Shortening, Table Oils, Margarine, and Other Edible Fats and Oils, NEC

SIC 2079

Industry report:

This category covers establishments primarily involved in manufacturing shortening, table oils, margarine, and other edible fats and oils that are not elsewhere classified. Companies primarily engaged in producing corn oil are discussed in SIC 2046: Wet Corn Milling.

Many of the goods classified in this industry are long-time staples of the American kitchen, including shortening, butter, and margarine. U.S. sales of butter, margarine, and table spreads totaled $5.2 billion in 2007. Although this figure represented an increase from the early years of the decade, when the market was estimated at $4 billion, the main reason for the increase was rising dairy prices, not increased consumer usage. Despite numerous challenges for this segment of the industry, 80 percent of Americans still used the products in the late 2000s and total sales were expected to increaseincrease by nearly $1.2 billion through 2012.

Margarine, a key product in this industry, was invented in France in 1869. Market share in the United States was initially impeded by quality concerns, then by the efforts of a powerful butter lobby. After technical improvements and fairer tax legislation, margarine gained greater acceptance and came to be largely regarded as a healthier and cheaper alternative to butter. By the mid-1990s, however, the $1.5 billion margarine industry began to falter, while butter increased its market share. Many consumers who had switched from butter to margarine as a healthier alternative became disillusioned after learning that vegetable shortenings raise the risk of cardiovascular disease. Of particular concern to many health practitioners was the presence of trans fatty acids (TFAs) in margarine. The U.S. Food and Drug Administration mandated the labeling of all products containing TFAs as of January 2006. When the mandate took effect, it applied only to retail products, not foodservice. However, consumer awareness of trans fats led some restaurants to stop using products containing TFAs, and some communities, including New York City, passed ordinances banning those products from use in restaurants.

Trans fatty acids are formed when hydrogen is added to any vegetable oil. This hydrogenation process increases the shelf life, texture, and stability of products. Popular processed foods are being reformulated without trans fats, and new products are being created. Any product called margarine must contain at least 80 percent fat (usually in the form of vegetable oil). In order to lower the fat content and calorie count, food manufacturers often replace some of that oil with water; technically, these products are "vegetable oil spreads" and not margarine. They may vary from 70 percent oil to none. Whereas health-conscious consumers had flocked to margarine in droves since the 1960s because of butter's high fat content, many people returned to butter in the early 2000s following news about the health risks of consuming trans fatty acids.

With the negative publicity related to TFAs, the production of margarine started to decline slowly in the late 1990s. Per capita margarine consumption declined from 10.0 pounds in the mid-1990s to 8.5 pounds in the early 2000s. Unit sales were down 6.2 percent in 2003 and fell to $1.2 billion in 2004, where sales figures somewhat stabilized.

Butter sales surpassed those of margarine in supermarkets, drug stores, and mass merchandisers (excluding Wal-Mart) in the mid-2000s. In 2005, butter sales totaled $1.3 billion, a 14 percent increase over the previous year, while margarine sales registered at $1.2 billion. Positive trends for margarine producers included excellent opportunities in Asia, where margarine sales were increasing, led by a whopping 15 to 20 percent annual increase in sales in Indonesia during the early 2000s.

The specialty oils market was the fastest growing segment of the industry in the 2000s. Blended oils, such as canola/corn oil, corn/palm oil, olive/canola oil, and peanut/sesame oil, as well as increasing consumption of flavored cooking oils infused with herbs and other seasonings, including garlic, won favor of increasingly health-conscious consumers. According to the U.S. Canola Association, production of canola oil rose rapidly from the early 1990s to the early 2000s, when production peaked at about 900,000 metric tons, then decreased somewhat to reach approximately 650,000 metric tons in 2008. Prices received by U.S. farmers increased during the first decade of the twenty-first century, from $6.71 per hundredweight (cwt) in 2000 to $18.75 per cwt in 2008. Consumers also paid more for the product, with average prices at 17.5 cents per pound in 2000, rising to 39.0 cents per pound in 2008.

Olive oil was also increasing in popularity due to health benefits. A report by Mintel showed that olive oil sales grew 79 percent between 2002 and 2007. Physicians were impressed by reports stating the rate of heart disease in certain regions of the Mediterranean--where olive is the principal oil consumed--was relatively low and that dietary monounsaturated fat was capable of lowering total cholesterol. Olive oil is very high in monounsaturated fat, which keeps cholesterol in check. Most olive oil used in the United States is imported, and U.S. imports of olive oil doubled from 1995 (122,270 metric tons) to 2004 (245,990 metric tons). By 2008 U.S. imports totaled 264,500 metric tons. Spain produces nearly 80 percent of the global supply, although a drought in Spain in 2005 resulted in production of 850,000 metric tons, compared with 1.2 million metric tons in 2004 and a record 1.5 million metric tons in 2003. The cost of a metric ton of olive oil (defined as raw material cost plus estimated freight to the United States) increased by 48 percent over six months. Supplies from other olive-producing nations, including Italy, Greece, and Tunisia, were too limited to make an impact.

The U.S. olive oil crop is based in California, and production in 2005 reached 383,050 gallons--triple the output of a decade earlier. By 2008, there were approximately 50 U.S. olive oil mills--almost all in California--and annual production figures reached 500,000 gallons, according to the UC Davis Olive Center.

© COPYRIGHT 2018 The Gale Group, Inc. This material is published under license from the publisher through the Gale Group, Farmington Hills, Michigan. All inquiries regarding rights should be directed to the Gale Group. For permission to reuse this article, contact the Copyright Clearance Center.

News and information about Shortening, Table Oils, Margarine, and Other Edible Fats and Oils, NEC

Research and Markets Adds Report: Soybean Processing Industry in the U.S. and its International Trade [2010 Edition]
Manufacturing Close-Up; June 21, 2010; 655 words
...2075 - Soybean Oil Mills (soybean processing, except edible soybean oil); and 2079 - Shortening, Table Oils, Margarine, and Other Edible Fats and Oils, NEC (processing soybean oil into edible cooking oils from soybeans crushed in the same ...
Research and Markets Adds Report: Other Oilseed Processing Industry in the U.S. and its International Trade - Q3 2010 Edition.
Entertainment Close-up; September 30, 2010; 700+ words
...Oil Mills, Except Corn, Cottonseed, and Soybean (oilseed processing); and 2079 - Shortening, Table Oils, Margarine and Other Edible Fats and Oils, NEC (processing vegetable oils, except soybean, into edible cooking oils from oilseeds...
Research and Markets Adds Report: Soybean Processing Industry in the U.S. and its International Trade [2010 Edition]
Manufacturing Close-Up; June 21, 2010; 655 words
...Vegetable Fats and Oils Manufacturing...Soybean Oil Mills (soybean...processing, except edible soybean oil); and 2079 - Shortening, Table Oils, Margarine, and Other Edible Fats and Oils, NEC (processing soybean oil into ...
Research and Markets Adds Report: Other Oilseed Processing Industry in the U.S. and its International Trade - Q3 2010 Edition.
Entertainment Close-up; September 30, 2010; 700+ words
...report "Other Oilseed Processing...charts and tables, the report...Vegetable Fats and Oils Manufacturing...Cottonseed Oil Mills (cottonseed...Vegetable Oil Mills, Except...and 2079 - Shortening, Table Oils, Margarine and Other Edible ...

Search all articles about Shortening, Table Oils, Margarine, and Other Edible Fats and Oils, NEC