Published on 31/03/2017 by Punchmedia

Ready-Made Meal Mentality Driving a Thriving Industry

The ready-made meals sector in Australia has moved well past microwavable dinners according to industry experts who believe it was likely to grow by more than 10 per cent annually to become a $1 billion commodity. The convenience of prepared meals has increased consumer uptake of industry products, especially in time-poor single-member households. Consumption trends have also encouraged the industry to expand its product range and appeal to a greater range of consumers. Rising health consciousness has prompted producers to introduce a range of low-fat and other healthy prepared meals. Over the five years through 2016-17, industry revenue is expected to increase at a marginal compound annual rate of 0.1%, to $601.4 million but experts believe the growth is yet to come.

Supermarket dominance

While Coles and Woolworths do not manufacture themselves, private labels have been a continual headache for industry operators that produce branded prepared meals. This is because private labels are comparatively cheaper and given more favourable shelf-space in supermarkets. Industry operators have traditionally beaten private-label goods on quality and taste. However, the improving quality and range of private-label prepared meals has encouraged consumers to purchase these products instead of branded meals. This has created increasing price competition in the industry, largely forcing manufacturers of branded products to refrain from lifting prices and introducing discounts more frequently. This has been a major factor in constraining industry revenue over the past five years.

Consumer trends

Although price competition has intensified, the industry has benefited from the rising popularity of prepared meals over the past five years. This has been due to rising demand from time-poor consumers, who favour the quick and easy nature of prepared meals that typically only require microwaving. Consumers often purchase prepared meals and store them at home for consumption when there is little time for cooking. The average weekly hours worked is expected to remain steady over the five years through 2016-17. Another significant consumer trend has been the ongoing healthy eating patterns. Australian consumers are now more health-conscious than they were five years ago. This has prompted most prepared meals manufacturers to launch healthy options, promoting low-fat, low-salt and low-kilojoule meal varieties.

Substitutes

While the industry benefits from a host of favourable consumer conditions, it has continued to battle with the rising strength of substitute foods. Takeaway and fast-food establishments have been traditionally embroiled in a tug-of-war with prepared meals. IBISWorld expects that these foods cater to similar target markets of time-poor consumers that often live alone and do little cooking. Over the past five years, prepared meals operators have responded to trends in health consciousness.

Profit and participation

Industry profit margins are expected to increase slightly over the five years through 2016-17, as more premium products that attract higher margins come onto the market. This has helped constrain industry profit margin growth over the past five years. Industry operators have also expanded their range of prepared meals which is expected to bring benefit in the long run. With profit margins hovering around 10%, the industry remains attractive for innovative operators that can compete with private labels and substitute foods. Competition from imported products has increased over the past five years, with imports expected to account for 11.2% of domestic demand during 2016-17. Exports have also grown over the past five years, to account for an estimated 6.8% of industry revenue in 2016-17.

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.

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