As the economy recovers, the growing trend toward premiumization will boost revenue growth.
Los Angeles, CA (PRWEB) July 01, 2013
Over the past five years, the Global Candy and Chocolate Manufacturing industry has been resilient to the wave of health-consciousness that has swept through developed nations, causing consumers to be wary of sugar-rich foods, including candy and chocolate. Industry firms have been successful in innovating products that appeal to health-conscious consumers, keeping demand buoyant. The industry even stayed strong amid low consumer spending in a distressed global economy. Although candy and chocolate are considered discretionary goods, consumers saw these products as a small, inexpensive treat to provide temporary escape from financial difficulties and other struggles that paralleled the challenging economic period. As the economy rebounds, consumers will gain more disposable income and increase spending on industry goods, especially premium chocolates, which are anticipated to facilitate a 1.3% revenue boost in 2013. Due to these factors, revenue is expected to rise at an annualized rate of 2.6% to $120.3 billion over the five years to 2013.
While revenue grew steadily over the past five years, profit was volatile due to fluctuating commodity costs. “Sugar and cocoa, the industry's most basic inputs, saw double-digit spikes each year for most of the period,” says IBISWold industry analyst Agiimaa Kruchkin. Major companies, for the most part, were able to pass on cost increases more effectively than smaller firms due to higher brand loyalty. However, even for these firms, the recession made it difficult to fully pass on these costs to customers, and profit was squeezed through 2009. In response, manufacturers have invested in more technology to improve operational efficiencies, reducing dependence on labor; consequently, wages fell from 10.6% of revenue in 2008 to an estimated 9.6% in 2013. As a result, profit is estimated to expand to 8.6% of revenue. In the next five years, global economic conditions are forecast to continue improving, allowing consumers in both developed and emerging countries to afford more confectioneries, notably higher-margin premium chocolates. Producers will benefit from the projected surge in per capita consumption of candy and chocolate in emerging economies such as China and Russia, while also continuing to introduce new products to saturated markets like North America and Europe. To drive demand in these mature markets, firms will develop healthy products and new flavors to reignite demand.
The Global Candy and Chocolate Manufacturing industry has a moderate level of concentration; the top five players account for about 50.8% of industry revenue. Concentration increased over the past five years as a result of acquisitions and mergers. For example, Mars' acquisition of Wrigley in 2008 created a significant boost to overall market share concentration. According to Kruchkin, these major companies wield significant power in the global market and have the ability to dictate direction and trends. However, the industry has a vast number of niche, small- to medium-size players (especially in Europe) that are still able to operate globally. In 2013, for instance, about 9,829 enterprises are expected to be involved in cocoa, chocolate or sugar confectionery manufacturing globally. For more information, visit IBISWorld’s Global Candy & Chocolate Manufacturing industry report page.
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IBISWorld industry Report Key Topics
Firms in the Global Candy and Chocolate Manufacturing industry purchase and process sugar, cocoa, cornstarch, nuts, fruits, emulsifiers and flavorings as inputs for chocolate and confectionery production. Final products include chocolates, chewing gum, hard candies, marshmallows and toffee, which are then sold to downstream wholesalers and retailers.
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Market Share Concentration
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Major Companies
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