Introduction
The article discusses the PESTLE forces of the United States of America shaping the Food Industry. The article explores each force in-depth and tries to decipher its impact on the business already operating within the food industry or aspiring to internationalize their company within the USA. These are the core forces that shape up the outcomes for any business within the matrix. Understanding these forces is critical for business managers to take effective decisions. This article will facilitate anyone who aims to understand the dynamics of the USA in terms of political, economic, social, technological, legal, and environmental forces. The article contains unique views of PESTLE Forces and insights that provide a complete in-depth holistic view of the forces in an industry-specific lens.
PESTLE Analysis Food Industry USA
Political Factors
Food production, its distribution, and consumption are influenced by government policies. It affects the cost and availability of food. Food policies generally affect wholesalers, retailers, consumers, and as well as farmers. People of the US are now more conscious about health due to which a number of contemporary issues related to food policies have come up. People focus on the nutritional quality of food. In the US, pandemic prepared certification is being provided by AIB International which ensures employees and the customers that the particular company is establishing best practices in this pandemic.
It has been seen during Trump’s era that he focused on deregulation and increasing aid to commodity farmers. Whereas, cutting food aid to needy families. The years of President Trump have dramatically reshaped food and farming across the country. It weakened protections for the workers. Now, in a pandemic, there is a dramatic explosion in hunger across the country. The yet president, Biden’s approach towards trade and payment is still unclear. But it is contrary to Trump’s policies and is engaging agriculturalists to work with the president on expanding trade.
It is important for International brands to know that there is no specific citizenship required to own an American company. US Investment Securities regulated by US Law does not forbid investors from outside. Foreigners can invest in US stocks by opening an overseas trading account with a foreign or domestic broker. Also, no specific certification is required to distribute food in the USA. Food facilities only need to register with FDA and then approval by FDA for each addition.
Economic Factors
FDA is now helping to save food that means reducing spoilage. They have created awareness videos that guide one about reducing food wastage, eventually saving money. Tax rates, exchange rates, inflation, and labor wages impact the industry. However, the population of the US is getting richer. All classes have now more money to spend on food which is expanding the food industry. Laborers are also earning more these days. Workers in the industry now demand higher wages, whereas the government expects lower wages as the owner of the business would have less profit.
The laborers hired for the farm face many difficulties in their daily life. Their lifestyles are below the standard as compared to the rest of the US population. They do not harness their work schedules and have to move to different places to earn. Many foreign-born farmers aren’t allowed to work in the US. This endangered citizenship and migration status has resulted in a lack of economic power. Also, the tax realm there is dynamic. The Supreme court has recently come up with a surprise. The tax laws would impact food businesses, manufacturers, and distributors. The corporate tax rate has been lowered to 21%. The new law has come up with a 20% deduction between now and 2025 which has indulged limitations towards business.
Food Processing Industries’ effective tax rate has increased up to 22.95% compared to the previous quarter. The effective tax rate total range has deteriorated. Foreign investors need to be aware of greenfield investments which have two types. Either the investor could purchase the already existing firm or create a new firm. New investments are preferred at a local level. Farmers were overwhelmingly supported by Donald Trump during his time but later he indulged in a trade war with China and retaliating many countries levied taxes on American products. This impacted the US food Industry.
Socio-Cultural Factors
Business owners need to closely look at the social changes around. Population growth, lifestyle, and age factor are among them. People are involved in agriculture, food production, retailing, or they may be consumers. 83% of the US farms are operated by males while the rest 13% are females which shows the significant role of women in US agriculture. The US ranks amongst the topmost housing, earnings, education, personal security, and physical well beings but it ranks below the average in work-life balance. Also, the health of the people isn’t so optimum. As people of the US possess a busy lifestyle so they opt for ready-to-eat food products. The US is facing longer winter splashes and a number of immigrants due to which the population has developed interests in cuisine and other food tastes.
The social behavior of the employees at the workplace is greatly affecting every business and so the food Industry. Power distance refers to the authority gap between the executives and the employees. Everybody in the organization must clearly understand and accept this. In the US more people aren’t accepting the difference between high-ups and the lower staff. People aren’t really depending on authorities, yet they are working professionally. And they do contact the pioneers of the senior officials if they find something intriguing. Merit is the only priority. Women or the US are family-oriented. This is widely accepted that men there are leading individuals.
Americans aren’t good at accepting fate or carelessly rely on the future. They fear and become anxious. They are worried about being watched by NSA but do not express the fear as they are unexpressive. Eventually, this will affect their professional behavior.
Long-term orientation means maintaining control over future concerns keeping in view the past occurrences. The US professionals focus on what they can see right in front of them and not on the long-term goals. This is fruitful as the individuals will strive for rapid results, but unfavorable at the same place because the people wouldn’t be able to achieve more through an eagle’s eye. Though people are individualists yet there is immorality due to indulgence and this would exert negativity towards their work.
Technological Factors
Technology adds beneficial products and services, thus taking the business to a wider domain. The US has started growing commodities from genetically modified seeds. Certain organizations such as Organic Consumers Association, the Non-GMO Project, and Greenpeace have reacted against this. US does not impose testing on GMO products. They are just thinking to label it on the products for public awareness because they do not hesitate from the origin of these products Traditional methods of raising poultry and other animals have been replaced by more intensive methods where animals are fed with a concentrated diet. This has increased the risk of food-borne illnesses. Similarly, more fish are being grown in a small space which is unhygienic and questionable. All such efforts to increase the food capacity are affecting the food industry of the US as the buyers are resisting such trends. In the US, 3000 acres of land are lost each day which imposes an increased burden on the remaining land. Moreover, the meat demand of the world is expected to increase immensely due to which more animals are being raised in smaller spaces. There has been increased automation in the food industry. It has engaged social media with it. People now confront self-checkout screens at restaurants which have reduced the cost on laborers. This automation has expanded to an extent that robots are now working in hotel kitchens and replacing humans which will lead to reduced laborer cost. The international brands who want to join US Food Industry must know that investing in automation would benefit them and will be fruitful for the industry as it would attract a wider customer range, bringing economic boosts.
Legal Factors
There is immense production of greenhouse gases along with the food, which is necessary to diminish. The food industry is now focused to reduce this emission to come in coordination with the Paris Agreement’s Climate Goals. This emission is expected to increase up to 30-40% by 2050 due to the rising population. 12 trillion dollars yet spent on the food industry, are expected to increase up to 16 trillion dollars in the upcoming years. This large amount spent indicates massive food production so controlling this production, and eventually, the emissions have become a security concern. The US food Industry aims to earn profitability yet doing no harm to social and environmental integrity. Regulations have been made to safeguard the consumers and stabilize economic orientation along with the consumer interests such as food safety, environmental protection, animal well-being, food safety, and optimum quality.
Policies have been made which will reduce meat production and consumption. Food wastage has been minimized through it. Proactive guidance is being made to increase crop yields as it is beneficial for biodiversity.
FSMA ( Food Safety and Modernization Act ) has been passed to shift the focus from the treatment of foodborne diseases towards its prevention. FSMA can be implemented through seven major rules given by FDA, preventing contamination.
The US Department of Labor, the State government, and the local governments have made laws to provide a safe, healthy, and fair environment to employees. Labor laws for workers at the restaurants have been given by FLSA ( Fair Labor Standards Act ). The overtime is compensated by one and one-half times their regular pay for each hour. The employees below 20 years are to be paid above 4.25 dollars per hour in the initial three months of employment. GMO food products are also considered safe and distributed. If another country wants to export its food products to the US so it must fulfill the labeling requirements. The five mandatory components for the label include nutritional information, list of ingredients, net contents of the package, contact information, and the statement of identity.
Environmental Factors
Weather affects the food industry as it impacts the area, intensity, and yield of crop production. During some past decades, crop production has increased. Consumers are shifting towards green food consumption and this behavior has increased after the pandemic breakout of Covid-19. Health and environmental consciousness, perceived attributes, family structure, and shopping behaviors of the US population are the major drivers generating consumers’ need to buy green food. So, the Industry must shift towards greens. Also, red meat production has immensely increased.
Due to this forests are being devastated. The increased environmental concern of the US population has created a behavior to eat green. This shift can’t be taken in a negative connotation, but the industry must recognize the shift for future concerns. This must be taken into account by the international business holders if they want to become a part of the US Food Industry. The US population wastes 31-40% of post-harvest food. Here consumers are the major class wasting the food due to desire to eat freshest. The wasted food doesn’t only impact the food industry but also the household budgets.
A need to address this wasted food is to bring back the money into circulation. The United States Environmental Protection Agency gives many food manufacturing and pollution prevention techniques that will guide a manufacturing facility to reduce chemical, energy, and water usage. The US food Industry shall keenly follow the guidance reducing maintenance cost, disposal costs, toxicities, transportation charges to further enhance profitability. President Trump’s era can’t be taken friendly to the food industry. He announced billions of dollars of cuts to USDA and FDA which was alarming to food safety. The farms today are more like industrial facilities rather than family farms.
Trump’s administration ignored the endangered species status of Bluefin tuna in the Pacific. Moreover, Trump’s administration was eager to approve GMO plants, fishes, and animals ignoring the harm that these products would bring to the environment. Joe Biden’s administration emphasized the importance of Biden’s transition team in maintaining infrastructure so that the country feed will be continued. Reliefs have also been asked during Biden’s era for the consumers, and the business. Biden’s administration made sure that government policies reflect consumers’ needs. Consumer packaged goods manufacturers were given protection policies in compliance with the public demands. Economy recovery efforts were drawn through stimulating funds.