Macaroni, Spaghetti, Vermicelli and Noodles

SIC 2098

Companies in this industry

Industry report:

This category covers establishments primarily engaged in manufacturing dry macaroni, spaghetti, vermicelli, and noodles. Establishments primarily engaged in manufacturing canned macaroni and spaghetti are classified in SIC 2032: Canned Specialties, and those manufacturing fried noodles, such as Chinese noodles, are classified in SIC 2099: Food Preparations, Not Elsewhere Classified.

Industry Snapshot

The dry pasta industry was a primary victim of the low-carbohydrate diet trend of the early twenty-first century. In the two decades from 1975 to 1995, Americans had increased their pasta consumption by 90 percent. Pasta was manufactured almost exclusively in the United States from durum semolina wheat. A growing consumer preference for nutritious, low-fat foods boosted the growth of the industry, nearly doubling mean annual per capita consumption between 1975 and 1995 to 24 pounds. In 1995, the typical consumer ate pasta an average of 2.7 times a week. The increased consumption was also due to a shift in consumer perceptions as it gained popularity among middle class and affluent adults and seniors, rather than being viewed as a meal for children or the working poor, as was the case during the 1960s.

All that changed with the dramatic shift toward low-carbohydrate diets. By 2003, dry pasta sales were losing 2 to 3 percent per year. The value of industry shipments declined steadily in the late 1990s, falling from nearly $1.8 billion in 1997 to $1.5 billion in 2002, a figure that is updated every five years by the U.S. Census. However, the aggressive marketing of whole grain and low-carbohydrate pasta food items buoyed sales by the mid-2000s. Still, in 2005 the retail market stood at $1.15 billion, a small drop overall of 1.3 percent from the previous total. By July 2007, dry pasta sales had jumped by 4.4 percent from the previous year to nearly $224 million.

In the late 2000s, pasta with all its versatility became a popular item in consumers pantry's as the economy struggled through one of the worst economic downturns and more meals continued to be prepared at home. Pasta manufacturers continued to introduce new products, especially those geared towards the health conscious consumer vying for their share of the market.

Organization and Structure

According to the U.S. Census Bureau, 180 establishments operated in this category for part or all of 2004. Industry-wide employment totaled approximately 3,965 workers receiving a payroll of nearly $128 million. Companies in this industry tended to be smaller in size with 75 percent employing less than 20 workers. The Annual Survey of Manufactures reported that overall shipments for the industry (also including cookie and cracker manufacturing and flour mixes and dough manufacturing from purchased flour) were valued at nearly $17.7 billion in 2005. Additionally, for the industry a total of 36,326 employees (of a total 46,757 employees) worked in production in 2005, putting in nearly 74 million hours to earn wages of more than $1.2 billion.

The bulk of dried pasta and noodles was sold through retail outlets such as supermarkets, convenience stores, and gourmet shops, for personal consumption. A scant 5 percent was sold to the food service industry, as many restaurants with a focus on pasta will produce their own fresh product.

Pasta Manufacturing.
Dried pasta is manufactured from coarsely ground durum wheat, or semolina. Durum is a hard, winter wheat, known for its high level of gluten, which makes a stiff dough appropriate for pasta. Farina, a softer wheat, is sometimes added, as are powdered flavorings such as tomato or spinach. Gluten is sometimes added to the dough, and nutritional supplements such as thiamin, niacin, riboflavin, and iron are added to "enriched" pasta. Most pasta is made without eggs, but noodles are formed by adding eggs to the dough before processing.

Prior to the formation of pasta into its characteristic shape, the wheat is harvested and tested for moisture content, volume, color, insects, chaff, and bran. Once the wheat is determined to meet sufficient standards, the process of milling begins. Wheat is first "tempered," or soaked in water, to separate the bran from the berry. Tempering also gives the berry enough moisture to prevent shattering when it is ground during the next part of the process. Once ground, the wheat is sifted numerous times to create semolina, which is coarsely ground flour with particles about the size of sugar crystals. A by-product of this repeated sifting is durum flour, which is sold for other uses. The semolina is added to water and any other ingredients, such as dyes, to create dough, which is then extruded through machines that form the pasta into its ultimate shape. The pasta is then dried, packaged, and distributed.

Background and Development

Although pasta is generally associated with Italy, and indeed many of the varied shapes originated in that country, the first pasta was actually Chinese. The development of an agricultural civilization led to pasta, possibly around 3000 BC Ancient Greeks considered pasta "marcus," or "divine food." An Etruscan tomb from around 400 BC depicted the making of the grain product. Horace, a first century BC poet, described lasagna as one course of a Roman banquet.

Pasta is also part of the cuisine of the Middle East. Pasta, as well as noodles, was a part of the Jewish, Arabic, and Persian cultures. All of this took place before Marco Polo's legendary expedition to China in the thirteenth century, which led to the widespread consumption by Italians, who added red tomatoes to the recipe.

Noodles were consumed in the New World with a cream sauce and cheese, in the manner popular among the British. Thomas Jefferson was the first prominent American to embrace pasta, when he purchased a "macaroni" machine in Italy and shipped it to the United States. An Italian restaurateur in Richmond, Virginia, served pasta to his influential clientele, which included Jefferson.

By 1848, French miller Antoine Zerega opened the first macaroni factory in the United States. He followed both Chinese and Italian traditions, drying strands of spaghetti on the rooftop of his Brooklyn factory. The subsequent immigration of large numbers of Italians to New York helped bring pasta into the mainstream of American cuisine.

A subtle wheat flavor is considered the ideal taste for pasta, since blandness prevents the pasta from competing with the flavor of the sauce. The ideal texture of pasta is obtained when it is cooked al dente. This translated from Italian literally as "to the tooth," but it described a noodle that was firm when chewed.

Regulatory Challenges.
Like much of the food industry, pasta manufacturers faced increased regulation under federal laws. The Nutrition Labeling and Education Act (NLEA) of 1990, which took effect in May 1994, required that pasta packaging list nutrients in greater detail than in the past. In addition, the NLEA provides for the Food and Drug Administration (FDA) to determine the serving size on which nutritional information is based, something that was previously determined by the manufacturers themselves.

Another trend in regulation in the early 1990s was based on concern over the effects of fumigants on the ozone layer. Many pasta manufacturers used methyl bromide to rid storage areas of weevils and other pests that consumed wheat. One bill considered in 1993 declared methyl bromide a class one ozone-depleter and called for its production to be discontinued by 2000.

Competitive Challenges.
The greatest challenge to the dry pasta and noodle industry comes from competition with other types of pasta. Growth of the frozen pasta industry is attributed to the convenience of the product, which comes with a variety of sauces and requires nothing more than heating in the microwave or the conventional oven. While cooking dry pasta is simple and requires little time, preparation of the sauce can be more complex, and working individuals are increasingly reluctant to create meals from intricate or lengthy recipes.

Shelf-stable pasta is another product that eroded market share of dry pasta, and is expected to continue to do so. The shelf-stable category includes dry packages like macaroni and cheese, pasta and noodle side dish mixes, add-meat dinner mixes, and soups or other meals that come in microwaveable containers. Shelf-stable pasta sales grew 6.7 percent annually in the early 1980s, but its popularity grew about 10 percent in the latter part of the decade.

Fresh pasta, which showed an increase in sales volume of 60 percent annually from 1988 to 1991, experienced a decrease in the latter half of the 1990s. Initially, fresh pasta gained market share among the affluent at the expense of its dry counterpart, as it was perceived to be more flavorful and nutritious. It was sold in gourmet shops as well as in restaurants and supermarkets. The drawback of fresh pasta is that it is highly perishable because of its high moisture content. The greater ease of distribution enjoyed by dry pasta manufacturers is believed to be a primary reason that dry pasta holds its own in market share.

Canned pasta poses no competitive threat to dry pasta and noodles. Despite attempts to upgrade its image to a premium food product, canned pasta continues to be perceived as most appropriate for children or for lower income individuals. Canned food is also thought to have depleted nutritional value, and the health value that drove much of the rise in pasta consumption is perceived to be lacking in canned dishes. Moreover, canned spaghetti with sauce is not believed by consumers to be as flavorful as that of either fresh, frozen, or dry pasta.

Industry shipments of dried pasta were $1.8 billion in 1997, a 38 percent increase from 1992. Retail sales of dried pasta were $2.3 billion in 1995, a 50 percent increase from 1991. One reason for this dramatic trend was research about cancer and heart disease prevention combined with the nutritional qualities of pasta. Numerous public and private studies during the 1970s and 1980s linked diets high in fat content with various types of cancers and heart disease. During this same time period, separate research of individuals in developing countries demonstrated the benefits of a diet high in fiber, a non-nutritional substance found in whole grains, vegetables, and fruits. In addition, studies revealed the importance of complex carbohydrates, which were also found in grains such as durum wheat. Consuming complex carbohydrates helped to provide a steady flow of energy because they took longer to digest than simple carbohydrates.

All of these findings rippled through the food industry, causing consumer preference to shift away from meals high in fat and choose foods low in fat. Americans reduced their consumption of meat and dairy products as part of a healthier overall diet. Simultaneously, consumers embraced diets with a higher percentage of whole grain foods, including pasta. In fact, the popularity of pasta among athletes led to the term "carb-loading," which was frequently accomplished through the ingestion of pasta or other grains. The consumption of foods high in complex carbohydrates prior to a marathon or other athletic endurance event was widely believed to boost performance.

In addition to being high in carbohydrates, pasta products became widely recognized for their nutritional value and relatively low levels of fat. A ten-ounce serving of cooked pasta contained 420 calories, 14 grams of protein (although wheat protein was considered incomplete), and only one gram of fat. It also provided one-fifth of the iron, niacin, and riboflavin, and one-third of the thiamin, needed for one day.

As the popularity of pasta grew in the mid-1990s, so did the market for value-added, or flavored, varieties. By the end of the decade, popular flavors included smoked salmon, porcini mushroom, tomato basil, lemon pepper, and chili pepper. Other factors contributing to pasta's popularity included its convenience, durability, and economy. A box of dried pasta lasts up to seven years on the shelf. It is a relatively good food value, at a cost of about a quarter per ten-ounce serving. The nationwide availability of prepared sauces added to the ease with which a pasta meal could be prepared. Pasta could be cooked on the stove top in about 10 to 15 minutes. It could be reheated along with the accompanying sauce in a microwave oven in half of that time. These factors had significant appeal to the increasing numbers of dual-income and single-parent households in the United States.

Approximately 75 percent of pasta was served for dinner in the mid-1990s, but the trend moved toward more frequent pasta lunches, with a 20 percent increase in consumption at this meal. The most popular shapes were macaroni, which saw a 33 percent increase in consumption, and lasagna, which showed 31 percent growth. Pasta products also dominated the side dish market, with 669 varieties offered in 1995, far exceeding the amount of rice dishes (137), salads (41), potato products (17), and stuffing mixes (14).

In the late 1990s, some health experts began to question the conventional wisdom of low-fat, high carbohydrates diets. High protein diets, such as the Atkins diet, began to gain in popularity, undermining the perception of pasta as a healthier choice than protein such as beef or chicken. As consumption began to fall, pasta production began to slow down as well. Another factor impacting pasta production by U.S. manufacturers was foreign competition. Italy-based Barilla Group, for example, began selling its pasta in the United States in 1996. Aggressive advertising efforts led to Barilla capturing a 15 percent share of America's $1 billion retail pasta market by 2002. As Italy's most successful company, Barilla of Parma had managed by 2005 to capture 17 percent of the overall U.S. retail pasta market, highlighted by a nearly 10 percent growth from the previous year, as indicated by Information Resources Inc. for a total of $196 million. The products are marketed through Barilla America Inc.

After the low-carb diet fallout and its effect on the pasta industry, sales began to moderate with the launch of low-carb, whole wheat, and organic pasta products, intended to win back the consumers lost to high protein diets. Pasta trends remain similar to bread and cereal trends as consumers want nutritious rather than "empty" calories, without any loss in flavor. Healthy pastas drive the market, including flavored, wheat, organic/soy, and filled pastas as seen by the 8.5 percent rise by mid 2006, compared to the previous year. Whole grain pasta sales were up nearly 15 percent during that time while organic skyrocketed by nearly 52 percent.

Several factors were expected to drive sales through the 2000s. Consumers were moving toward increased cooking and entertaining at home, presenting a huge opportunity for pasta meals. Convenience and ease of preparation was also a selling point. However, a decline in the number of households with children, and a lackluster promotion of pasta's healthful benefits, are anticipated to offset positive factors in the market.

Current Conditions

In the late 2000s, 354 establishments engaged in manufacturing dry macaroni, spaghetti, vermicelli, and noodles with shipments valued at more than $405 million and industry-wide employment of 6,011 workers in 2009. On average, each establishment had shipments totaling $1.3 million with 17 employees. States with the highest concentration in the production of dry pasta was California, New York, Illinois, and Texas. Based on shipment values, New Jersey was the leader with over $113 million in dry pasta shipments.

Manufacturing of dry noodles (e.g. egg, plain, and water) was the top performing industry category with 68.1 percent of industry share with shipments totaling $167 million, followed by the manufacturing of dry macaroni and spaghetti that accounted for 21.2 percent of industry share and $119.5 million in shipped dry pasta. Dry macaroni products manufacturers (e.g. alphabets, rings, and shells) were responsible for 9.6 percent in market share and $114.7 million in shipments.

As the economy continued to struggle through the recession, the largest branded industry leader, New World Pasta reported sales were up 15 percent in 2009. Peter Smith, CEO of New World Pasta told Food & Drink magazine "�consumers are searching out more economic products, and they've rediscovered pasta is one of the great values in the grocery store." The company launched SmartTaste containing more fiber, calcium, and vitamin D. That followed with the introduction of their "quick-cook" pasta that cuts down the cooking time, and was working on a "vegetable-infused pasta," still in the testing stage for the health conscious consumer that promises to provide one serving of vegetables in one single serving of pasta.

Specialty pasta manufacturers also continue catering to the consumer bringing healthy pasta to store shelves. For instance, pasta containing ALA Omega 3 derived from flax seed oil slated by some as "the next superfood." In an effort to reach all consumers, including those allergic to gluten, which is a protein found in wheat manufacturers launched pasta produced from brown rice free of gluten. In fact, according to The Nielsen Company's report, gluten-free pasta revenues increased 40 percent year over year ending March 13, 2010, as both private label and brand sales fell 1.8 percent for the 52 weeks that ended July 11, 2010 to $1.62 billion. Industry leader, American Italian Pasta Company was at the forefront of the growing trend with the introduction of its gluten-free, egg-free, and dairy-free Heartland pasta for those with allergies.

Industry Leaders

Kraft Foods Inc. of Northfield, Illinois, leads the industry with an overall $34.4 billion in 2006 sales. Per the company's 2006 annual report, the "convenient meals" segment--in which the pasta lines are included--accounted for 16 percent of the overall sales, or $5.5 billion which represented a 1.8 percent increase from the prior year. The dominant pasta producer in North America was the Kansas City, Missouri-based America Italian Pasta Company (AIPC), which employed about 600 people who manufacture its leading brand, Muellers, along with several other private and branded labels. Its major customers include Wal-Mart, Sam's Club, and SYSCO, as well as a number of major food processors (Kraft and General Mills) and grocery stores. In 2001, the company had purchased several pasta product lines from a struggling Borden Incorporated. Now defunct, Borden had been an industry powerhouse but met its decline in the early 2000s after failing to recover from financial blunders in the 1990s. Another industry leader was Harrisburg, Pennsylvania-based New World Pasta Company, which had also acquired a portion of Borden's pasta lines, including Creamette and Prince lines.

Kraft Foods Inc. posted revenues of $40.4 billion with 97,000 employees worldwide in 2009, a 3.7 percent decline compared to $41.9 billion reported in 2008 with the "convenient meals" segment still responsible for 16 percent of overall sales. America Italian Pasta Company (AIPC) reported revenues of $398.1 million in 2008, increasing to $628.2 million in 2009 with 675 employees. AIPC, still the largest producer of dry pasta in North America offered about 300 various pasta shapes with some 3,700 SKUs. The company was acquired by private-label food producer Ralcorp in 2010.

Following the low-carb diet craze, New World Pasta Company, Inc. found itself filing for Chapter 11 bankruptcy protection. After the company emerged in December 2005, it was acquired by Ebro Puleva located in Spain for $362.5 million with brands in both Europe and North America. Even though the company went from 1,200 employees in 2002 to 620 workers as of October 2009, they were better positioned for growth following their reorganization.

Workforce

Due to technological advances in the pasta industry, including the use of computers in the manufacturing process, the number of workers declined from the early 1980s to the mid-2000s, from slightly more than 6,000 to roughly 3,965 in 2004. For the larger category of bakeries and tortilla manufacturing, the U.S. Department of Labor's Bureau of Labor Statistics reported in production occupations accounted for 47 percent of the workforce and earned a median hourly income of $11.35.

America and the World

Until the 1990s, the United States imported a negligible volume of manufactured pasta. That situation changed drastically as foreign producers took advantage of the expanding U.S. pasta market. U.S. pasta distributors complained about the inferior quality of some pastas from Italy and Turkey, charging that those countries were purposely dumping inferior products on the U.S. market at below-market prices. The outcry prompted the International Trade Commission and the Commerce Department to impose stiff tariffs on the imported products.

The durum wheat used to make pasta grew steadily as an export beginning with the 1959-60 growing season. Exports of this wheat variety climbed from zero that year to peak annual levels of 80 million bushels during the 1980s. By the 1990s, the United States exported 50 percent of its annual production. Algeria was the largest importer of U.S. durum wheat, with Tunisia second. Trade with those countries was part of the Export Enhancement Program, an incentive program to facilitate U.S. exports to North African nations.

As domestic pasta consumption skyrocketed, durum farmers were hard-pressed to meet the demand. In 11 of the 15 years from 1981 to 1996, domestic use of durum for pasta production, combined with export sales, exceeded domestic production. The shortage of durum wheat drove prices up to $7.50 per bushel, a substantial increase from the $4.50 price of the late 1980s.

After the passage of the Canada/United States Free Trade Agreement (CUSFTA) in 1988, U.S. farmers in Minnesota, North Dakota, and Montana voiced concern over the growing volume of Canadian wheat sold in the United States. In 1994, the North American Free Trade Agreement (NAFTA) superseded CUSFTA and included Mexico. By the 1990s, Canadian wheat accounted for 14 percent of U.S. durum production. The situation was exacerbated when U.S. durum wheat fields were hit by Karnal bunt disease when it was discovered in 1996, which reduced the wheat to a powdery soot. Canada banned imports of all U.S. durum and many U.S. producers refused to accept durum from states reporting infected wheat. The countries worked to resolve the matter, which included Canada identifying U.S. states that were not affected and testing only durum wheat from those that were. As for Mexico, the United States had previously not allowed wheat shipments when Karnal bunt was identified in 1983. Since NAFTA, the country was allowed limited shipments into the United States. Otherwise, shipments of U.S. wheat to Mexico rose dramatically after the agreement from 967,000 tons in 1993 to 1.7 million tons in 2000 to nearly 2.5 million tons in 2003. By 2004, wheat was the fifth-highest export to Mexico with an excess of $459 million, a record amount.

The United States ranked fourth in the world in mean annual per capita pasta consumption. Italians consumed over 59 pounds per capita annually and Venezuelans nearly 28 pounds, while Americans ate 19 pounds each annually.

Of the reported 12.8 million tons of pasta produced in May 2010 globally, North America accounted for 21.1 percent of total production. The European Union constituted 36.6 percent of production; followed by Central and South America with 23.4 percent; other European Union countries with 11.8 percent; Africa produced 4.6 percent; Asia was responsible for 1.9 percent; Australia captured 0.4 percent; and the Middle East with 0.2 percent.

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