Profit Margins for the Food and Beverage Sector

Many investors like the food and beverage industry. Many of these companies belong to the consumer staples segment because they’re considered non-cyclical, which means they aren’t as vulnerable to smaller market fluctuations. One metric that investors use to evaluate companies and industries is the profit margin. It provides information about a company’s ability to manage its costs and effectively price its products. Learn more about profit margins and how they work in the food and beverage industry.

Key Takeaways

• Many food and beverage companies belong to the consumer staples segment, which tends to be less cyclical and subject to smaller market fluctuations.
• There are several ways to calculate the profit margin, such as gross margin, EBITDA margin, and net margin.
• The core components of the food and beverage sector are food processing, nonalcoholic beverages, and alcoholic beverages.
• Within the food and beverage sector, higher profit margins certainly make beverage companies look like better investments than food processing firms.

What Is a Profit Margin?

A profit margin is a profit measurement. More specifically, it is the percentage of profit that a company keeps after deducting all of its expenses or how much profit a company earns for every dollar of sales.

A company’s profit margin is often calculated as its net income divided by its total revenues. If the company does not generate any revenues or the earnings are negative, its profit margin is either meaningless or negative.

Investors often calculate profit margins and compare them across sector and industry averages to determine where a particular company stands in the overall distribution of margins. There are several different ways of calculating the profit margin, such as gross margin, earnings before interest, taxes, depreciation, and amortization (EBITDA) margin, and net margin.

Sectors in the Food and Beverage Industry

What exactly is included in the food and beverage industry? This can be somewhat difficult to define because there can be substantial overlap between businesses. There are multiple sectors in this industry, including:

• Production
• Processing and manufacturing
• Packaging
• Serving and storage
• Distribution and delivery
• Retail sales

To a lesser extent, grocery stores and restaurants can also be considered part of the food and beverage sector. Grocery stores are often classified as retail instead, while restaurants are frequently considered services. There is also agriculture itself, without which the food and beverage industry would not be possible. However, agriculture is quite different from most other parts of the economy.

Food Processing Profit Margins

According to CSIMarket, the gross profit margin for the food processing industry was 31.99% in early 2024. That was above the total market average of 25.18%. Furthermore, the EBITDA margin for food processing was 20.49%, which was above the total market figure of 3.09%.

The net profit margin in the food processing industry was 12.1%, far higher than its 2019 figure of 5.16%. It was once safe to say that profit margins in the food processing industry are generally lower than average.

Important

Profit margins within industries can fluctuate substantially from one year to the next. However, the food and beverage sector is somewhat more stable than the rest of the market.

Nonalcoholic Beverage Profit Margins

Profit margins in the nonalcoholic beverage market tend to be much higher. Firms in this industry, such as Coca-Cola (KO), often have large economic moats. The gross profit margin for the nonalcoholic beverage industry was 50.83% in 2023, compared with 53.68% five years earlier. At the same time, the EBITDA margin was 10.62%, and the net profit margin was a very impressive 15.22%.

Alcoholic Beverage Profit Margins

Alcoholic beverage company profit margins are generally very similar for nonalcoholic beverage firms during 2023. The gross profit margin was 54.11% in the last quarter of 2023, the EBITDA margin came in at 0.91%, and the net profit margin was 11.47%.

The similarities with nonalcoholic beverage profit margins should not be surprising, as brand names dominate both industries. If anything, regulatory barriers to entry may make it even harder for new firms to enter the alcoholic beverage market.

What’s the Difference Between Gross and Net Profit Margin?

Gross and net profit margin are two profitability ratios that help determine whether a company is financially healthy. Both are expressed as a percentage. A company’s gross profit margin is the total revenue that a company has left after subtracting the total cost of goods sold (COGS). A net profit margin, on the other hand, is the total revenue a company earns after accounting for its direct and indirect costs.

Is the Food and Beverage Industry Non-Cyclical?

Yes, the food and beverage industry is considered non-cyclical. The non-cyclical industry generally performs very well regardless of how the economy fares. That’s because it is made up of companies that provide essential goods and services (like food and beverages) that consumers need and still buy when times are tough. People tend to choose more affordable options, though, during a recession and may open up their pursestrings during recovery periods.

What Are the Sales for U.S. Retail and Food Services?

According to the Census Bureau, advance estimates of U.S. retail and food services sales were $724.1 billion in April 2025. That’s a 0.1% increase from the previous month and a 5.2% increase from April 2024.

The Bottom Line

Higher profit margins certainly make beverage companies look like better investments than food processing firms. In fact, famous investor Warren Buffett built part of his fortune by buying Coca-Cola stock at the right time. However, those high profit margins usually mean that stock prices are also higher. Successful investors must learn to be greedy when others are fearful and to find companies with higher profit margins.