PEST Analysis Example for the Food Industry

PEST analysis identifies external factors which influence a business. In this case, we’re examining how the food industry is affected by political, economical, social and technological factors.

PEST analysis helps to plan with these factors. If any of the four are ignored, a solid foundation is lacking in your strategic planning.

This is true for our PEST analysis example for the food industry.

Political Factors

Trends affect the food industry. Fast food restaurants are adding “healthier options” on their menus as public health policies are pushing for foods with lower sodium and sugar intakes.

Current policies push for the public to be more conscious when buying foods. For example, as part of the Health Menu Choices Act, food services with over 20 locations in Ontario, Canada, must now post the number of calories for food and drinks openly. A change like this could affect purchases of foods (and the importing/exporting of ingredients) for their country.

Fast food chains also show calories, but not as openly.

McDonald’s reveals calorie and nutritional information on their website. But they, and other fast food chains, face criticism for their lack of healthy options on their menus. The public health policies encourage consumers to make healthier choices and McDonald’s isn’t a necessary (or healthy) choice.

Still, with their funds and global power, McDonald’s can strive to include healthier food options to push back against the criticism.

McDonald’s targets low to medium income families. With improved international trade, McDonald’s expands its global supply chain to similar families all over the world. They have the funding necessary to use strategic planning in order to lower taxation impact without violating political laws.

Additionally, taxation, inflation, import/export costs, and evolving health policies affect what foods McDonald’s offers.

Economic Factors

The state of the country and unemployment rates can affect the food industry. Healthier alternatives to foods are pricier compared to fast food or easy-to-make meals.

Not only that, but the convenience of readily made food — despite the unhealthiness — can outweigh the trial and error of cooking food from scratch. This has allowed greater expansion of fast food restaurants over the last decade.

But they’re working against each other.

Wendy’s Co. is throwing out discounts and promotions left and right over the past year. In response, McDonald’s is pressured to keep their prices low. And yet, in the face of consumers growing more health conscious, McDonald’s Q2 sales in 2016 were far lower than their Q1 sales.

Food interest rates, taxation, and consumer spending affect the options and opportunities presented in the food industry. Although there is a slowdown in sales, fast food is a convenience and a necessity to many still.

Social Factors

Fast food trends shift based on what consumers want. As mentioned throughout this analysis, healthiness is the focus in many countries. This is not only pushed by governmental authorities, but by consumers, as well.

What we’re seeing is a rise in organic and whole foods as diets and lifestyle changes come into play. Vegetarian, vegan and pescetarian eating are becoming less of a fad and more of a lifestyle choice — particularly with the younger generation. How these foods appeal to people is based on their branding look.

As a result, fast food chains are implementing their own branding makeovers.

To input professionals and young adults into their consumer base, McDonald’s is changing their company appearance. The restaurant interior was initially “grab and go”. Now they have a much cleaner and modern look with wood, softer lighting, menu screens, and wifi.

To market to the younger generation, they had to change their branding and look. They even changed their slogan to “Lovin’ Beats Hatin’” but that hasn’t gone over too well. And they’re adding healthier options to their menu still.

Technological Factors

Technology can give a competitive edge. Technology is necessary to create packaging, food labels, and the production of food. Newer corporations may be lacking in technology power compared to veteran food-based companies.

McDonald’s moved big screens into their restaurants to showcase their menu. Additionally, they show footage of new promotional drinks and foods, as a method of marketing. They also use their website to provide allergy notices, calorie information, and promotions.

With technology advancing, it helps food corporations reach consumers in new and easier methods. We even have online groceries which deliver fresh produce to customers quickly.

But startups or smaller businesses will have a hard time with outreach compared to global giants like McDonald’s.

In conclusion..

The food industry is seeing a large shift due to consumer consciousness.

Fast food chains, such as McDonald’s, are expanding overseas as sales in western countries have been slowing down. To appeal to new (and younger) demographics McDonald’s utilize their website and have completely repackaged their brand and restaurant look.

It’s clear, now more than ever, how much say consumers have in the development of the food industry.

Image: Dmitry Kalinovsky/Shutterstock.com