FOOD PROCESSING PROFITS DURING ECONOMIC STAGNATION

Processed food sales are presumably less affected by an economic slowdown than is the rest of the economy because food is a noncyclical commodity. But how well does the U.S. food manufacturing sector do during economic stagnation? How vulnerable are profits during a time of economic slowdown? These questions are important because the food manufacturing industries, despite slow volume growth, were profitable during the prosperous 1980s, both in terms of profit levels and returns on stockholders’ equity, assets, and sales. The year 1991 is an excellent period to measure this profit performance in a recession because the recession was in effect the entire year. This research examines two basic questions: (1) how did food processors’ profitability compare to other industries in 1991, and (2) how did food processing profitability compare to the 1987-1990 period--a time of economic growth?