Although revenue will rise with higher consumer spending, input costs will pressure profit
Los Angeles, CA (PRWEB) October 31, 2012
The Candle Manufacturing industry is at the whim of consumer spending power. Candles are highly discretionary purchases and compete against other home decor and air-freshening products. As such, when consumer disposable incomes declined during the recession, industry revenue suffered as well, falling an estimated 0.4% and 1.4% in 2008 and 2009, respectively. Profit (i.e. earnings before interest and tax) also suffered. Compounded by rising input costs, declining spending on candles caused profit margins to drop. As the economy slowly recovers and consumers' pockets open up, the industry is set to recover, says IBISWorld industry analyst Nikoleta Panteva. In 2012, per capita disposable income is expected to increase 1.3%, giving way to a 2.3% revenue gain. Profit is also set to grow as input cost increases subside. Despite declines during the recession, the Candle Manufacturing industry has fared relatively well, growing at an average annual rate of 0.9% to $1.6 billion from 2007 to 2012.
International trade is a significant part of the industry. Exports account for 14.1% of revenue, and imports satisfy 24.0% of domestic demand. Over the past five years, the US dollar has lost some of its value, causing imports to decline at an annualized rate of 3.4%, while exports have grown an average 15.0% per year. With the dollar set to appreciate over the next five years, imports are forecast to increase, and exports are expected to decrease. The Candle Manufacturing industry has a medium level of concentration. The largest firm is The Yankee Candle Company. Industry concentration has increased somewhat during recent years due Yankee Candle's growing revenue. Pacific Trade International Inc. opened its first manufacturing facility in the United States in 2011. At the same time, numerous candle manufacturers have fully or partially outsourced production due to the availability of cheap labor and raw materials overseas, says Panteva. Some merger and acquisition activity took place before the recession, but unfavorable economic conditions have resulted in discontinued operations.
Industry performance is anticipated to recover steadily. Per capita disposable income will grow from 2012 to 2017, supporting demand for discretionary purchases like candles. As such, industry revenue is forecast to grow. Shoppers will be keener to buy higher-margin organic and sustainable candles, allowing industry profit to rise. Still, the upward trend in input costs, such as plastics and resin, will constrain profit potential. Operators will need to remain on top of color and scent trends to compete effectively. For more information, visit IBISWorld’s Candle Manufacturing in the US industry report page.
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IBISWorld industry Report Key Topics
This industry manufactures scented and unscented candles.
Key External Drivers
Industry Life Cycle
Products & Markets
Products & Services
Globalization & Trade
Market Share Concentration
Key Success Factors
Cost Structure Benchmarks
Barriers to Entry
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