Aggressive marketing and new product innovations will support growth in production
Los Angeles, CA (PRWEB) January 28, 2013
After facing some bitter challenges, America's sweet tooth managed to keep the Chocolate Production industry relatively solid. In recent years, increasingly health-conscious buyers have been consuming less sugar due to the link between excessive sugar intake and health issues, negatively affecting demand for high-sugar chocolate products. In addition, consumers had low disposable income during the recession, deterring them from purchasing expensive specialty chocolate, which contributed to the 7.6% revenue decline in 2008. “However, the industry bounced back quickly because people used chocolate, particularly cheaper chocolate goods, as a comfort food during these difficult times, offsetting the revenue decline,” says IBISWorld industry analyst Olivia Tang. Additionally, product developments combined with marketing and promotional messages revamped consumer demand, and renewed interest in the chocolate market. As a result of these conflicting factors, revenue expanded at a slow annualized rate of 0.3% to $15.5 billion during the five years to 2012. In 2012 alone, higher disposable income during economic recovery will allow Americans to afford high quality, expensive chocolates, boosting revenue 2.5%.
Profit expanded consistently over the past five years despite high and volatile commodity costs because firms were able to pass these costs to buyers in the form of higher product prices. For example, the price of sugar grew 11.6% per year on average in the past five years, but firms raised chocolate prices even more, padding profit margins. Even with these price hikes, brand-loyal consumers continued to buy the same chocolate brands, preventing demise for industry profitability. Firms also streamlined production processes by adopting new technologies, enabling them to employ fewer people and cut wage costs. Consequently, profit margins expanded from 9.3% of revenue in 2007 to 16.4% in 2012. In the next five years, the industry is projected to grow steadily because higher disposable incomes will enable consumers to afford and indulge in discretionary products like chocolate. Additionally, Americans will continue to be health-conscious, demanding sugar-free, dark and organic chocolates, which will be major growth segments. Consequently, revenue is projected to increase through 2017.
The Chocolate Production industry has a moderate, but close to high, level of concentration where the top four players account for about 67.8% of industry revenue in 2012, up from 49.0% in 2007. Concentration increased so dramatically over the past five years mainly because of acquisition activity. Only 2.5% of firms employ more than 500 workers, including all major players, and 6.5% of the industries employ 100 or more workers, yet they command the majority of industry revenue. According to Tang, major companies have such a strong position in the industry because their well-known brands attract loyalty from customers. On the other hand, smaller enterprises employing fewer than 20 people make up 79.1% of the industry, but there are no sole proprietors. Smaller firms are so numerous because they typically make up local niche stores. However, they service small regions in the immediate surrounding area with smaller product lines and, therefore, generate a small fraction of revenue. For more information, visit IBISWorld’s Chocolate Production in the US industry report page.
Follow IBISWorld on Twitter: https://twitter.com/#!/IBISWorld
Friend IBISWorld on Facebook: http://www.facebook.com/pages/IBISWorld/121347533189
IBISWorld industry Report Key Topics
The Chocolate Production industry manufactures chocolate from cacao beans, sells raw chocolate, and makes chocolate products and confectioneries. Other ingredients, such as flavorings, syrups, nuts, fruits and preservatives, are purchased from various other industries and combined with raw chocolate to produce many of this industry's 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
About IBISWorld Inc.
Recognized 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 US 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 Los Angeles, IBISWorld serves a range of business, professional service and government organizations through more than 10 locations worldwide. For more information, visit http://www.ibisworld.com or call 1-800-330-3772.
# # #