Diversification and Profitability Among Large Food Processing Firms

Excerpts from the report Preface: Farmers and numerous legislative and economic groups concerned with agricultural policy have become increasingly aware of the conglomerate acquisitions and internal growth affecting food industries. In recent years, firms in food processing have, through internal and external growth, enlarged their product lines to include more food products and numerous nonfood products from other manufacturing industries. Farmers and consumers have wondered what such changes mean for the firms with which they conduct business and what effect these changes will have on their market relationships with these firms. The specific objectives of this study are to determine: (1) whether any observable relationships existed between the degree of diversification of food processing firms and their performance variables, such as profit rates and margins; (2) the relationship of other structural variables, such as concentration and size of firm, to profit variables; (3) effects of the degree of diversification on the stability of profit rates of food processing firms over time; and (4) the measurement problems associated with product diversification