Slow rising incomes and volatile cocoa prices have kept industry revenue growth at bay.
New York, NY (PRWEB) July 21, 2014
The Chocolate Production industry transforms raw material such as cocoa beans, sugar and milk into a variety of products including chocolate bars, stuffed chocolates and premium chocolate boxes. According to IBISWorld Industry Analyst Amal Ahmad, “In the five years to 2014, sluggish disposable income growth has kept revenue growth at bay, at an annualized 2.4% rate.” Still, this includes higher projected growth of 5.0% in 2014 due to ongoing depreciation of the Canadian dollar and a subsequent boost of export revenue, bringing total revenue to reach $3.1 billion.
Traditionally, this industry has recorded high double-digit profit margins due to the high value added involved in the manufacturing process. Still, profit over the past five years has been perturbed by volatile raw material prices, especially the price of cocoa. The majority of cocoa beans come from West Africa, causing events in that region to greatly impact global supply and subsequent purchase prices. Falling cocoa prices through 2013 had relaxed industry costs and boosted profit margins. However, this trend is expected to reverse as global demand for cocoa outstrips global supply. Profit is estimated to fall to 10.5% of revenue in 2014.
One bright spot over the past five years has been the industry's export markets. Since 2009, exports' share of revenue has increased substantially, aided by a stagnant Canadian dollar vis-a-vis the US dollar. The United States is the primary destination for Canadian chocolate exports, with the premium boxed chocolate variety being the most popular export. This also boosts the industry's profitability since premium chocolates benefit from consumer loyalty and brand recognition and can sell for consistently high prices.
Going forward, sluggish growth in disposable income and weaker export growth will limit industry revenue. IBISWorld projects revenue will grow in the five years to 2019. In addition, volatile and rising cocoa prices are anticipated to keep profit margins stagnant. “Operators are likely to respond to these twin challenges by focusing on products in favour with the market including artisan chocolates and healthy organic and dark chocolates,” says Ahmad.
For more information, visit IBISWorld’s Chocolate Production in Canada industry report page.
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IBISWorld industry Report Key Topics
The Chocolate Production industry produces cocoa-based confectionery such as chocolate bars, boxed chocolates and filled and unfilled chocolate blocks. Industry products are typically sold to wholesalers or retailers who then distribute them to consumers. The production of chocolate-covered confectionery, such as chocolate-covered nuts, is also included within industry operations.
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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