Increasing health consciousness, exacerbated by the growing popularity of sugar-free substitutes, has been affecting demand for sugar products
Melbourne, Australia (PRWEB) August 27, 2014
Sugar Manufacturing in Australia has been plagued by erratic climatic conditions and fluctuations in global supply and demand, which have contributed to considerable revenue volatility over the past five years. The industry derives a large share of its revenue from exports. Australian sugar manufacturers are subject to global market dynamics, with supply and prices being determined by larger sugar-producing nations such as Brazil and India. A strong Australian dollar for the majority of the past five years has negatively affected industry exports, but strong sugar consumption in South-East Asia has offset this somewhat. Industry revenue is forecast to expand by an annualised 4.6% in the five years through 2014-15, to reach $3.1 billion. This includes a 1.2% growth forecast in 2014-15. The production of sugar cane, which is the industry's key input, has been hampered by adverse weather conditions, which in turn have negatively affected the output of sugar. Intensifying health consciousness, exacerbated by the growing popularity of sugar-free substitutes, has also been affecting demand for sugar products. According to IBISWorld industry analyst Nick Flores, “the prevalence of low-cost private-label sugar products has contributed to declining profit margins, as retailers have been implementing price cuts to obtain a greater share of the consumer dollar.”
The industry is characterised by increasing levels of globalisation, brought about by the emergence of multinational companies. Examples include the acquisition of Sucrogen by the Singapore-based Wilmar International Limited, and the Thailand-based Mitr Phol Sugar Corp., which has recently obtained a controlling stake in MSF Sugar Limited. Multinational companies that boast vertically integrated operations and a global reach have become dominant in the industry. This has threatened the industry's single-desk export arrangements, as these companies have been trying to use their own networks to market their respective sugar production. “The spate of consolidation and rationalisation activity over the past decade is expected to continue, as producers seek increased vertical integration and cost efficiencies,” says Flores.
The Sugar Manufacturing industry has a high concentration level, and has become more concentrated over the past five years. Industry consolidation means that fewer companies control the number of mills operating in the industry and a smaller number of mills are serving wider geographic markets. Increased consolidation is consistent with similar trends in other food manufacturing industries. Industry consolidation activity has gained momentum over the last few years, with leading sugar manufacturers increasing in size and capacity. For example, in April 2010, MSF Sugar Limited launched a joint venture project with Bundaberg Sugar to operate both companies' assets in northern Queensland, which would further increase production quotas. MSF acquired Bundaberg in December 2010, making it one of the top four sugar manufacturers in Australia.
For more information, visit IBISWorld’s Sugar Manufacturing industry in Australia report page.
Sugar manufacturers process sugar cane to create raw or refined sugar or molasses. These products are then exported or sold to food manufacturers, grocery wholesalers and supermarket chains.
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