IBISWorld Market Research
Import competition from low-cost producers constrains industry growth.
Melbourne, Australia (PRWEB) October 31, 2013
The Fruit and Vegetable Processing industry has been plagued by import penetration in light of spiralling local operating costs. Industry revenue is forecast to reach $6.0 billion in 2013-14, which represents a 2.5% decrease on the previous year. IBISWorld industry analyst Nick Flores states “relatively high local wages and overheads have threatened the relocation of processing facilities offshore, as major players attempt to consolidate operations and lessen costs.” Industry revenue grew by an annualised 1.0% in the five years through 2013-14. Chronic supply-side issues hampered by adverse weather conditions have increased input prices, thereby undermining the competitiveness of local players.
A strong Australian trade-weighted index has further accelerated the growth of imports, which have increasingly accounted for a greater share of domestic demand. Partly due to the erratic supply of key inputs due to severe weather conditions, supermarkets were incentivised to directly source processed goods from overseas under their own private-label brands. According to Flores, “the growing acceptance and marketing of private-label products have further intensified competition for the industry, as these have generally driven the prices of industry products down.” Industry players are compelled to reduce prices to maintain market share, further squeezing profit margins. Lower profitability has forced the exit of less competitive players, and influenced the consolidation of processing facilities to reduce expenditure. A slightly weaker Australian trade-weighted index forecast for the majority of the next five years bodes well for industry players, as it provides a boost for the export market. To combat the proliferation of cheaper imports, industry players need to recognise the growth opportunity of export markets in expanding their reach. Imports are positioned to remain strong in the next five years, owing to advantages in economies of scale and lower production costs. As a result, enterprise and establishment numbers are projected to decrease marginally over the next five years primarily due to tightening profit margins and increased import competition.
The Fruit and Vegetable Processing industry has a low level of market share concentration. Improvements in transportation methods, ownership consolidation and the development of extended product shelf life are enabling the industry's top manufacturers to reduce costs by centralising production facilities. A relatively static market and the need to achieve economies of scale have partly explained the emergence of strong imports. Imports are accounting for a growing share of domestic demand, and may further reduce industry concentration as firms specialise more on particular niche segments. Major industry players include Simplot Australia, McCain Foods, Coca-Cola Amatil and Heinz Wattie’s. For more information, visit IBISWorld’s Fruit and Vegetable Processing report in Australia industry page.
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IBISWorld industry Report Key Topics
This industry consists of companies that bottle, can, preserve, quick-freeze and quick-dry fruit and vegetables (excluding sun-dried products). It includes dehydrated vegetable products, soups, sauces, pickles and mixed meat and vegetable and cereal products. The industry also includes firms that process fruit and vegetables.
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