Food Industry and
Food systems
Dr. Wassiuw Abdul Rahaman
Department of Economics, University of
Ghana, Legon
Learning outcomes
• At the end of this lecture you should be
able to do the following:
– Identify and explain structure of the food
industry
– Discuss some contemporary issues of the food
industry
– Explain food system
• Distinguish between global and local food system
– Problems of the food system in Ghana
• Food is one of the great universals in our lives
and one of the things that brings us together.
– The industrial complex that produces, processes,
and distributes it is one of the largest industries in
the world.
• On a global basis the food industry is the
largest industry in terms of people employed
and value of product.
• The food industry can be divided into
four major sectors:
– Farm service,
– producers,
– processors,
– marketers.
Farm Service Sector
• The farm service sector
provides producers with the
inputs such as feed, fertilizer,
fuel, equipment, and
chemicals.
– Many firms in is sectors are 2
multinational corporations
There is also a variety of small, local 3
service companies that serve diverse
needs of local farmers for irrigation
equipment, farm structures, etc. 4
Farm Service Sector
• There are also numerous firms that provide
farmers with services such as banking,
accounting, insurance, legal advice, and
agronomic consulting.
• As farming becomes increasingly complex,
farmers are pressed to rely heavily on
providers of farm services—a fast-growing,
highly localized sector of the food industry.
Producers
• The producers sector
includes all of those firms
engaged in the biological
processes associated with
production of food & fiber.
– Examples include farmers and
ranchers.
3
Producers buy from the farm service
sector and sell to the processor
sector.
4
Processors
• The processors sector
creates value converting
agricultural commodities
into those products that
consumers want.
– Processors change the
form of food and create
value in the process.
4
Processors
• Processors can be divided into two groups:
– Commodities processors - (milling wheat into
flour).
– Food products processors - (bakers who turn flour
into bread).
• Food product processors can be further divided
into:
– Those that produce for the retail food consumer.
– Those that produce for food service distributors.
Marketers
• The marketers sector also
creates value in the food
industry by changing the
time and place of food.
– The distribution system that
ties producer and consumer
together is the marketing
system.
It brings the consumer what he/she
wants, where & when it is wanted.
Food Industry Contemporary Issues
• Like any other major industry, the food
industry is in a continuous dynamic of
change and adjustment.
• Two main issues
–Globalization
–Coordination
Globalization
• In most instances, commodity processors tend to
be on the forefront of globalization.
– Because demand for processing technologies is truly
global—we all need food to survive.
• Among commodity processors, the most
successful are very internationalized, with
processing facilities all over the globe.
– To fail to behave globally in the commodity
processing business is a recipe for corporate failure.
Globalization
• Globalization in food products processing has not
been as strong, as consumers in each country have
different tastes and preferences.
– The final food product soybeans may be soy protein
meal in one country and a nice steak in another.
• Many food product processors are making a push
to globalize, seeing growth of the processed food
market exploding in many developing countries.
• There are three truly global food product
processing companies:
– Coca-Cola, Unilever, and Nestlé.
Globalization - Criticisms
• Food security—every country wants to be certain its
nutritional needs will be met.
– As the industry becomes globalized, individual countries are
losing control to multinational companies that may have
objectives different from those individual countries.
• Global concentration—similar to the issue of industrial
concentration.
• Many individuals are concerned about the loss of national identity
associated with globalization.
Coordination
• Marketers are the companies that tie
the final food consumer to the
processor.
– Their job is to make certain that whatever the
consumer wants is there when and where the
consumer wants it.
– The communication system that conveys
consumer wants to the producer is called
coordination.
Coordination
• Traditionally, coordination has been
accomplished by prices sending messages from
one link in the marketing chain to the next.
– This is changing, with management & strategic
alliances replacing markets & the price system of
allocation.
• Most food purchased for home consumption is
purchased at a retail supermarket.
– Using technology, consumers can send signals to
producers using hotlines, websites & product blogs.
Coordination
• Traditionally, most retail stores purchased food
from wholesalers, who purchased in bulk from
processors, selling in smaller batches to retailers.
– Many—particularly smaller—retailers still use this
system.
• Many larger chains combine wholesale and retail
functions in a single firm, reducing transaction cost.
– Reduced costs can be passed on to consumers as lower
prices, or captured by the producer as higher profits.
Food Systems
• A food system is the path that food travels from
conception in the field all the way to digestion in
the stomach.
• Everyone eats, so everyone is involved in a food
system
• Food system includes the growing, harvesting,
processing, packaging, transporting, marketing,
consuming, and disposing of food.
Food Systems
• A food system encompasses everything from
farmland and farm inputs to the table
– Land, farm inputs (water, fertilizer, seeds, energy,
pesticides, animal feed)
– Outputs (crops, food, manure, water and air
pollutants, environmental degradation)
– Transportation, processing, packaging, marketing
– Purchasing by consumers for home use
– Purchasing by institutions, restaurants, etc.
– Eating
Global Food System
• Complex system with a long supply chain and has a lot
of processed food
• Importance
– Provides food for the world
– Provides food to agriculture-poor regions of the world
– Brings consumers produce that cannot be grown in their
area, e.g., coffee and bananas to Europe
– Brings out-of-season produce to consumers
– Transports some produce and crops long distances to areas
where demand could have been met by local farmers
Global Food System Map
Local Food System
• Local in this sense has a geographic
connotation.
• No generally accepted definition for the term
local.
• Local food systems differ from global systems
because they contain a short supply chain,
minimally processed food supplied by local
farmers and local consumption
Local Food System
• Importance
– Addressing food security of a particular local
region
– Emphasizing eating locally produced food
– Working to address local justice, hunger, and
poverty issues
Local Food System Map
Some problems of the food system
in Ghana
• Problems are factors that limit the
realization of full potential or set
objectives.
• It implies that both internal and
external factors may limit producing
and marketing firms in ways that
eventually lead to an inefficient
business of agriculture in an economy.
Some problems of the food system
in Ghana
• The internal factors cause weakness;
the external factors are threats.
• Where firms are weak and cannot take
advantage of external opportunities or
are threatened by external factors, the
agribusiness system become inefficient
Some problems of the food system
in Ghana
• Ecological: remote sources of supply (rural
farms); agricultural products are biological and
ecology specific; seasonal production, bulky,
highly perishable and raw non-consumables
• Technological/low resources base: farm inputs,
transportation, storage, packaging, handling and
processing facilities (are traditional,
inadequate/in poor condition/unavailable)
Some problems of the food system
in Ghana
• Political/social: production on small farms;
lack/poor enforcement of standardization; low
level research and ICT; uncontrolled growth of
urban centres
• Economic: instability of input and output
prices; inflation; high interest rates and low
investment capital.
Some scenes from Asasetre, Nzema
East District of Ghana
Agro Processing- storage and Food
safety
Agro processing- storage and Food
safety
Agro Processing- the processing
site
Agro Processing- the human
resource factor
Agro processing- the technology
Agro processing- the technology
Agro processing- the technology
Manual
Sieving and
Roasting
Agro processing- the technology
Warehousing- loss management
Summary
• Food industry has four main sectors:
– Farm service, producers, processors and
marketers
• Two food systems:
– Global and local food systems
• The difference between the two has to do with
length of supply chain
Summary
• Problems of the food system in Ghana include:
– Ecological
– Technological
– Political/social
– Economic instability