Food Preparations, NEC

SIC 2099

Industry report:

Miscellaneous food preparations with separate classifications include: SIC 2091: Canned and Cured Fish and Seafoods; SIC 2092: Fresh or Frozen Prepared Fish and Seafoods; SIC 2095: Roasted Coffee; SIC 2096: Potato Chips and Similar Snacks; SIC 2097: Manufactured Ice; and SIC 2098: Macaroni and Spaghetti. Manufacturers of flour mixes are classified in Industry Group 204.

Industry Snapshot

According to 2009 industry statistics, the $29.1 billion miscellaneous food preparations industry had nearly 4,000 establishments that employed over 90,000 people. States with the largest concentration were California, Texas, Florida, New York, and Illinois.

In general, food processing companies were affected negatively by a weak economy during the late 2000s. However, companies that survived did so by trimming costs and becoming more efficient in their operations. Not only did demand weaken in some sectors as consumers' budgets shrank, but the cost of doing business increased, such as ingredient and fuel prices. However, as the 2010s began, while about one-third of food processes companies were still shrinking their operations, another third was looking to expand their businesses during the year as optimism slowly began to return to the marketplace.

Vinegar
One of oldest products classified within SIC 2099 is vinegar. Records of vinegar use date back 5,000 years, and some historians estimate it was known of as long ago as 10,000 years. Throughout vinegar's long history, it has had a wide variety of applications, including use as a preservative and as a cleaning agent. During the Civil War, vinegar was used to prevent scurvy, a disease caused by vitamin C deficiency.

Vinegar, derived from two French words meaning "sour wine," is a product of fermentation. When natural sugars ferment, they produce alcohol, which after undergoing further acetic fermentation becomes vinegar. One of the best known types is wine vinegar, but throughout history many other types of vinegar have been produced. These include vinegars made from naturally sweet products like molasses, sorghum, honey, and syrup, and vinegars made from fruits, potatoes, and grains.

Four methods have evolved to control the fermentation process by which vinegars are made. Under the most labor-intensive method, called the solera system, vinegar is aged in different types of wood, a process that can take decades. Another technique, termed the Orleans method, uses a starter culture in a manner similar to the process by which bakers ferment bread dough in sourdough preparation. The Orleans method is implemented to produce vinegar in wooden barrels and takes up to six months. A faster method, termed the "quick process," involves the aeration of wine along with organic materials to produce vinegar in about a week. The quickest vinegar production, however, occurs in a process called continuous production, which requires holding wine in a pressurized tank under carefully controlled conditions. Air is forced through the liquid to aid the fermentation process. Wine is continually added and finished vinegar taken off the top of the tank. Converting wine into vinegar using this process takes approximately one day.

In the United States, the vinegar industry formed alongside the apple industry. As a result, it is concentrated in areas with large harvests of apples. Cider vinegar is made from apples or apple juice. As the U.S. vinegar industry developed, it offered a variety of products to perform different functions. White vinegar, also called distilled vinegar, is primarily used in home canning and for making pickles, salsa, and relishes. Wine vinegar is an integral ingredient in vinaigrettes. Malt vinegar, a mildly sweet product, complements salads and fish and chips. Rice vinegar, a particularly strong variety, is added to sushi rice. A rich, dark product, balsamic vinegar is used for vinaigrettes and as a condiment. Sherry vinegar, another variety with a strong flavor, is a cooking vinegar. In addition to the types of vinegar produced by using varying sources, infused vinegars are made by adding flavorings such as berries, garlic, or herbs. Increased sales of balsamic vinegar, which were growing at an annual rate of five percent at the turn of the twenty-first century, boosted overall vinegar sales into the early years of the first decade of the 2000s. The value of vinegar and cider shipments in 2001 totaled $182 million.

Tofu
A product with a long history, tofu is a white, gelatinous substance made from soybean curd. It bears a slight resemblance to cream cheese but has a softer texture that has sometimes been described as "squishy." Although tofu by itself is considered bland, when cooked in a recipe it picks up flavors from other ingredients. To make tofu, manufacturers begin by soaking soybeans for 12 to 18 hours. After soaking, the beans are mashed and strained. The retained juice solidifies, is cut into portions, and packaged for sale.

Originating in China approximately 1,000 years ago, tofu has been a staple in Oriental cooking for centuries. Tofu began gaining popularity in the United States following World War II when returning servicemen, accustomed to eating it abroad, began eating tofu at home.

Sales of tofu experienced rapid growth in the early 1990s. Because it is a good protein source naturally low in saturated fat and with no cholesterol, its popularity was increasing particularly among vegetarians and health-conscious consumers. Tofu also benefited from a growing interest in ethnic cooking. The tofu expansion could be attributed in part to improvements in packaging technology, giving products a longer shelf life. Most tofu is sold in packages of water and has a short shelf life of only about 10 days. In 1990, one producer, Mori-Nu, reported the development of innovative packaging enabling its product to have a 10-month shelf life without refrigeration.

Tofu sales in 2002 grew 2.8 percent to $250 million. Soy foods that contain tofu, such as veggie burgers, posted total sales of $3.6 billion, thanks to double-digit annual growth beginning in 1992. To entice more customers to try tofu, manufacturers began developing new products such as seasoned tofu and marinated, precooked tofu. Tofu and soy products did not fare as well at the end of the 2000s, however. According to Soytech LLC, the soy industry contracted during 2009.

Tea
Another food product with historic ties to China is tea. Tea was originally made from the dried, processed leaves of an Asian shrub. One of the oldest companies in the U.S. tea industry was founded by Sir Thomas Lipton, a Scotsman, who began importing tea into the United States in 1890. The first instant tea was marketed by the Nestle Beverage Company in 1948.

Sales of tea products experienced growth the United States during the 1990s. According to Information Resources Inc. of Chicago, sales of loose teas and tea in bags grew one percent to $640 million; ready-to-drink teas sold in the United States increased 1.8 percent to $421 million in 1995. The market is no longer relegated to a simple hot drink served with lemon and honey; it has married tea--black, green, or herbal--to all sorts of flavor permutations.

Herbal teas in supermarkets passed the $100 million sales mark in 1991. The top three companies in herbal tea sales were Celestial Seasonings, Inc. with 49.1 percent of the market (and with a new line of herbal "remedy" teas in 1995), Lipton with 23.1 percent, and Bigelow with 14.6 percent. In 1992, enough herbal tea was sold in the United States to brew 58 million gallons. Sales represented a five percent increase over the previous year. According to a report in Brandweek, one of every eight cups of tea consumed in the United States is either decaffeinated or herbal, and approximately 80 percent is consumed as iced tea.

Product expansions in the tea category, according to Prepared Foods, are attributable to the introduction of green teas and chai. Green teas purportedly provide healing benefits, which is why numerous companies now provide green tea products, including John Wagner & Sons and AFC. Chai is a rich, milky tea-based drink often used as part of Indian ceremonial meals and tastes of vanilla, honey, and spices. Oregon Chai introduced its chai liquid concentrates to consumers in 1995.

Tea-juice hybrids increased in popularity through 1995, with a great number of product introductions that year--and not only from Snapple. Nestle added numerous products to its Nestea line in 1995, including an instant Lemonade Tea and Suntea Style mix, and several fruit-flavored beverage mixes. Snapple Cider Tea, a combination of black tea and apple cider that may be served hot or cold, was introduced by The Quaker Oats Company. (Snapple was sold to Triarc Companies in 1997.)

Growth continued into the early years of the first decade of the 2000s. Total tea sales in the United States reached five billion dollars in 2002, compared to two billion dollars in 1990, and the number of brands was also increasing. Along with Lipton, Red Rose, and Nestea, popular brands in the early years of the first decade of the 2000s included Tazo Tea and Republic of Tea. The U.S. Census Bureau reported coffee and tea sales of $6.24 billion in 2005.

Peanut Butter
One product native to the Americas is peanut butter. While not indigenous to North America, peanuts were grown by South Americans at least 1,000 years ago. Although the circumstances of their introduction to North America are unknown, historians believe peanuts were grown by early European settlers, who used them as food for hogs. George Washington Carver is credited with developing more than 300 uses for peanuts and helping establish them as an important crop. Improvements made between the 1930s and the 1990s helped peanut farmers experience a fivefold increase in per acre yields. During the early 1990s, most U.S. peanut production came from Georgia. Other leading peanut cultivation states were Alabama, Texas, North Carolina, and Virginia.

Approximately half the peanuts eaten in the United States are consumed in the form of peanut butter. Consumer Reports calculated that on any given day, peanut butter is consumed by one out of every six Americans. Although peanut butter is considered a good source of protein, dietary fiber, and B vitamins, it contains a high percentage of fat. To make peanut butter, manufacturers remove peanut skins and grind the nuts into a thick, pasty substance. Frequently, hydrogenated vegetable oil is added as a stabilizer, and salt and sugar are added to improve flavor. Chunky varieties, containing pieces of peanuts, were also developed.

One of the problems associated with peanut butter is the presence of aflatoxin. Aflatoxin is a carcinogenic poison produced by aspergillus flavus, a mold that grows on peanuts when they are not properly stored. Aflatoxin problems first appeared in the 1960s and led U.S. officials to establish limits on the amount of the substance allowable in peanut products. A 1990 Consumer Reports study noted that some peanut butter exceeded allowable levels of aflatoxin.

During the early 1990s, the top U.S. peanut butter brands--Jif, Skippy, and Peter Pan--accounted for two-thirds of all peanut butter sales. Specialty and health food stores offered "natural" peanut butters that lacked sweeteners and stabilizers, and some featured "grind your own" peanut butter options.

Consumption of peanut butter in the early part of the first decade of the 2000s totaled nearly six pounds per year per U.S. household. The popularity of high-protein diets in the early years of the decade boosted sales of peanut butter, which was once again viewed as a healthy snack.

Spices
Spice sales have grown steadily since the 1980s, continuing unabated in the early years of the first decade of the 2000s. Total value of this industry segment was $3.7 billion in 2007. "Easy-to-use blends, rubs, and marinades are stirring up a lot of interest, but old-fashioned standbys, including bay leaves, cinnamon, coriander, sesame seeds, turmeric, wasabi, and vanilla, have been rediscovered as Americans embrace the 'new world' of regional ethnic cuisine, such as Thai, Vietnamese, and Moroccan cooking," according to Richard Turcsik in the August 2003 issue of Progressive Grocer.

An estimated 60 percent of spices sold in the United States are to add flavor to the food processing and food service industries. Population growth (particularly census figures noting increased Asian and Hispanic populations), increased popularity of ethnic foods and prepared meals, and increased consumption of food outside the home affected the continued growth in spice sales. Major spice users include fast food outlets such as KFC and McDonald's, which not only spice their foods, but also provide prepackaged condiments to customers.

Current Conditions

Food preparation manufacturers were faced with cost pressures of key products such as milk, eggs, grain, and oils that climbed to record levels in the late 2000s, a large concern for the manufacturers. Consequently, food manufacturers were struggling with soaring prices of their ingredients as well. After record-high commodity prices in 2008, prices stabilized in 2009 along with lower energy prices, giving companies some welcome relief.

In addition, although many companies' top lines may have decreased in sales, many saw sales of private labels increase as budget-conscious consumers looked to cut their weekly spending.

Despite the recessive economy, positive gains were seen in the sales of refrigerated teas, which increased tenfold during the 2000s to an estimated $3.05 billion in 2009. Although private label ready-to-drink tea only held a three percent market share, the segment had grown by over 53 percent during 2009. Health-conscious consumers sought the convenience and price offered by private labels' ready-to-drink teas.

In loose-leaf and bag teas, the trend was toward organic teas and teas rich in antioxidants, and more and more Americans turned to tea as a healthy alternative to other beverage choices. Several tea producers were adding ingredients or highlighting naturally occurring health benefits in their teas. For example, Lipton was promoting the presence of between 14 mg and 18 mg of L-theanine in each cup of Lipton tea; according to Lipton, L-theanine naturally stimulates the brain to produce a relaxed and alert mental state at levels of 50 mg. Bigelow Tea released a new line, Herb Plus, that included Wild Blueberry & Acai, which had antioxidants, and Pomegranate Blueberry, which had omega-3 fatty acids.

According to the Tea Association of the USA, Americans consumed more than 60 billion servings of tea (2.8 billion gallons) in 2009. About 82 percent of all tea consumed in the United States is black tea, followed by green tea (17 percent). Smaller segments are made up of Oolong and white teas. About 85 percent of tea consumed in the United States is iced tea. Tea consumption and sales have grown for 18 consecutive years, according to the Tea Association of the USA.

Peanut butter sales were hurt in 2009 following an outbreak of salmonella among peanuts in Georgia. Despite peanut butter producers' attempts to assure consumers that their products were not affected, peanut butter sales fell by as much as 25 percent in early 2009. However, once the salmonella scare passed, shoppers returned to purchasing peanut butter. In fiscal 2010, J. M. Smucker, which owned the Jif brand, reported increased sales of Jif.

Rising demand of ethanol production kept corn prices at or near record highs in the late 2000s. Although prices began to soften slightly into 2010, dressing manufacturers and other food processers had absorbed the extra cost for key ingredients such as high fructose corn syrup. U.S. production of snacks, coffee, condiments, and nuts, which includes seasonings and dressings, was predicted to climb at an annual compounded rate of 5.1 percent between 2008 and 2013.

Industry Leaders

The leader within the tea segment was the Thomas J. Lipton Company, a wholly owned subsidiary of Unilever PLC, which posted sales of $57.1 billion in 2009. Lipton, headquartered in Englewood Cliffs, New Jersey, held a 22 percent share of the North American black tea market as of 2009.

Lipton, a pioneer in the development of naturally decaffeinated teas, was founded in 1915 by Sir Thomas Lipton, who had been selling his teas in the United States since 1890. In 1992, Lipton reported that its Suffolk, Virginia, production facility blended more than 36 million pounds of tea. Lipton's tea products include tea bags, instant iced tea, and ready-to-drink iced tea. In 1991, the company established the Pepsi Lipton Tea Partnership, a venture undertaken to bring together expertise from Lipton's tea producers and Pepsi's bottling and distribution system. In addition to tea products, Lipton also marketed Lipton Soup Mixes, Recipe Secrets, Lipton Side Dishes, and Cup-a-Soup. The company's Lawry's division offers spice and seasoning blends, sauces, and Mexican food products.

At the helm of the spice segment was McCormick & Company, Inc., founded in 1889. Its product line, sold in the United States on the East Coast under the McCormick label and on the West Coast under the Schilling label, featured a wide variety of spices from 18 areas around the world. The company's other primary business involves plastic bottle and tube manufacturing.

McCormick & Company was the world's leading spice marketer in 2010. The firm continued working to bolster its market share via new product releases and acquisitions, such as the 2003 purchase of the Zatarain's brand for $180 million. McCormick's industrial and food service divisions provide flavors, seasonings, and specialty food products to more than 80 of the top 100 food manufacturers in the United States as well as to many major restaurant chains. In addition to the United States, McCormick sells products globally. McCormick had revenues of $3.19 billion in 2009.

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