This paper investigates productivity developments in the Swedish food and beverage sector during a period characterized by deeper integration with the EU. Detailed firm level data is used to estimate firm-level TFP, which is aggregated to a sector level and thereafter decomposed into two components. One measures the unweighted productivity average while the other reveals the effect of different developments of heterogeneous firms on aggregated TFP. The expected productivity growth does not reveal itself on a sector level. However, a finer division of the food and beverage sector reveals productivity growth in five out of ten sub-industries, and an improved resource allocation among firms within sub-industries explains most of the productivity growth. Growing industries are relatively successful on the international market, while sub-industries lacking growth are characterized by weak capital utilization.