Rising input prices crunch profit, but products with a high cocoa content show promise
London, United Kingdom (PRWEB) May 17, 2013
The Chocolate & Confectionery Production industry has found itself in a sticky situation during the past five years. The onset of the financial crisis and the United Kingdom's descent into recession have gradually eroded consumer confidence, sharply constraining spending on chocolate and confectionery products. At the same time, rising cocoa, sugar and milk prices have increased production costs, but weak demand has limited producers' ability to pass these costs on to consumers, resulting in falling profitability. According to IBISWorld industry analyst Patrick Ross, “the organic and fair trade movements have gathered momentum over the past decade and created niche segments across the food and beverage sector”. Rising health consciousness has drained demand away from industry products in general, but also created opportunities for producers to develop low-sugar products. Imports have been capturing an ever greater share of domestic demand and become a threat to UK operators. In the five years through 2013-14, industry revenue is expected to decline at a compound annual rate of 2.8%. In 2013-14, industry revenue is forecast to decrease by 2.1% to £4.8 billion, its lowest value in over a decade.
The future of the industry is dependent on the forecast economic recovery, stable input prices and product innovation. Cocoa prices will remain subject to inflation as key producers stabilise their supply, and the situation could be worsened by adverse weather conditions. Pressure from imports will encourage consolidation and spark fierce competition that could kill off weak producers. The organic and fair trade movements are expected to gather further pace over the next five years, supported by the eventual resurgence in discretionary spending and consumer confidence. Ross adds, “the high cocoa content trend will help lift the industry as it will allow producers to pass higher organic cocoa prices on to consumers”. The sugar-free confectionery and chewing gum segments are also expected to grow, largely driven by the emphasis on health and nutrition. Over the next five years through 2018-19, IBISWorld estimates that industry revenue will continue to decrease, but recover gradually in the second half of the period.
The Chocolate & Confectionery Production industry has a medium level of market share concentration as the top four manufacturers account for 61.7% of industry revenue. Major companies include Mondelez International, Mars Chocolate UK and Nestle UK.
For more information on the Chocolate & Confectionery Production industry, including latest industry trends, statistics, analysis and market share information, purchase the full report from IBISWorld, the nation’s largest publisher of industry research.
IBISWorld industry Report Key Topics
This industry is broken down into two subclasses: cocoa product production and sugar confectionery manufacture. Most of the cocoa product segment is made up of chocolate, but it also includes cocoa butter, cocoa fat and cocoa oil. The sugar confectionery segment covers the manufacture of chewing gum, caramel, nougat, lozenges, toffee and fondant.
Key External Drivers
Industry Life Cycle
Products & Markets
Products & Services
Globalisation & Trade
Market Share Concentration
Key Success Factors
Cost Structure Benchmarks
Barriers to Entry
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