Wholesale bypass will continue to be a threat to the industry over the next five years.
Melbourne, Australia (PRWEB) October 14, 2014
A major shift in the dairy supply chain has hurt the operators in the Dairy Produce Wholesaling industry in Australia. Wholesalers were once an integral part of the chain, acting as a key link between manufacturers and retailers. According to IBISWorld analyst Brooke Tonkin, “the increasing dominance of the major supermarkets and rising consolidation among dairy manufacturers has created a major problem for the industry.” Wholesale bypass and downward price pressure are causing industry revenue to decline at an estimated annualised 3.1% over the five years through 2014-15, to reach $3.21 billion.
The major supermarkets, Coles and Woolworths, have immense operating scale. This has contributed to increasing wholesale bypass over the past five years. The supermarkets have used their size to exert an increasing degree of control over the supply chain, by dealing directly with manufacturers. This has drastically reduced the need for dairy produce wholesalers over the past five years, contributing to the industry's decline. “Rising domestic milk prices have increased purchase costs for the industry over the past five years,” says Tonkin. However, wholesalers have generally been unable to pass these rising prices on to customers, due to downward price pressure from food retailers competing with the major supermarkets. This has contributed to falling profit margins over the past five years. The industry exhibits low levels of market share concentration.
The food-services sector has become a small beacon for the industry over the past five years. Increasingly busy consumer lifestyles, rising incomes and a growing trend towards eating outside the home have contributed to strong growth within the food-service sector. The fragmented nature of the food-service sector discourages manufacturers from entering into direct purchase agreements with these customers, which has benefited the Dairy Produce Wholesaling industry. A shift among wholesalers towards these customers is anticipated to marginally lift industry revenue by 0.5% in 2014-15. Dairy produce wholesalers will continue to contend with increasing wholesale bypass over the next five years. As manufacturers become larger, they are anticipated to focus on export markets themselves rather than going through wholesalers acting as trade agents. This will severely reduce the industry's growth opportunities.
For more information, visit IBISWorld’s Dairy Produce Wholesaling industry in Australia report page.
This industry consists of businesses that primarily wholesale dairy products, acting as the intermediary between manufacturers and retailers. Dairy products include milk, cheese, cream, butter, yoghurt, powdered milk, dairy desserts and ice cream.
Follow IBISWorld on Twitter: http://twitter.com/#!/ibisworldau
IBISWorld industry Report Key Topics
Key External Drivers
Industry Life Cycle
Products & Markets
Products & Services
Market Share Concentration
Key Success Factors
Cost Structure Benchmarks
Basis of Competition
Barriers to Entry
Technology & Systems
Regulation & Policy
About IBISWorld Inc.
Recognised as the nation’s most trusted independent source of industry and market research, IBISWorld offers a comprehensive database of unique information and analysis on every Australian industry. With an extensive online portfolio, valued for its depth and scope, the company equips clients with the insight necessary to make better business decisions. Headquartered in Melbourne, IBISWorld serves a range of business, professional service and government organisations through more than 10 locations worldwide. For more information, visit http://www.ibisworld.com.au or call (03) 9655 3886.