Revenue will partially recover, though breakfast substitutes will slow growth.
New York, NY (PRWEB) July 19, 2014
Conflicting trends over the past five years hampered the Cereal Production industry. Wary of the economy, many turned to cereal as an inexpensive breakfast option. In 2009, however, revenue dropped due to a flood of US imports, followed by the consumer shift to pricier breakfasts as disposable incomes recovered. Moreover, as people returned to work they had less time to prepare breakfast. Instead, Canadians opted to buying food at cafes or coffee shops, decreasing demand for cereal. However, by 2012, households had evened out spending to include branded and more expensive healthy cereals. This trend is expected to lift revenue in 2014. Overall, revenue is expected to fall over the five years to 2014.
According to IBISWorld Industry Analyst Britanny Carter, “profit has proved volatile over the past five years due to fluctuations in commodity prices.” For example, the price of wheat dropped in 2009 only to surge over 2011. Other major industry inputs, including barley, sugar and corn, experienced similar price jumps due to supply shocks. Although unable to fully pass on these cost hikes to price-conscious consumers, industry profit margins are expected to grow slightly due to improved demand conditions for price-premium cereal. Moreover, smaller operators that have been unable to turn a profit have exited the industry. Consequently, the number of cereal production companies is expected to decline over the five years to 2014.
Over the next five years, recovering disposable income will encourage consumers to purchase brand-name, high-end cereal, which is expected to improve industry returns. “In addition, more Canadians will purchase organic and whole-grain cereal options due to growing health trends,” says Carter. Growth will be limited, however, by rising competition from substitutes, such as yogurt parfaits and breakfast sandwiches. Consumers are expected to eat out for breakfast more frequently as higher employment levels tighten schedules, tempering demand for industry products. Revenue is therefore expected to grow by 2019. Though input prices will continue to pressure profit, prices will rise at a slower rate and demand for price-premium cereals will offset any purchase cost increases over the period.
For more information, visit IBISWorld’s Cereal Production in Canada industry report page.
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IBISWorld industry Report Key Topics
This industry acquires raw materials, such as corn, wheat, flour, sugar, malt extract, rice and salt from various sources, and processes these ingredients into ready-to-eat cereal, granola cereal (except bars and clusters) and hot cereal. It also purchases raw materials such as plastic and paperboard containers from other manufacturers for packaging purposes. The finished breakfast cereals are subsequently sold to grocery wholesalers, retailers and food service providers.
Key External Drivers
Industry Life Cycle
Products & Markets
Products & Services
Globalization & Trade
Market Share Concentration
Key Success Factors
Cost Structure Benchmarks
Barriers to Entry
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