There’s no denying that the food industry is one of the strongest in the world — after all, everyone needs to eat! Indeed, there are some interesting dynamics at play in this space, like rising labor costs, which make it unclear just how profitable food businesses will continue to be.
In this PESTLE analysis, we’ll look at the Political, Economic, Sociocultural, Technological, Legal, and Environmental factors affecting the food industry; in particular, we’ll look at how both restaurateurs and food distributors might be affected by current trends. Check out our SWOT analysis of the food industry to find out the internal and external factors that impact this major industry.
Here are the Political factors impacting the food industry:
Governments across the world have expansive regulatory frameworks for every aspect of the food industry. This includes the cleanliness of commercial kitchens, the standards for storing and transporting produce, and even the requirements for laborers in the food business. Without a doubt, this makes the food industry one of the most tightly-regulated industries of all. On the plus side, this ensures that consumers aren’t exposed to poor quality nutrition, but the complexities of regulation certainly take away from the margins of the food business.
Here are the Economic factors impacting the food industry:
Growing Disposable Incomes
As a general trend, the world’s population is only getting richer. That means that individuals in the lower, middle, and upper classes all have more money to spend on luxuries — including restaurant food. As a result, the overall revenue of the food industry is growing, as individuals cook less and eat out more often. This has a positive effect on all corners of the space, including restaurateurs, food distributors, and the individual workers who play a role in these businesses.
Increasing Labor Costs
Disposable incomes are growing for a reason: laborers are earning more money these days. On the whole, the cost of hiring workers is increasing across all industries. This is caused by not only a growing demand for employees, but also higher and higher government expectations for minimum wages. As in many other industries, the effect of increasing labor costs is simple: less margin for the owner of the business, and thus less profit.
Here are the Sociocultural factors impacting the food industry:
Nowadays, scientists know more about the relationship between food and our bodies than ever before. There’s a clear relationship between the food we eat and our personal health, and consumers are conscious of this. As a result, many individuals are looking for healthier ways to fuel their bodies. This doesn’t necessarily have a positive or negative effect on the food industry, but it means that businesses will have to adapt to stay relevant. For example, fast food businesses will likely have to move away from traditional, high-calorie fried foods towards healthier alternatives like salads.
Aside from having a better grasp of what kinds of food are and aren’t healthy, consumers are also more knowledgeable about their individual dietary restrictions. For example, many individuals now understand the negative impact of gluten in those with Celiac disease. This has led to consumers expecting greater understanding on behalf of those who work in the food industry. Once again, this isn’t necessarily a bad thing, but it means that the food industry will have to make changes to keep clients happy.
Here are the Technological factors impacting the food industry:
We’re seeing various types of automation more and more in the food industry. Perhaps the best example is the use of self-checkout screens at fast food venues such as McDonalds, but it’s not the only one! Just recently, social media platforms went crazy as viral footage of a hotel’s robot cooking up omelettes began to spread. As we find more ways to use technology — including robots — in the food industry, there will be less need for laborers. Overall, this is a good thing for the industry, as it will allow businesses to improve profitability and reduce the likelihood of human error.
Here are the Legal factors impacting the food industry:
As touched upon in the Political section of this PESTLE analysis, the food industry has high standards for safety matters. In particular, there are scores of rules in every country on how food should be transported, stored, and prepared — including directions on what temperatures various food types can reach, how they should be cleaned, and so on. While this is indeed largely a Political issue, it becomes a Legal matter if any of these regulations are ever breached. As such, those in the food business need to be extremely careful to ensure that they stay within the bounds of these rules to prevent costly lawsuits.
Here are the Environmental factors impacting the food industry:
Impact of Meat
Not only is there growing awareness for the health repercussions of the food we eat, but also for the environmental repercussions of the food we eat. One particularly problematic food group from an environmental point of view is meat. The production of meat — especially red meats — uses huge amounts of water and creates a significant carbon footprint. No less, the meat industry is tearing down large amounts of forest to create new space for farms. The result of this is that more and more individuals are switching to plant-based diets, and governments are slowly taking interest. Once again, this isn’t necessarily a negative for food businesses, but they will have to recognize the impact of this shift in the long term.
PESTLE analysis of the food industry: Final Thoughts
This PESTLE analysis of the food industry is certainly an interesting one. It’s a mix of positives, negatives, and uncertainties. On the one hand, consumers have more to spend on food and robots can reduce expenses. On the other hand, the space is carefully regulated and labor prices are increasing. What’s more, eaters’ diets are becoming increasingly more specific. Of course, the food industry is here to stay, but it seems those who prevail will have to understand what consumers really want to be eating in the 21st century.
Read also: A PESTLE analysis example in food industry
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