Consumer spending will support growth, but wholesale bypass will remain a threat
Los Angeles, CA (PRWEB) January 05, 2013
Economic fallout, unrelenting rising fuel prices and reduced consumer confidence characterized most of 2008 and 2009. According to IBISWorld industry analyst Doug Kelly, “At the same time, as consumers restricted spending by dining out less over the period, they have relied more on groceries.” The Soft Drink, Baked Goods and Other Grocery Wholesaling industry posted negative performance over the past five years with an average revenue decrease of 1.3% per year to total $240.1 billion. Given the difficult economy, even this minor decline is a considerable feat.
The industry's future depends on retail demand for grocery products; however, wholesale bypass is becoming a greater concern for industry operators. Nevertheless, the industry features an overwhelming majority of small, specialized wholesalers (e.g. ketchup wholesalers, spice wholesalers) that can provide a wider, higher-quality selection in their chosen niche than competitors. “Income growth and consumer sentiment also affect retail demand for industry products,” says Kelly. With the economy expected to bounce back in the next five years, the industry will benefit from an increase in both factors. Marginal increases in employment and profit margins will also aid revenue growth from 2012 to 2017.
The two largest businesses in the Soft Drink, Baked Goods and Other Grocery Wholesaling industry account for about one-fifth of total industry revenue combined, giving the industry a low level of concentration. As a result of this low concentration, the industry is highly price competitive, with low profit margins made on the industry's products. Firms within the industry rely on the provision of value-added services to fatten their margins. The existence of many small players also allows for easy entry into this industry. IBISWorld expects this concentration to increase over the next five years because the larger firms have a greater capacity to capitalize on expanding logistics and distribution technologies. Increased acquisition activity is forecast over the next five years, with firms looking to expand and take advantage of economies of scale to produce higher operating margins.
The Soft Drink, Baked Goods and Other Grocery Wholesaling industry has stability on its side, regardless of its economic surroundings. The mature industry will continue to produce a constant stream of revenue as a whole; however, individual companies can experience volatility depending on their particular product. Because food is a staple product, Americans will not cease grocery shopping any time soon, keeping grocery retail demand constant. Wholesaling industries may be in for a bit of a culture shock, as large manufacturers and retailers look to come out of the recession by aggressively cutting operating costs, which may mean sacrificing the middleman. As such, IBISWorld expects the next few years to be a bumpy recovery for this industry, before it settles back into its own. In the five years to 2017, industry revenue is forecast to grow. However, revenue is estimated to decline 1.1% in 2012 on lower demand and higher grocery supply chain disintermediation.
For more information, visit IBISWorld’s Soft Drink, Baked Goods & Other Grocery Wholesaling in the US industry report page.
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IBISWorld industry Report Key Topics
Operators in this industry primarily wholesale specialized grocery products, such as soft drinks or baked goods, however this industry does not wholesale: frozen foods, dairy products (except dried or canned), poultry products (except canned), confectionery products, fish and seafood products (except canned), meat products (excepted canned) or fresh fruit and vegetable products.
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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