Food and beverage companies represent an attractive investment option for investors since these companies belong to a consumer staples segment, which tends to be non-cyclical and subject to smaller market fluctuations. One metric that investors use to evaluate companies and industries is profit margin, which speaks of the company's ability to manage its cost and effectively price its products. In May 2015, the profit margin for companies in the food and beverage sector ranged from -24.1% to 24%. The average profit margin was 5.2%.
Profit margin is calculated as net income divided by the company's total revenues. If the company does not generate any revenues or the earnings are negative, the profit margin is either meaningless or negative. Investors often calculate companies' profit margins and then compare them across sector and industry averages to determine where a particular company stands in the overall distribution of margins.
The profit margin for the food and beverage sector ranged from -24.1% for Boulder Brands, a producer of natural consumer packaged food, to 24% for Anheuser Busch Inbev SA, a well-known brewing company. Beverage companies tend to have a slightly higher average profit margin of 5.8%, compared to the average profit margin of 4.6% for food companies, since a few food producers have large negative earnings.
Investors often look at other statistical measures to get a sense of the typical profit margin in a particular sector. One such measure is the median, which is especially helpful for a highly skewed distribution of profit margins. In May 2015, the food and beverage sector had a very low degree of skewing, and the median profit margin for the sector was 5.5%.