Structural change, mostly the number or size of firms in the meat industry, has been the principle characteristic of the meat industry in recent years. Structural change also relates to the amount of product differentiation or changes in the ease of entry or departure from an industry. Changes in consumer demand caused by convenience and perceived health concerns have likely contributed to the recent structural transformations within the meat industry. Not only has the market share for large firms increased, but the relationships between processors and producers have become closer. The movement toward 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 or coordination has been the primary method used by processors to increase efficiency in livestock marketing channels. 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 between producers and processors takes several different forms.