The purpose of this article is to examine the changes which have occurred in each of these sectors and discuss the implications for the future of the beef industry. Structural change has been the principle characteristic of the meat industry in recent years. Structural change can also relate to the amount of product differentiation or changes in the ease of entry into or exit from an industry. Changes in consumer demand brought about by convenience and perceived health concerns have likely stimulated the recent structural transformations within the meat industry. The movement towards a closer relationship between processors and input providers is linked in part to the cost structure of the meat processing industry.
Meat processing is a decreasing cost industry, i.e., economies of size exist.
This implies that the average costs of processing decline rapidly as the number of animals slaughtered increases. Vertical integration refers to ownership across pricing points in a market channel. An example of vertical integration would be the ownership of hogs by processors from birth through processing and wholesaling. Vertical coordination may occur with or without vertical integration. That is, different segments of the marketing channel may coordinate their efforts with or without the same firm owning both segments.