Food

There has been no big-bang merger in the food industry--no Exxon-Mobil or DaimlerChrysler. But consolidation has come nonetheless. There have been hundreds of small restaurant mergers and a handful of large grocery takeovers. And it is likely to set the tone for the industry in the years to come.

Increasingly, size is what counts. In a bid to win market share, the big restaurant chains have been expanding so fast over the past few years that they have outpaced the surge in diners. McDonald's, for example, has increased its number of U.S. outlets by 50% over the past decade. That kind of saturation makes it tough for the mediocre--or midsized--chains to stay in the game. And as consumers buy more and more prepared foods, and look to the Internet for delivery, medium-size supermarkets will also find themselves outclassed. "When the going gets tough," says Piper Jaffray Inc. restaurant analyst Alan F. Hickok, "the weak get weaker."