Published on 06/11/2015 by Punchmedia

Confectionery Manufacturing Brings Sweet Reward

Despite Australia's increasing obsession with eating healthy and leading a healthier lifestyle generally, it seems there is still money to be made in chocolate and confectionery manufacturing according to a recent IBISWorld Report.

Revenue and Profitability

Industry revenue is estimated to grow at an annualised 0.6% over the five years through 2014-15, to reach $5.9 billion. Increasing demand for chocolate and confectionery products from supermarkets and grocery stores, the industry’s largest market, has driven this performance over the past five years and contributed to growth. Large-scale supermarket chains such as Coles and Woolworths tend to stock a wide variety of chocolate bars and blocks, hard and soft confectionery, and chewing gum, and on-sell these goods to consumers.

Manufacturing Profit Margins

Profit margins are estimated to account for 10.1% of revenue in 2014-15. The high level of value addition during production processes, particularly for chocolate manufacturing, tends to result in fairly strong profit margins. Over the past five years, industry profitability has improved due to falling purchase costs. The domestic price of sugar and the world price of cocoa have both fallen, easing manufacturers’ input costs.

Consumer Preferences

One of the key developments that has affected the industry over the past five years has been the importance of health and nutrition. Although brand loyalty is still strong, customers may now be willing to switch to alternative brands based on sugar and fat content in an effort to eat more healthily. Organic products have also become extremely popular over the past five years, and consumers are willing to pay more for products that are manufactured without artificial materials or chemicals. However, organic chocolate still represents a very small share of the world market.

Manufacturing Fair-Trade

Australia is one of the world’s fastest growing markets for fair-trade certified products. As a result, major players Cadbury and Nestle have introduced fair-trade certified chocolate to satisfy shifting consumer demand. In 2009-10, chocolate contributed less than 10% of total fair-trade sales in Australia, but this share grew to 58.2% of total sales in 2011-12. In addition, according to Fairtrade Australia and New Zealand, fair-trade chocolate sales grew by 11.0% in 2013-14. Retailers such as ALDI and Alter Eco have also introduced their own private-label fair-trade chocolate and cocoa products, increasing industry competition.

Trading Landscape

The industry has undergone several key changes over the past five years. Mondelez International Inc acquired Cadbury in 2010 for $20.7 billion. Mondelez Australia is now the largest player in the industry and benefits from extremely high brand loyalty, which has contributed to considerable consolidation among the industry’s major players over the past five years. Chocolate and confectionery manufacturers engage in international trade and this can have a substantial effect on the industry’s performance.

punchmedia

Curtis is a leading expert in the business-for-sale industry, serving as a senior content creator at anybusiness.com.au.

With a career spanning over fifteen years, Curtis has accumulated extensive knowledge in the domain of business sales, acquisitions, and valuations. His deep understanding of market dynamics and his ability to translate complex industry jargon into accessible insights make him a trusted resource for entrepreneurs and business owners looking to buy or sell businesses.

Author profile

Related articles

Mature workers made redundant seeking franchise opportunities

02/02/2014 by gavinLower

Mature workers who’ve been made redundant are investigating opportunities to work for themselves through franchises, a leading Australian franchise business says. “We’re seeing more and more people in the situation where they are made redundant and want some certainty with what they want to do in the future,” says John Stanton, Australasian franchise recruitment manager at mobile coffee business Cafe2U. He told StartupSma...