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National Survey: Food, Beverage Firms See Growth in '06

CHICAGO -- Food and beverage executives are optimistic that they will increase their companies' headcounts in the next year, reported the 2005 Survey of U.S. Food & Beverage Companies, conducted by Grant Thornton LLP, based here.

According to the national survey, 64 percent of executives expect their company's employment will increase in both 2005 and 2006, compared to what executives said in 2004, when only 46 percent felt industry employment would increase in 2005 and 49 percent in 2006.

In addition to headcount growth, the survey also found that food and beverage companies foresee an increase in global expansion, with 82 percent expecting a rise in their company's global expansion plans. Furthermore, 74 percent of respondents expect the level of mergers, acquisitions, and restructuring in the industry to increase in 2005 compared to current levels.

"As the global economy continues to prosper, U.S. companies are looking to other countries, as well as other companies to expand their operations and with this comes a larger workforce," said Jim Maurer, Grant Thornton's managing partner of the consumer and industrial products practice.

With regard to product segment growth, 64 percent reported that their companies will see the greatest potential for growth in the "better for you" category, which includes better for you products (42 percent), organic foods (15 percent), obesity-addressing items (5 percent) and nutraceuticals (2 percent). Ethnic cuisine is also considered an area of opportunity, with 24 percent seeing growth potential in that category.

Other findings from the survey include:
-- 75 percent of food and beverage executives said that successful product development i offers the most opportunity for company growth, followed by successful marketing of a product (63 percent), and operating efficiencies (62 percent);
-- 63 percent of respondents believed that competition with larger companies is a critical issue. Other critical issues included food safety, with 57 percent, and fuel costs, with 39 percent;
-- 82 percent said they see an increase in their company's global expansion plans, with 56 percent reporting that the weakened U.S. dollar has not had an impact on international business or expansion plans;
-- 74 percent expect the level of mergers, acquisitions, and restructuring in the industry to increase in 2005 compared to current levels;
-- 77 percent anticipate current health and regulatory concerns to increase their company's costs by more than 5 percent in the next five years;
-- 81 percent expect commodity prices to increase in the next year;
-- 78 percent plan to increase product development spending in 2005 versus 2004;
-- 73 percent see an increased need for capital in the next five years, with only 47 percent foreseeing an increase in the availability of reasonably priced capital during the same time;
-- 50 percent of company's report that they will use private equity as their primary source of capital in the next two years.
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