Industry growth will stabilise as dairy production increases
Melbourne, Australia (PRWEB) January 16, 2013
The Dairy Produce Wholesaling industry has benefited from increases in world dairy prices over the past five years, but has been adversely affected by a fall in industry production. Declines in milk production have occurred because of drought conditions, and dairy production in Australia and New Zealand has subsequently decreased. According to IBISWorld industry analyst Naren Sivasailam, “the industry's performance has also been impeded by the effect of wholesale bypass, as strong increases in oil prices have affected profitability”. IBISWorld estimates that industry revenue will increase by 2.6% per annum over the five years through 2012-13.
Wholesale bypass involves retailers bypassing separate wholesalers and buying directly from the manufacturer. The large wholesalers in the industry are also the largest dairy product manufacturers. This has increased competition, particularly for smaller, less-efficient specialist dairy product wholesalers. In 2012-13, the largest companies in the industry are Lion Pty Ltd, Murray Goulburn Co-operative Co Limited, Fonterra Co-operative Group Limited and Parmalat Australia Ltd. “Effective wholesale bypass has been aided by the increased consolidation and vertical integration of dairy product manufacturers”, says Sivasailam. Smaller wholesalers play an important role in supplying food-service establishments and smaller retailers and in supplying niche products, which have higher search costs. Wholesale bypass reduces revenue and profitability for the industry.
The future of the Dairy Produce Wholesaling industry will be contingent on a variety of downstream demand conditions and the changing landscape of commodity prices. Domestic dairy product prices are forecast to stabilise as the economic recovery becomes more pronounced and dairy producers reduce the culling rate of herds as farm returns improve. Milk production in Australia is forecast to grow at a strong rate per annum over the next five years, assuming a return to average seasonal conditions. The introduction of new technology will increase the efficiency of the industry. For instance, the industry may benefit from further introduction of radio frequency identification technology to make existing supply chain processes more efficient. The industry will also face increased competition from supermarkets pushing their private label dairy products, particularly as they have the size and clout to bypass wholesalers.
For more information, visit IBISWorld’s Dairy Produce Wholesaling report in Australia industry page.
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IBISWorld industry Report Key Topics
Businesses in this industry wholesale dairy products. Dairy products include milk, cheese, cream, butter, yoghurt, powdered milk, dairy desserts and ice cream. The industry is made up of three different types of wholesalers: manufacturing companies that wholesale direct to clients, wholesalers that are the intermediary between manufacturers and retailers (merchant retailers), and wholesalers that are integrated downstream into retail.
Key External Drivers
Industry Life Cycle
Products & Markets
Products & Services
Market Share Concentration
Key Success Factors
Cost Structure Benchmarks
Basis of Competition
Barriers to Entry
Technology & Systems
Regulation & Policy
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