Persistently sluggish incomes will combine with weaker export growth to limit industry revenue growth.
New York, NY (PRWEB) March 14, 2015
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. In the five years to 2015, sluggish disposable income growth has kept revenue growth moderate, at 2.8% per year on average. Still, this includes higher projected growth of 3.3% in 2015 due to ongoing depreciation of the Canadian dollar and a subsequent boost of export revenue, bringing total revenue to $3.3 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,” according to IBISWorld Industry Analyst Amal Ahmad. 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 to 17.5% of revenue. However, this trend has since reversed, with global demand for cocoa outstripping global supply and causing cocoa prices to soar. This is raising purchase costs for operators and limiting profit to an estimated 10.0% of revenue by 2015.
One bright spot over the past five years has been the industry's export markets. Since 2010, 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,” says Ahmad. This also buoys profit margins since premium chocolates can sell for consistently high prices.
Going forward, persistently sluggish incomes will combine with weaker export growth to limit industry revenue growth. Meanwhile, rising cocoa prices are anticipated to keep profit margins at bay. 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.
For more information, visit IBISWorld’s Chocolate Production in Canada industry report page.
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IBISWorld industry Report Key Topics
This industry produces cocoa-based confectionery such as chocolate bars, boxed chocolates and filled and unfilled chocolate blocks. 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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