The strengthening dollar has given rise to import competition, subduing revenue in turn
Los Angeles, CA (PRWEB) March 06, 2013
The strengthening loonie has made imported spirits relatively cheaper for Canadians, which has led to a decrease in revenue for the domestic Distilleries industry. According to IBISWorld industry analyst Agata Kaczanowska, “Canadians are increasingly opting for imported liquors, eroding demand for domestic distilleries.” Over the past five years, IBISWorld anticipates the value of the dollar to increase at a 1.2% annualized rate relative to the currencies of the country's major trading partners. Adding to industry woes, per capita alcohol consumption is on track to deflate about 0.8% per year on average over the same period. Thus, revenue is expected to fall at a 1.0% annualized five-year rate, including a 0.5% decline in 2013 to total an estimated $943.0 million.
Despite a contracting market for domestic brews, the Distilleries industry has seen an influx of new businesses. Establish distillers like Diageo and Corby continues to dominate the market, but craft distillers have carved a niche in the market in recent years. “Although new entrants and imports are fuelling competition, the industry remains attractive because successful companies are highly profitable,” says Kaczanowska. According to the latest data from Statistics Canada, despite the fact that almost half of distilleries generating revenue of $30,000 to $5,000,000 annually were unprofitable in 2010, the average industry profit margin remained high. This indicates that profit varies significantly between distilleries. Despite a brief dip in profit that year as the recession forced operators to offer discounted prices, IBISWorld estimates that profit in 2018 will be consistent with its 2008 level.
During the next five years, the industry is anticipated to benefit from an increase in spirits consumption. However, due to the strengthening of the Canadian dollar, much of this rise in demand will likely be captured by importers that are vying for a larger share of the market. Imports are forecast to keep on rising, satisfying an even larger share of domestic demand in 2018 than they currently do. Consequently, revenue for this domestic industry is projected to slowly decline over the next five years. Rising input prices will also challenge the industry. For example, the price of wheat is projected to rise steadily, pressuring industry profitability. Such pressures are expected to discourage domestic entrepreneurs from entering the industry; IBISWorld expects enterprise growth to slow over the period. For more information, visit IBISWorld’s Distilleries in Canada industry report page.
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IBISWorld industry Report Key Topics
This industry primarily distills liquor to produce beverage spirits (except brandy), alcoholic eggnog, alcoholic mixed drinks, whiskey or potable ethyl alcohol. Beer and wine production are not included in this industry.
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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