Loyalty, innovation and marketing propelled the industry through the economic storm
Los Angeles, CA (PRWEB) August 13, 2012
America's sweet tooth kept the Candy Production industry resilient despite high unemployment and volatile commodity prices over the past five years. “Although consumer disposable income was low during the recession,” says IBISWorld industry analyst Olivia Tang, “people bought more candy because it was considered a small luxury that could be enjoyed without financial guilt.” When the economy began to recover in 2010, however, and people had more spending money, they returned to dining out as a more preferable luxury. In addition, an increasingly health-conscious consumer base slowly weaned itself off of high-sugar foods like candy. This health-driven trend ate into revenue growth from 2010 to 2012, so in response, many companies introduced sugar-free candies. Consequently, these opposing trends kept annualized growth at a low rate of 1.7% over the five years to 2012.
Candy is a profitable industry largely because major players use marketing tactics such as advertisements to establish their brand. Firms that leverage their well-known brand can charge a premium for their products because of the perceived superior quality and ensuing brand loyalty. Therefore, larger firms are also able to easily pass on the high cost of sugar to downstream buyers through more expensive prices. Furthermore, says Tang, firms have been reducing labor costs and improving profitability by depending more on technology to improve operating efficiencies. In fact, the number of employees is anticipated to fall 2.9% per year on average to 15,759 during the five years to 2012. The Candy Production industry's two largest companies, Mars Inc. and The Hershey Company, account for more than half of the industry’s revenue.
Product innovation will foster industry growth in the next five years, with an initial increase of 1.7% expected in 2012. For example, manufacturers will target adult audiences by launching more products with less sugar or products enhanced with vitamins to address consumer health concerns. Even so, some health-conscious consumers will eat less candy, which will hamper demand growth. Therefore, revenue is projected to grow at a still-mild rate during the five years to 2017. During this period, the industry will also continue to consolidate; the number of firms is forecast to decline. Companies will merge in hopes of gaining market share and expanding their customer base in a highly competitive industry. For more information, visit IBISWorld’s Candy Production in the US industry report page.
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IBISWorld industry Report Key Topics
The Candy Production industry acquires raw materials such as sugar, cornstarch, fruit, preservatives, additives and flavorings to process them into confectionery. For example, the industry manufactures chewing gum, hand candies, marshmallows and toffee, but excludes chocolate products. The finished goods are then sold to confectionery and grocery wholesalers and retailers.
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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