Because industry products are discretionary, the recession decimated revenue
Los Angeles, CA (PRWEB) October 09, 2012
The Acoustic and Electric Guitar Manufacturing industry has weathered a rough five years to 2012, with revenue falling an average of 4.9% annually during this period. However, the revenue drops were confined to 2008 and 2009, and the moderate growth since is expected to continue in 2012 with expected 4.9% growth to $968.8 million. Sales suffered in 2008 and 2009 due to the recession-ravaged consumer market. High unemployment has led to a falling, then slowly recovering, per capita disposable income. Guitars are typically a discretionary purchase, and as consumers' disposable incomes fall, they are more likely to look to the used guitar market or forgo purchasing a guitar altogether. “Trade plays a significant role in the industry, with exports accounting for about one-third of industry revenue and imports satisfying almost half of domestic demand,” says IBISWorld industry analyst Dale Schmidt. Low labor costs in foreign countries, especially Mexico and China, allow manufacturers located in those countries to undercut the prices of domestic manufacturers, especially on low-to-mid range guitars. Domestic manufacturers still hold a competitive advantage for high-end guitars, which are the primary export of the industry; exports primarily go to Mexico, Canada and Europe. The falling value of the dollar over the past five years has made domestically manufactured guitars more affordable for foreign consumers, which has aided the rise in exports over this period.
Over the five years to 2017, the guitar manufacturing industry is expected to continue growing at a moderate pace. Revenue is expected to grow over this period to finally pass the prerecession high. Revenue growth will be attributed to growing consumer incomes and a growth in export markets. The average industry profit margin is expected to stay roughly even over the forecast period after dropping from 6.9% of industry revenue in 2007 to 6.2% in 2012. Profit margins will stay level despite increasing revenue due to rising input prices and stiff price competition from foreign manufacturers.
Market share concentration within the Acoustic and Electric Guitar Manufacturing industry is moderate, with the top four companies accounting for an estimated 76.3% of industry revenue in 2012. Fender Musical Instruments Corporation and Gibson Guitar Corporation dominate the US manufacturing landscape, with nearly all of their upscale product lines assembled in the United States. Combined, the brands account for more than half of industry revenue. According to Schmidt. the remaining share of industry revenue is divided between small-scale, low-output manufacturing firms that produce specialized or handcrafted electric and acoustic guitars. A majority of low quality guitars are manufactured abroad, with Yamaha, Ibanez, ESP and Samick being the leading foreign companies with guitar sales in the United States. Over the next five years, IBISWorld expects concentration to grow as larger, established firms acquire smaller firms. For more information, visit IBISWorld’s Acoustic and Electric Guitar Manufacturing in the US industry report page.
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IBISWorld industry Report Key Topics
This industry manufactures acoustic and electric guitars. Operators that manufacture guitar amplifiers and accessories are also included in this industry.
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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