According to an updated report from market research company, IBISWorld, changes in consumer trends coupled with volatile input prices and a saturated market are factors that are driving a number of changes within the Australian snack food industry.
IBISWorld industry analyst, Ryan Lin said that the push toward healthier eating choices was a major factor in the industry’s stagnant performance.
“While the industry has shown glimpses of promise in the five years through 2013-14, it has been plagued with rising commodity prices, turbulent economic conditions and increasingly health-conscious consumers that have ditched snacking in favour of healthier alternatives,” said Lin.
According to the report, the five years through 2013-14 is expected to see industry revenue increase by an annualised 2.2 percent to total $3.0 billion. In 2013-14, revenue is expected to increase by only 0.5 percent.
The report states that the industry’s major players, including Frito-Lay Australia Holdings Pty Limited and Snack Foods Limited, have been faced with lower profit margins, increased competition from private labels and stagnating domestic demand. This has been particularly evident within the salty-snacks segment, which has historically been the most profitable.
“Changing consumer tastes and lifestyles have led to an increase in health awareness, making it one of the most important factors driving consumption choices,” said Lin.
Lin says that it is these changing consumer preferences that are driving the need for innovation and new product introductions, however the Australian market is somewhat inhibited by high production costs, opening up the market to cheaper product alternatives from other nations.
According to IBISWorld, snack food imports are at a higher value than exports, accounting for an estimated 8.2 percent of industry revenue in 2013-2014.
The report also states that despite significant consolidation within the snack food industry, enterprise numbers have not declined as smaller niche producers are continuing to enter the market.