁵⁾ The snacks subsector tends to offer greater opportunities to manufacturers than many other subsectors in the sense that much more value can be added to new products to be developed or to existing products to be improved. For this reason, this subsector is likely to continue to grow, despite the fact that the market is already very large.

As for the drink industry as a whole, the EU and North America have increased their shares of production in overall global output, as have some developing countries, as shown in table 1.7. However, the alcoholic drinks subsector has been feeling increasing pressure from non-alcoholic drinks, as today's consumers also tend to seek a healthy image in drinks. For example, the EU has experienced a negative growth rate in the consumption of alcohols and spirits, the rate being 0.48 per cent for 1985-90 and 0.34 per cent for 1993-94. It has also declined in the wine subsector, from 2.1 per cent for 1985-90 to 0.2 per cent for 1990-94, the rate having fallen as low as 0.95 per cent for 1993-95. The brewery subsector is in a similar position. Its consumption growth rate in the EU declined from 0.87 per cent in 1985-90 to 0.64 per cent in 1993-94. On the other hand, the non-alcoholic drinks subsector, which includes carbonated drinks, lemonade, fruit juice, mineral water, fitness drinks, canned tea and coffee, has experienced a period of rapid expansion in recent years. Its growth rate in the EU climbed from 4.9 per cent for 1985-94 to 6.8 per cent for 1993-94.⁽³⁶⁾

The situation is similar in many other industrialized countries. Beer production in the United States declined from 203.7 million barrels in 1990 to 199 million in 1995⁽³⁷⁾ despite growth in population and in disposable income. On the other hand, the carbonated drinks market rose from 7.68 billion cases in 1989 to 8.39 billion in 1993.⁽³⁸⁾ In Australia, the turnover for the soft drinks subsector rose from A$1.6 billion for 1989-90 to A$1.95 billion in 1992-93, as compared to an increase from A$2.25 billion to A$2.45 billion in the brewery subsector for the same period.⁽³⁹⁾ In Hungary, however, the wine, beer and non-alcoholic drinks subsectors all increased the value of their output; the non-alcoholic industry grew by more than 300 per cent compared to a 75 per cent increase in the beer and a 183 per cent increase in the wine industries for the period 1992-95.⁽⁴⁰⁾

The growth or decline in the demand of certain products discussed above reflects a changing market situation and changes in consumer preferences. It is said that people now consume less alcoholic drinks but consume more drinks as a whole, in terms of value.⁽⁴¹⁾ Food and drink manufacturers must remain attuned to consumers' changing preferences and tastes and be able to adapt flexibly to the market environment if they are to survive and grow in the global market.

Trade

International trade in FD products has expanded considerably during the last decade due to a number of factors. One is that consumption has stagnated or declined in many industrialized countries due to market saturation, which has forced the producers to be more aggressive in exploring new opportunities elsewhere. On the other hand, many developing countries with surplus agricultural production have been making serious efforts to build up their FD processing industries into more value-added, export-oriented operations. Increased trade liberalization has also encouraged the movement of agricultural commodities as well as value added FD products throughout the world. Against the backdrop of these new developments, the competition among food and drink exporting countries is intensifying.

Table 1.11 shows that, except for 1993, the values of both exports and imports of food products expanded during the 1988-95 period in all regions of the world for which data are available. Exports grew by 35 per cent for the world as a whole between 1989-91 and 1995. The fastest growth was achieved by South America, where export value increased by 70 per cent, followed by Asia.

Table 1.11. Index numbers of global food* export and import value, by region, 1988-95 (1989-91 = 100)


Region	Export value
Region	1988	1989	1990	1991	1992	1993	1994	1995

World	88	94	102	104	112	106	118	135
Africa	92	99	103	97	95	94	110	122
North and Central America	96	100	102	98	105	103	108	133
South America	83	88	107	105	115	117	144	169
Asia	89	96	96	108	118	116	137	154
Europe	86	91	103	106	116	105	115	130
Oceania	81	95	103	102	103	109	120	125
USSR (former)	109	114	119	67


Region	Import value
Region	1988	1989	1990	1991	1992	1993	1994	1995

World	88	94	103	103	111	101	113	128
Africa	91	105	101	94	116	107	115	134
North and Central America	82	92	104	104	112	114	123	121
South America	75	87	95	118	133	147	193	243
Asia	89	102	100	98	107	106	123	154
Europe	88	88	104	108	117	99	111	122
Oceania	80	96	101	104	108	112	119	138
USSR (former)	94	105	108	87
Excluding fish products. Source: FAO: Trade Yearbook 1995*, Vol. 49 (Rome, 1996), pp. 5 and 6

Major agricultural producers in the past used to export their products mostly as commodities with little value added. The key to trade expansion in today's competitive world, however, is not how much food a country exports in terms of volume, but how much it can sell in terms of value. Australia, with its vast expanses of agricultural land, has been one of the world's major food producers. Agri-based products accounted for more than 50 per cent of its total manufacturing exports in 1989-90, though the figure declined to less than 40 per cent by 1994-95, as shown in table 1.12. The country's FD industries have been making efforts to add more value to their products before exporting. The value of the exports of highly processed products almost doubled during the period presented, while the value of minimally processed products grew slowly. However, the bulk of Australia's agricultural exports is still unprocessed or minimally processed, which implies an opportunity for the FD industries to engage in increased processing of commodities prior to exportation.

Table 1.12. Australian exports and imports of food and drink products and their proportion of total manufacturing exports and imports, 1989-95 (current prices in A$ million)


Year	Exports					Imports
Year	Highly processed	Minimally processed	Unprocessed	Total	%	Highly processed	Minimally processed	Unprocessed	Total	%

1989-90	1 988	5 343	7 002	14 334	51.1	1 608	440	460	2 509	5.2
1990-91	2 081	5 295	5 072	12 448	39.9	1 660	468	417	2 545	5.5
1991-92	2 541	5 399	5 486	13 426	40.9	1 778	505	424	2 706	5.6
1992-93	3 097	6 140	5 870	15 107	40.4	2 042	522	424	2 987	5.3
1993-94	3 543	6 779	6 230	16 552	40.0	2 223	580	500	3 303	5.4
1994-95	3 734	6 838	6 187	16 759	38.4	2 389	652	773	3 814	5.4
Source: Government of Australia (Department of Industry, Science and Technology): Food Australia: Processed food and beverages industry (Canberra, 5th edition, Dec. 1995), pp. 26-27.

The EU is one of the largest food producers and exporters in the world. Since the growth rate of food consumption in many of its member countries has been stagnant or declining, the food industry in the EU has tried to expand into other geographical regions. Efforts resulted in a 72 per cent increase in the value of EU food exports to the countries outside the Union between 1988 and 1995. Since imports grew by only 25 per cent for the same period, the balance in favour of the Union increased almost fivefold, as shown in table 1.13.

Table 1.13. European Union: Exports and imports of food, drink and tobacco products to and from the countries outside the European Union, 1985-95 (current prices in Ecu million)


Year	Export	Import	Balance

1985	24 672	21 180	3 492
1988	21 477	19 054	2 423
1990	24 977	19 894	5 083
1992	27 908	21 308	6 601
1993	30 768	21 850	8 919
1994	33 359	24 418	8 941
1995*	36 982	23 873	13 109
Eurostat estimation. Source: European Commission: Panorama of EU Industry 1997*, Vol. 1 (Brussels, 1997).

Turkey has been an important producer and exporter of food products in Europe outside the EU. The value of its exports climbed from $1.31 billion in 1993 to $1.73 billion in 1994 and $3.04 billion in 1995, an increase of 32 per cent in 1994 and 76 per cent in 1995 over the previous year. Its imports also rose from $994 million in 1993 to $1.79 billion in 1995, an increase of 80 per cent. It has been reported that owing to a relative improvement in the economy aided by more favourable exchange rates, the domestic demand for FD products is also making a healthy gain.⁽⁴²⁾

Tokyo has long been known as one of the most expensive cities in the world to live in. This has mainly been due to the fact that the agricultural and food sectors have been well protected and the consumers have been obliged to pay higher prices for food items. However, due to increasing deregulation in the sector, there has been an unprecedented level of price competition in recent years between domestic and imported products. This is resulting in the rapid penetration of imported products into the Japanese market, as presented in table 1.14. The decline in exports, both in terms of value and of the proportion of total manufacturing exports, indicates the tough time Japanese food manufacturers now face in global competition, particularly after the Plaza Agreement of 1985, following which the yen appreciated considerably.

Table 1.14. Value of Japanese exports and imports of foodstuffs and their proportion of total exports and imports, 1980-95 (yen billion)


Year	Exports		Imports
Year	Value	Percentage of total	Value	Percentage of total

1980	359	1.22	3 326	10.4
1985	315	0.75	3 719	12.0
1990	237	0.57	4 572	13.5
1992	244	0.57	4 728	16.0
1993	223	0.55	4 378	16.3
1994	209	0.52	4 771	17.0
1995	200	0.48	4 784	15.2
Source: Government of Japan (Statistics Bureau, Management and Coordination Agency): Japan Statistical Yearbook 1997 (Tokyo, 1997), pp. 416-417.

In order to overcome their weaker position vis-à-vis competitors from abroad, Japanese food manufacturers rapidly increased their foreign direct investment (FDI). The FDI by the food industry reached the unprecedented level of $1.3 billion in 1989, which was 66 per cent more than all the accumulated investment up to that year by the industry. Although the rate of increase in FDI slowed down immediately thereafter due to recession, it picked up again by the mid-1990s. Up until 1992 over half of the FDI by Japanese industry went to the United States, but Australia has since become the prime target. Recently, an increasing amount of investment has been directed towards China in view of its low production cost and the large potential the country offers as a future market.⁽⁴³⁾

The trade performance of the United States FD industries has been positive, particularly in recent years. As shown in table 1.15, the value of its exports has risen steadily, although their proportion in total manufacturing exports stagnated due to a healthy expansion in other manufacturing sectors. The value of the FD trade balance has been consistently positive.

Table 1.15. United States: Exports and imports of food and kindred products, by value and proportion of total manufacturing exports and imports, 1985-95 ($ million)


Year	Exports		Imports
Year	Value	Percentage of total	Value	Percentage of total

1985	10 055	5.7	12 521	4.5
1990	16 160	4.9	16 564	4.1
1991	17 492	4.9	16 298	4.0
1992	19 761	5.2	17 445	3.9
1993	20 509	5.1	16 090	3.3
1994	23 094	5.2	17 342	3.1
1995	26 021	5.2	18 326	2.9
Source: US Department of Commerce: Statistical Abstract of the United States 1996: The National Data Book (Washington, DC, 116th edition, Oct. 1996).

Hungary has been a major food producer in Eastern Europe. Currently, about 20 per cent of its production is earmarked for export, and this accounted for 15-18 per cent of total export revenues for the country in 1996-97. As presented in table 1.16, exports have been dominated by the meat, poultry, and fruit and vegetable subsectors, which together accounted for 65 per cent of total FD exports in 1995. The milling and alcoholic drinks subsectors might constitute future growth areas.

Table 1.16. Hungary's foreign trade in food, beverages and tobacco products, 1993-95 ($ million)


Branch	Exports			Imports
	1993	1994	1995	1993	1994	1995

Meat and meat products	268	268	298	98	183	164
Poultry	291	357	383	2	4	3
Fruit and vegetable products	431	563	557	88	116	100
Dairy	54	47	55	48	45	22
Milling	7	15	87	19	14	21
Fodder	20	20	24	3	4	5
Bakery	3	3	7	3	7	5
Sugar	5	6	27	27	10	10
Chocolate and confectionery	48	61	69	54	70	62
Pastry	4	11	20	2	2	1
Other food products	26	22	16	54	57	44
Alcohol and alcoholic beverages	62	69	120	11	11	27
Wine	112	97	128	4	4	3
Beer	9	9	9	19	23	12
Non-alcoholic beverages	8	12	11	1	3	6
*Food products and beverages*	*1 438*	*1 654*	*1 908*	*581*	*718*	*674*
Tobacco	24	31	48	44	4	6
*Food products, beverages and tobacco products*	*1 462*	*1 685*	*1 956*	*625*	*722*	*680*
Source: Judit Kiss: Technology and employment in the Hungarian food and drink industry (Budapest, Institute for World Economics of the Hungarian Academy of Sciences, Mar. 1997), unpublished paper, p. 9.

Many developing countries are increasingly penetrating the FD markets throughout the world, as shown in table 1.11. Exports of fish products and processed fruit and vegetables from India, for example, are growing rapidly. The total value of the exports of fish products jumped from Rs.13.76 billion in 1991-92 to Rs.35.76 billion in 1994-95. The exports of processedfruit and vegetables also climbed from Rs.1.94 billion in 1991-92 to Rs.4.7 billion in 1995-96.⁽⁴⁴⁾ According to another source, today's processed fruit and vegetables earn Rs.4.5 billion worthof export revenue for India, Rs.0.8 billion of which comes from the export of mango pulp alone.⁽⁴⁵⁾

As the world becomes more deregulated for FD products, global trade in such products will expand further. Increased trade will mean an intensification of competition. The market has become a difficult place to survive in for many FD producers, but it has also given opportunities for expansion to other producers that can offer quality products at competitive prices.

Structure of the food and drink industries

Large-scale FD enterprises may dominate the industries in terms of the revenues they earn and the number of workers they employ. But these industries are still much more fragmented than they may appear to be, given the far greater number of small enterprises than medium-sized or large ones. In 1992 about 256,000 of all enterprises (92 per cent of the total) producing food, drink and tobacco products in the EU were categorized as small (less than 20 workers). On the other hand, there were 16,500 (6 per cent) medium-sized (20-99 workers) and 4,600 (1.7 per cent) large (100 or more workers) enterprises. Large-scale firms accounted for 69 per cent of the total turnover in these industries, compared to the 16 per cent and 15 per cent generated by medium-sized and small firms respectively. As far as employment was concerned, 52 per cent of the total workforce in these industries was employed by large firms, compared to 18 per cent and 30 per cent by medium-sized and small enterprises respectively.⁽⁴⁶⁾

The world's FD industries have become increasingly concentrated as a larger market share has been taken by fewer, stronger companies. By way of example, the world's ten largest companies accounted for 41 per cent of total global turnover in 1994, compared with 30 per cent in 1974. The total turnover of the 100 largest companies jumped from $143.5 billion in 1974 to $826.4 billion in 1994. However, companies based in the United States became less dominant over the two decades. The number of American companies among the 100 largest firms fell from 50 to 28, while their combined turnover decreased from 54 per cent to 44 per cent of the total turnover of the top 100 companies. The number of companies in this group based in Western Europe, including Switzerland and Sweden, rose from 37 to 43, though their combined turnover was down from 37 to 35 per cent. On the other hand, the number of Japanese companies as well as their combined turnover climbed from 7 to 20 per cent and from 5 to 14 per cent respectively. A number of the other 100 largest companies in 1994 were based in Australia, Canada, the Philippines and South Africa.⁽⁴⁷⁾

These strong positions have been built through the growth and expansion of firms and through mergers and acquisitions. Many mergers and acquisitions have taken place across national borders as companies have seen little chance of a significant growth in their own domestic market and so have sought new opportunities elsewhere. Acquiring well-established businesses provides greater access to new markets and proves more cost-effective than starting anew. The new, enlarged company can then take advantage of the additional network through which it can boost the sale of its original products. Mergers and acquisitions are often also received favourably by the stock markets.⁽⁴⁸⁾ To take an example, after the 1997 announcement that two large companies in the United Kingdom, Guinness and Grand Metropolitan, would merge to create a conglomerate worth $33 billion, shares in Guinness rose by 85 pence to 600, while Grand Metropolitan shares increased by 76 pence to 593.⁽⁴⁹⁾ Many cases of mergers and acquisitions took place in the 1980s. A total of 4,463 mergers and acquisitions involving FD-related businesses, including hotels, restaurants and food retailers, took place in Canada and the United States between 1981 and 1987.⁽⁵⁰⁾ There were some 228 cases of takeovers of EU food companies between 1988 and June 1993, amounting to nearly $18 billion. The largest proportion (23.7 per cent) of these companies was acquired by companies based in the United States, involving transactions worth about $8 billion. Swiss-based companies acquired 13.2 per cent of them at a cost of over $6 billion, while the rest were taken over by companies based in other European countries.⁽⁵¹⁾ The expansion of companies based in both the United States and Switzerland into the EU countries was largely associated with their interest in securing more advantageous positions in the European single market. Although the number of mergers and acquisitions declined in the early 1990s partly due to recession, the number involving the companies based in Canada and the United States increased from 365 in 1991 to 529 in 1995.⁽⁵²⁾ After takeovers of diversified companies, consolidation tends to take place and the entire production structure is rationalized and reorganized for improved productivity. During the course of restructuring, the company may decide to concentrate on certain core areas, while shedding non-core or non-performing businesses or any excess capacity to become leaner, more efficient and more profitable.

Most companies in Europe used to produce essentially for national or regional markets, but this has changed as companies from different countries now come under the same management. A large company with a number of plants scattered throughout Europe, for example, would concentrate a few of them on the manufacture of certain products in order to supply the whole European market more efficiently. In extreme cases, a single large plant with the most efficient machinery would concentrate on the production of one item since the product unit cost is reduced as the production volume increases.⁽⁵³⁾

Unilever, one of the largest food-processing companies in the world, bought some 64 food businesses during the period 1992-94 while disposing of 28 others, and thereby cutting a substantial number of jobs. In 1993 the company spent nearly £500 million to cover the cost of restructuring, including the cost of redundancy packages. The company has become increasingly focused on its core activities, such as the manufacture of margarine, ice cream and tea, while disposing of other activities such as distribution operations and chemical business, as it continues to restructure its entire operations to its advantage in global competition. For example, in 1992, only 3 per cent of its ice cream sales were transnational, but this figure is expected to rise to around 35 per cent by 1999.⁽⁵⁴⁾

There are many examples of the trend toward increased concentration in the FD industries through company takeovers in Europe, leading to restructuring. In Belgium, for example, the number of FD processing firms declined from 7,096 in 1992 to 6,990 in 1994.⁽⁵⁵⁾ In 1991 in France, three large companies accounted for 66 per cent of the yoghurt market, 70 per cent of the dairy dessert market, 60 per cent of the ready-to-eat meals market, and 67 per cent of the mineral water market. As for the chocolate and confectionery segments, five companies had a combined market share of 91 per cent, while four companies accounted for 84 per cent of the coffee market.⁽⁵⁶⁾

In North America, too, concrete examples of mergers and acquisitions and subsequent restructuring affecting employment abound. To take an example, in 1997 the large United States-based firm H.J. Heinz, following the acquisition of a number of companies, announced a major restructuring plan involving the closure or disposal of 25 plants worldwide, entailing the reduction of some 2,500 jobs, or 6 per cent of its total workforce of 43,000. By way of these measures, the company hoped to increase its total sales from the current $10 billion to $15 billion in five years.⁽⁵⁷⁾

The number of drink manufacturers in Japan declined from 8,446 in 1980 to 7,168 in 1993, while that of confectionery firms dropped from 15,449 to 11,263 in the same period. On the other hand, the number of frozen food producers rose from 1,778 to 2,483 in the same period.⁽⁵⁸⁾ The reduced number of firms is not necessarily due to restructuring after mergers and acquisitions, but available information suggests that a considerable number of FD manufacturers in the country have undergone restructuring in recent years to slim down and become more competitive. Some have absorbed or sold their subsidiaries, while others have rationalized their entire operations and closed down some plants.⁽⁵⁹⁾

The organization representing the drink workers in Togo reported that in 1994 two of the three companies whose workers it represented had undergone restructuring. Although none of the workers' representatives nor union members had been affected by the restructuring, some non-skilled workers had lost their jobs. Moreover, all three companies were acquired in 1996 and placed under new management which then undertook a restructuring and rationalization process, which was likely to result in further job losses.

In addition to takeovers, many companies form joint ventures or strategic alliances, or conclude franchising, licencing and distribution agreements, in order to penetrate new markets, partly as a way of reducing risk. Large companies may also engage in joint ventures in markets where they are relatively new and weak but where they wish to compete with well-established firms. For example, Nestlé has formed a joint venture with General Mills in the breakfast cereal market to challenge Kellogg's dominance.⁽⁶⁰⁾

While franchising is often seen in fast-food restaurant and convenience store businesses, this type of partnership, and also production and distribution under licence, have become increasingly common in the soft drinks and brewery industries. While beer consumption has been stagnating in industrialized countries, in China, for example, it has grown at an average of 15 per cent per annum in recent years. In view of the sheer size of the population and the enormous potential for continued market expansion in the country, at least 30 foreign brewers were reported to have established partnerships with local brewers in the period 1993-94 alone.⁽⁶¹⁾

Partnerships may also be created with non-local rather than local firms to explore new business ventures elsewhere. After the return of democracy to Central and Eastern Europe, Coca-Cola decided to embark on a most ambitious but risky investment in the region in partnership with 12 bottling companies from various countries, including Australia, Norway and Turkey. The group became profitable within five years and claims that its investment created 15,000 direct jobs in the region. Furthermore, according to the study Foreign direct investment in transitional economies: The Coca-Cola system in Poland and Romania, undertaken at the University of South Carolina, the employment multiplier effect has been ten additional jobs for each direct job. The study asserts that the new jobs have generated an entire new chain of economic activities, such as tens of thousands of small retail businesses as well as advertising and packaging businesses, that are providing the framework and incentive for transitional economies to be competitive in the global economy.⁽⁶²⁾ While company takeovers often lead to rationalization and job losses, strategic alliances in dynamic and emerging economies, for example, can result in employment creation and new opportunities in related areas, as in the above case.

Food and drink industries are increasingly being faced with dwindling margins as they are squeezed by more demanding and cost-conscious consumers and increasingly powerful retailers who control access to store shelves. Today, retailers in many industrialized countries increasingly fill their shelves with own-label products -- sometimes known as private label -- which provides them with greater margins (sometimes as much as 15 per cent more than branded products).⁽⁶³⁾ The share of own-label products in the total FD market in the United Kingdom in 1993 was 30 per cent, which was the highest in Europe. This was said to have been helped mainly by weak trademark legislation in the country that has allowed retailers to sell close copies of manufacturers' brands.⁽⁶⁴⁾ The share in the country has now reached 37 per cent.⁽⁶⁵⁾

The share of own-label products in total FD sales in other countries is also rising. In Germany it rose from 13 per cent to 25 per cent between 1980 and 1993, while in France it increased from 11 per cent to 21 per cent during the same period. In Switzerland the share had reached 26 per cent in 1992-93. In the United States it increased from 15 per cent in 1988 to 20 per cent in 1993, and is expected to climb to 27 per cent by the end of the century.⁽⁶⁶⁾

Own-label products used to be considered as cheap generic equivalents of branded quality products. They usually had less attractive packaging and inferior taste, and were limited to certain items only. This is no longer the case, however. A wide variety of own-label products are now available so that the consumer can choose over branded products. As retailers do not have to allocate the kind of budget for promotion of their products as FD manufacturers of brand names normally do, they have been able to invest more in improving the quality of their own-label products. Thus, their products have become increasingly popular among value-conscious consumers. Retailers with point of sale electronic information systems are also in a better position than FD producers of brands to monitor sales and customer buying trends,⁽⁶⁷⁾ to which they can respond more quickly.

This trend is resulting in price wars and forcing many FD producers to accept dwindling margins. In the United States, for example, the price of a frozen food main dish dropped from $4.50 to $2.99 in the early 1990s. The price of potato chips dropped by 8 per cent between 1989 and 1992, as opposed to a 9 per cent rise in the consumer price index for the same period.⁽⁶⁸⁾ Faced with this increasingly harsh market environment, many producers are striving to make their operations more efficient and competitive and to develop products that will attract today's choosy consumers. They are resorting to all kinds of modern technology to achieve their goals.

Investment

Although the FD industries have traditionally been more labour-intensive than many other industries, the rapidly changing domestic and global market situations have transformed them into increasingly capital-intensive sectors. Technological advances have put FD companies under growing pressure to adopt new technologies to improve their productivity. Many have invested extensively in building new plants equipped with the latest machinery, while others are spending heavily on the research and development of more attractive products.

Table 1.17 presents gross capital investment per worker in the food industry and in total manufacturing in the former FRG for the period 1988-92. Investment increased steadily in both sectors, bar a small decline recorded in manufacturing in 1992 from the previous year. Investment rose by 35 per cent in the food sector during the entire period shown, as opposed to a 25 per cent rise for 1988-91 and a decline of 3 per cent in 1992 from the previous year for manufacturing. The investment per head in the food sector was 28 per cent higher than that seen in manufacturing in 1988, and the gap was widened to 43 per cent in 1995. This indicates how increasingly capital-intensive the food industry has become.

Table 1.17. Germany (former FRG): Gross capital investment per worker in the food industry and in manufacturing, 1988-92 (DM in current prices)


Sector	1988	1989	1990	1991	1992

Food	14 141	14 716	16 244	18 932	19 038
Manufacturing	11 077	11 885	12 973	13 813	13 354
Source: Michael Breitenacher and Uwe Christian Täger: Branchenuntersuchung Ernährungsindustrie, ifo Struktur und Wachstum, Industrial Series, Issue No. 48 (Germany).

The total investment in Hungary's FD industries grew by 2.6 times between 1991 and 1995, as shown in table 1.18. While the meat subsector benefited the most in the early years, investment was later shifted towards the fruit/vegetable, chocolate/confectionery, brewery and non-alcoholic beverages subsectors. The brewery industry was the largest beneficiary in 1993, 1994 and 1995. As regards the type of investment, a significant proportion (70 per cent in 1995) of total FDT investment was allocated to the purchase of modern machinery. Investment on constructing new plants accounted for 24 per cent of the total in 1995, with the remainder going on other items such as research and development (R & D). The largest proportion (37 per cent) of the budget for R & D in the FD industries in 1995 was allocated to product development, followed by experimental development (11 per cent). Although FD firms of all types of ownership are allocating more of their R & D budgets to product development, those owned by foreign investors were found to spend a higher proportion on product development than those owned by joint ventures or solely by Hungarian nationals.⁽⁶⁹⁾

Table 1.18. Investment distribution in Hungarian food and drink industry investments, 1990-95 (millions of forint in current prices)


Branch	1990	1991	1992	1993	1994	1995

Meat and meat products	3 869	2 587	2 287	3 080	3 144	3 314
Poultry	954	731	708	939	1 710	2 388
Fruit and vegetable products	1 973	1 420	2 062	1 895	3 171	4 198
Vegetable oil	720	1 061	164	1 844	637	512
Dairy	1 360	683	1 281	1 508	2 209	2 699
Milling	3 179	2 052	233	474	1 213	1 110
Fodder	n.a.	n.a.	1 319	870	931	2 242
Bakery	979	1 388	1 752	1 266	1 395	1 409
Sugar	1 517	1 698	1 453	1 726	1 900	2 080
Chocolate and confectionery	785	630	790	1 309	3 741	4 635
Pastry	n.a.	n.a.	223	280	312	214
Other food products	n.a.	n.a.	575	2 400	2 774	855
Alcohol and alcoholic beverages	584	2 301	579	1 011	1 428	1 152
Wine	426	683	216	492	486	675
Beer	1 084	1 274	2 191	3 958	5 701	5 706
Non-alcoholic beverages	82	90	1 086	2 324	5 557	5 521
*Food products and beverages*	*17 512*	*16 598*	*18 018*	*26 191*	*37 388*	*43 196*
Tobacco	222	325	1 910	3 903	2 094	2 319
*Food products, beverages and tobacco products*	*17 734*	*16 923*	*19 928*	*30 094*	*39 482*	*45 515*
n.a. Not available. Source: Judit Kiss: Technology and employment in the Hungarian food and drink industry (Budapest, Institute for World Economics of the Hungarian Academy of Sciences, Mar. 1997), unpublished paper, p. 16.

The fixed capital per head in India's FD industries increased from Rs.8,200 in 1974-75 to Rs.25,000 in 1992-93, though it stagnated or fluctuated for many of the subsectors up to 1984-85, as presented in table 1.19. Investment in most of the subsectors peaked either in 1988-89 or 1992-93, an indication that new technology had increasingly been adopted starting in the late 1980s. The meat, oils and fats, animal feed and soft drinks subsectors enjoyed a much higher level of investment than the average. In particular, investment in the meat industry in 1992-93 surged by 3.7 times as much as the 1988-89 level to more than four times the average for the FD industries. A high level of investment was also made in the soft drinks subsector, and the fact that the level remained high from 1988-89 to 1992-93 indicates that a serious effort had been made to modernize this particular subsector in the face of increased global competition affecting the country.

Advances in information technology have had a considerable impact on the FD industries in such diverse areas as office and personnel management, stock management, accounting, marketing and distribution. The results of a survey on investment in information technology in food-related sectors conducted in Japan found a steady increase in investment in this area. The average investment made by large (more than 500 workers) food manufacturers increased by 30 per cent from 1989 to 1992, while that by smaller (100-299 workers) manufacturers rose by 78 per cent during the same period. In the food distribution sector, average investment climbed by 87 per cent among large companies, compared to 45 per cent among smaller companies. Investment grew by 25 per cent among large food retailers, compared to 73 per cent among smaller ones.⁽⁷⁰⁾

Table 1.19. India: Capital intensity* in the food-processing industry (Rs. thousands at 1980-81 prices)


Branch	1974-75	1979-80	1984-85	1988-89	1992-93

Meat	66.7	37.1	32.6	29.1	107.1
Dairy	29.5	30.7	32.5	47.1	37.5
Fruit and vegetable	15.2	11.7	19.4	28.2	24.1
Fish	20.4	20.0	16.8	17.2	27.9
Grain milling	7.2	7.7	10.7	12.9	13.3
Bakery	11.6	10.9	15.9	19.3	22.8
Cocoa and confectionery	8.8	8.8	13.7	59.9	33.3
Oils and fats (hydrogenated)	21.5	19.2	26.3	42.7	61.6
Other oils and fats	6.7	9.5	17.6	28.0	50.6
Coffee	0.3	0.5	0.6	0.7	0.9
Ice-cream	31.7	29.0	30.0	34.7	25.9
Animal feed	13.7	16.8	31.6	30.0	72.9
Others	11.8	7.9	14.9	31.7	28.7
Soft drinks and syrup	24.5	16.8	28.0	71.4	7.3
*Average*	*8.2*	*9.3*	*13.8*	*21.6*	*25.0*
* Fixed capital per employee. Source: Veena Nabar: Technology and employment in Indian food and drinks industry: Some case-studies (New Delhi, July 1997), unpublished paper, p. 44.

Since 1990 a considerable sum has been, and is still being, invested in the FD industries in New Zealand, particularly in the dairy sector. Investment has focused primarily on new plants equipped with state-of-the-art technology aimed at large-scale operations (the plant with the largest processing capacity can handle 14 million litres of milk per day) and also smaller operations whose products target specific niche markets. For example, the New Zealand Dairy Group spent NZ$200 million in 1995 alone on a milk powder plant and the world's largest cheese making plant, both of which use modern computer technology. The company calculates that by 2001 it will need to invest an extra NZ$100 million each year to process its milk supply. It is estimated that the entire investment in the dairy industry since 1990 has amounted to NZ$1 billion.⁽⁷¹⁾

Net capital expenditure per head in the FD industries in the United Kingdom increased steadily from 1986 to 1993, as presented in table 1.20, an indication that these industries have gradually become more capital-intensive. Expenditure in the tobacco industry declined from 1986 to 1988, but rose rapidly thereafter, virtually doubling each year up to 1993. The difference in the extent of capital-intensiveness is reflected in the widening gap in the gross value added per head in these industries. Furthermore, net capital expenditure in the FD industries in the United Kingdom in 1993 accounted for 17.6 per cent of the total expenditure for manufacturing as a whole. The subsectors which reported significantly high net capital expenditure included beverages (largely beer and mineral water), meat and meat products (particularly poultry), dairy products (liquid milk and cream) and "other foods" (including cocoa and chocolate confectionery, bread and cakes). Although table 1.20 showed the net capital expenditure per head in the FD industries in 1993 to be only 41 per cent of that in the tobacco industry, it was about one-third higher than that for manufacturing as a whole. The net capital expenditure in the FD industries was 15 per cent of the gross value added, as opposed to 11 per cent for manufacturing,⁽⁷²⁾ another indication that the capital intensity in the FD industries is now above the average for manufacturing. Table 1.21 presents the level of expenditure made on R & D in 1995 by nine leading FD manufacturers in the United Kingdom as well as the total expenditure for the FD industries as a whole. The expenditure was led by Unilever which accounted for 78 per cent of the total expenditure for the FD industries, while the combined expenditure of these nine companies was 98 per cent of the total for these industries. Unilever's presence puts the FD industries' proportion of R & D expenditure to sales as high as 1 per cent and puts that of R&D to profit at 15 per cent. These ratios are still relatively low compared with 1.7 per cent and 17 per cent respectively for companies in all sectors. The pharmaceutical sector is reported to have spent 12.3 per cent of its sales on R & D, the highest proportion.⁽⁷³⁾

Table 1.20. United Kingdom: Net capital expenditure and gross value added per head in the food and drink industries as compared with the tobacco industry, 1986-93 (£ thousands in current prices)


Sector	Capital expenditure/GVA	1986	1988	1990	1992	1993

Food and drink	Net capital expenditure per head	2 228.5	2 879.6	3 556.2	3 726.4	3 774.3
	Gross value added per head	18.1	19.8	23.2	26.1	26.7
Tobacco	Net capital expenditure per head	1 517.1	982.2	2 435.1	4 981.0	9 170.2
	Gross value added per head	32.5	49.0	80.0	120.0	136.6
Source: Office for National Statistics, United Kingdom: The Food, Drink and Tobacco Sector Review (Quarter 2, 1996).

Table 1.21. United Kingdom: R & D expenditure in food and drink companies, 1995


Company	R & D expenditure (£m)	R & D as percentage of sales	R & D as percentage of profit

Unilever	585.0	1.9	25.2
Grand Metropolitan	43.0	0.5	4.7
Tate & Lyle	29.0	0.6	9.3
United Biscuits	21.2	0.6	n.a.
Cadbury Schweppes	18.0	0.4	3.4
Dalgety	14.5	0.3	15.4
Booker	11.8	0.3	14.2
Hillsdown	10.5	0.3	n.a.
Allied Domecq	9.0	0.1	1.1
All food and alcoholic drink	753.9	1.0	15.1
Source: Department of Trade and Industry: The UK R & D Scoreboard, 1996 (Company Reporting Limited, Edinburgh, 1996), cited in Burns with Garcia, op. cit., p. 19.

Investment in the FD industries in the United States has increased substantially in recent years, and is resulting in healthy growth for these industries. The recent expansion of the prepared fresh and frozen fish and seafoods subsector, for example, was the consequence of a rise in capital expenditure in this subsector, particularly in the 1980s. Annual capital expenditure in this branch rose from $17.8 million in 1972 to $217 million in 1990, at an annual growth rate of 15 per cent. New capital expenditure per head climbed from $712 to $5,360 during the same period. Although these levels were lower than the average capital expenditure per head for all manufacturing ($1,335 in 1972 and $5,411 in 1990), the average annual rate of growth per head in this subsector was 12 per cent compared to 9.3 per cent in all manufacturing. During the period 1981-90 it grew even faster, at an average rate of 16.7 per cent per year.⁽⁷⁴⁾

Table 1.22 shows how capital expenditure in the food industry in the United States increased from 1987 to 1995. The investment trend described above has occasionally resulted in overcapacity, as demand in many countries has not kept pace with production capacity. In fact, the demand for certain items, such as beer, has even declined in many industrialized countries, which has imposed major restructuring on many subsectors with serious implications for employment.

Table 1.22. United States: Total investment in new plants and equipment in the food industry (SIC Code 20), 1987-95


	Year	New capital expenditure .($ billion)

	1987	7.20
	1988	7.49
	1989	8.33
	1990	8.86
	1991	9.36
	1992	9.90
	1993	9.39
	1994	10.09
	1995	11.92
	Source: US Bureau of Census, as provided by the Bakery, Confectionery & Tobacco Workers' International Union (AFL-CIO), Summer 1997.

1. UNDP: Human Development Report 1995 (New York, Oxford University Press, 1995).

2. FAO: Food security and nutrition, Technical background document No. 5, World Food Summit (Rome, 1996).

3. United Nations: World population prospects as assessed in 1980 , Population Studies, No. 78 (New York, 1981).

4. UNDP: Human Development Report 1995, op. cit.

5. UNDP: Human Development Report 1997 (New York, Oxford University Press, 1997).

6. FAO: The state of food and agriculture, 1994, FAO Agriculture Series, No. 27 (Rome, 1994).

7. FAO: FAO Yearbook: Fishery statistics -- Catches and landings , FAO Fisheries Series, Vol. 80, 1995, (Rome, 1997).

8. UNIDO: Industrial Statistics Database, 1997.

9. European Commission: Panorama of EU Industry 1997, Vol. 1 (Brussels, 1997).

10. Selma Tozanli: "L'évolution des structures des groupes agro-industriels multinationaux pendant le dernier quart du XXe siècle", in Economie rurale (Paris, Société française d'économie rurale), No. 231, Jan.-Feb. 1996, p. 29.

11. FORCE (Formation continue en Europe): Training in the agrofood sector: A survey of the FORCE Programme (Brussels, Commission of the European Communities, June 1993).

12. The Economist (London), 2 Apr. 1994, p. 114.

13. J.A. Burns with Marian Garcia: The impact of technical change on employment in the UK food and drink industries, project for the ILO (University of Reading, July 1997).

14. Information provided by FNAF-CGT (General Confederation of Labour--National Farm Produce and Forestry Federation), France, Mar. 1997.

15. European Commission, op. cit.

16. Naoki Kuriyama: Case-studies on technology and employment in the food and drink industries in Japan (May 1997), unpublished paper.

17. Business World (Bombay), 7 July 1997, p. 23.

18. Quick Frozen Foods International (Fort Lee, NJ, US, Oct. 1996, Vol. 38, No. 2, p. A15).

19. ibid., p. A21.

20. ibid., p. 62.

21. ibid., pp. A4-12.

22. Information provided by the National Nutritional Foods Association, US.

23. Union Bank of Switzerland: Sectoral trends in the Swiss economy: Developments in 1996 and outlook for 1997 (Zurich, 1997).

24. Food Science and Technology Today (London), Vol. 11, No. 2, June 1997, p. 71.

25. Government of Australia (Department of Industry, Science and Technology): Food Australia: Processed food and beverages industry (Canberra, 5th edition, Dec. 1995), p. 34.

26. Veena Nabar: Technology and employment in Indian food and drinks industry: Some case-studies (New Delhi, July 1997), unpublished paper, pp. 36 and 39.

27. Judit Kiss: Technology and employment in the Hungarian food and drink industry (Budapest, Institute for World Economics of the Hungarian Academy of Sciences, Mar. 1997), unpublished paper, p. 6.

28. Kim Clark: "Tough times for the chicken king", in Fortune (New York), 28 Oct. 1996, pp. 72-73.

29. Kiss, op. cit., p. 6.

30. Nabar, op. cit., pp. 36 and 39.

31. UNDP: Human Development Report 1997, op. cit., p. 179.

32. European Commission, op. cit.

33. Nabar, op. cit.

34. European Commission, op. cit.

35. E.J. Brach: A Misadventure in Candy Land, an Economic and Social Analysis (Chicago, Il., US, Midwest Center for Labor Research), May, 1994, pp. 6-7.

36. European Commission, op. cit.

37. Beer Institute: Brewers Almanac 1996 (Washington, DC), p. 29.

38. Richard Tomkins: "Tonic for fickle tastebuds", in Financial Times (London), 24 Aug. 1994, p. 11.

39. Government of Australia (Department of Industry, Science and Technology), op. cit., p. 28.

40. Kiss, op. cit., p. 4.

41. Roderick Oram: "Stella Artois and Jupiter see stars rise in the east", in Financial Times (London), 20 Jan. 1995.

42. Information provided by the Confederation of Turkish Employers' Associations.

43. Kuriyama, op. cit., p. 4.

44. Nabar, op. cit. p. 38.

45. Business World, op. cit., p. 21.

46. European Commission, op. cit.

47. Tozanli, op. cit., pp. 30-32.

48. Burns with Garcia, op. cit., p. 30.

49. Erik Ipsen: "$33 billion giant: Guinness to unite with Grand Met", in International Herald Tribune (Zurich), 13 May 1997.

50. The Food Institute: Food Business Mergers and Acquisitions 1995 (Fair Lawn, NJ, US), p. v.

51. "Indigestion: A survey of the food industry", in The Economist (London), 4 Dec. 1993, p. 13.

52. The Food Institute, op. cit., p. iv.

53. IUF: Executive Committee meeting -- documentation and minutes (Geneva, Apr. 1994) p. 7(g)/appendix/4.

54. "Munching on change: Unilever's food business", in The Economist (London), 6 Jan. 1996, p. 58; Burns with Garcia, op. cit., p. 31; and IUF: Unilever Bulletin (Geneva), No. 27, 1996, pp. 2-3.

55. Information provided by Centrale Chrétienne de l'aliméntation et des services, Belgium.

56. "Un secteur qui pèse lourd", in Avenirs -- Agriculture et agro-alimentaire (Paris, Office national d'information sure les enseignements et les professions, 1992), No. 438, p. 41.

57. Matt Murray: "H.J. Heinz lets genie out of the bottle", in The Asian Wall Street Journal (Hong Kong), 17 Mar. 1997.

58. Kuriyama, op. cit.

59. Information provided by IUF's Japan Coordinating Council (IUF-JCC).

60. Burns with Garcia, op. cit., p. 30.

61. "The beer barons raise their glasses to the world", in The Economist (London), 13 May 1995, pp. 69-70.

62. Kevin Done: "East acquires a taste for the real thing", in Financial Times (London), 28 Aug. 1995.

63. Bernard Simon: "Upstart Cott shakes cola kings", in Financial Times (London), 15 June 1994.

64. "Change at the check-out: A survey of retailing", in The Economist (London), 4 Mar. 1995, p. 8.

65. John Murray Brown: "Purchases bring change to the industry", in Financial Times (London), 21 May 1997, p. 14.

66. "Change at the check-out", in The Economist , 4 Mar. 1995, pp. 8-11.

67. Burns with Garcia, op. cit., p. 12.

68. Bill Saporito: "Why the price wars never end", in Fortune (New York), 23 Mar. 1992, pp. 26 and 28.

69. Kiss, op. cit., pp. 17-18.

70. Kuriyama, op. cit., pp. 11-12.

71. Information provided by the New Zealand Dairy Workers' Union.

72. Burns with Garcia, op. cit., p. 18.

73. ibid., pp. 18-19.

74. Mark Dumas: "Productivity trends: Prepared fish and seafoods industry", in Monthly Labor Review (Washington, DC), Oct. 1992, Vol. 115, No. 10, p. 7.

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