Consolidation and vertical integration will step up production efficiency, expanding profit margins
Los Angeles, CA (PRWEB) March 12, 2013
American pop culture and cuisine are hard to imagine without staple meals like macaroni and cheese, and spaghetti and meatballs. Though pasta is originally from Italy, American consumers have developed appetites for dry pasta products ever since they were commercially introduced in the mid-1800s. According to IBISWorld industry analyst Anna Son, “the United States is not only the largest consumer of dry pasta products worldwide, but is also the second largest producer by volume.” Given the affordability and versatility of dry pasta products, industry came out of the recession sturdy, as cash-strapped consumers tightened their purse strings and turned to less expensive foods, such as pasta. During the past five years, IBISWorld estimates industry revenue has grown at an average annual rate of 3.2% to total $2.5 billion, including a 1.3% increase in 2013.
The Dry Pasta Production industry is dominated by a few high-profile companies, notably Ralcorp, Barilla and New World Pasta. “Over the past five years, companies have consolidated operations to make processes more streamlined and efficient, thus resulting in reductions in capacity and employment,” says Son. Furthermore, industry operators are expected to cook up higher profit margins by reaching economies of scale in case of price spikes of major commodities, such as wheat and eggs. Larger operators that diversify their product lines and markets are better shielded from shifts in consumer tastes and demand.
The Dry Pasta Production industry has a medium level of market concentration, with the top three players estimated to generate about two-thirds of total industry revenue in 2013. Concentration increased in the past five years due to mergers and acquisitions among major players. For instance, Ralcorp Holdings acquired the American Italian Pasta Company in 2010, thus expanding the company's product offerings and market reach. Similarly, Viterra is currently in the process of completing its acquisition of Dakota Growers Pasta Company. Concentration also increased when many smaller operators struggled and consequently exited the industry in 2008 and 2009.
During the five years to 2018, IBISWorld forecasts revenue will increase at an annualized rate of 3.5% to $2.9 billion. The industry will further undergo consolidation, as operators seek to centralize operations and consolidate processes. Vertical integration, which is already a common feature among top industry operators, will provide firms with greater control of quality and supply of materials. Driven by the wave of health-consciousness that swept the nation, companies will launch products that feature healthier attributes, such as low carbohydrates and higher fiber. As the economy rebounds, higher disposable incomes will allow consumers to afford these newer premium products, which typically carry a higher price tag and higher profit margins. In other words, new products will be the sprinkle of cheese on top.
For more information, visit IBISWorld’s Dry Pasta Production in the US industry report page.
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IBISWorld industry Report Key Topics
This industry manufactures dry pasta products after purchasing ingredients from other food manufacturers. The end products are then packaged and distributed to grocery wholesalers, supermarkets and other food outlets.
Key External Drivers
Industry Life Cycle
Products & Markets
Products & Services
Globalization & Trade
Market Share Concentration
Key Success Factors
Cost Structure Benchmarks
Barriers to Entry
About IBISWorld Inc.
Recognized as the nation’s most trusted independent source of industry and market research, IBISWorld offers a comprehensive database of unique information and analysis on every US industry. With an extensive online portfolio, valued for its depth and scope, the company equips clients with the insight necessary to make better business decisions. Headquartered in Los Angeles, IBISWorld serves a range of business, professional service and government organizations through more than 10 locations worldwide. For more information, visit http://www.ibisworld.com or call 1-800-330-3772.