Food marketing costs at a glance

Food Review, Sept-Dec, 2001

Elitzak, Howard

U.S. consumers spent $661.1 billion on food in 2000, excluding imports and seafood (table 1). Consumers' preference for quick, easy-to-prepare convenience foods, including more away-from-home eating, translated into an increased demand for food marketing services, such as labor, packaging, transportation, and energy. The estimated bill for marketing domestic farm foods totaled $537.8 billion in 2000 and represented 81 percent of consumer expenditures for farm foods. The remaining 19 percent, or $123.3 billion, represents the gross return paid to farmers.

From 1990 to 2000, consumer expenditures for farm foods rose $211.3 billion (fig. 1). Higher marketing costs were the primary factors contributing to rising consumer food expenditures over the past decade. Between 1990 and 2000, marketing costs rose 57 percent and accounted for most of the 47-percent rise in consumer food spending. In comparison, the farm value of food purchases climbed only 16 percent during this period.

Labor used by manufacturers, wholesalers, retailers, and eating places cost $253 billion in 2000 and accounted for nearly 40 percent of total consumer food expenditures (fig. 2). The total number of food marketing workers in 2000 was about 14.3 million, roughly 17 percent more than in 1990. Nearly 80 percent of the growth in food industry employment occurred in eating places.

Packaging is the second largest component of the marketing bill. At $53.5 billion, packaging costs accounted for 8 percent of the food dollar and were up 47 percent from 1990. Paperboard boxes and containers are the largest packaging cost and constitute approximately 40 percent of total packaging expenses.

The energy bill for food marketing costs totaled $23 billion in 2000, and accounted for 3.5 percent of retail food expenditures. Higher natural gas prices helped boost energy costs in 2000. Eating places incurred nearly 40 percent of the fuel and electricity costs of food marketing.

Advertising expenses totaled $26.1 billion and accounted for 4 percent of food expenditures in 2000. Food manufacturing accounts for over 50 percent of total food industry advertising expenditures, with food service contributing another 25 percent, and food retailing about 15 percent. Advertising expenditures have risen 52 percent since 1990, with foodservice firms and food retailers having the largest increases in advertising costs.

The author is an agricultural economist with the Food and Rural Economics Division, Economic Research Service, USDA.

[Figure 1 omitted]

Table 1

Consumers' Demand for Convenience Boosts the Marketing Bill

Expenditures                    1980      1990      1995      1999
                                           Billion dollars

Labor                           81.5     154.0     196.6     241.5
Packaging                       21.0      36.5      48.2      50.9
Rail and truck transportation   13.0      19.8      22.3      25.2
Fuels and electricity            9.0      15.2      18.6      22.0
Pretax corporate profits         9.9      13.2      19.5      29.2
Advertising                      7.3      17.1      19.8      24.8
Depreciation                     7.8      16.3      18.9      23.0
Net interest                     3.4      13.5      11.6      14.4
Net rent                         6.8      13.9      19.8      25.3
Repairs                          3.6       6.2       7.9       9.6
Business taxes                   8.3      15.7      19.1      22.2
Total marketing bill           182.7     343.6     415.7     503.1
Farm value                      81.7     106.2     113.8     122.2
Consumer expenditures          264.4     449.8     529.5     625.3

Expenditures                    2000
                                Billion
                                dollars

Labor                          252.9
Packaging                       53.5
Rail and truck transportation   26.4
Fuels and electricity           23.1
Pretax corporate profits        31.1
Advertising                     26.1
Depreciation                    24.2
Net interest                    16.9
Net rent                        26.7
Repairs                         10.1
Business taxes                  23.5
Total marketing bill           537.8
Farm value                     123.3
Consumer expenditures          661.1

Source: USDA's Economic Research Service.
Figure 2

Labor Took Biggest Chunk of Food Dollar in 2000


Farm value       19.0cents

Marketing bill
 Labor           38.0cents
 Packaging        8.0cents
 Transportation   4.0cents
 Energy           3.5cents
 Profits          4.5cents

 Advertising      4.0cents
 Depreciation     3.5cents
 Rent             4.0cents
 Interest         2.5cents
 Repairs          1.5cents
 Business taxes   3.5cents
 Other costs      4.0cents

Source: USDA's Economic Research Service.