Product innovation and aggressive marketing strategies are expected to boost demand for industry products.
Changing consumer tastes have prompted industry product innovation, and operators have been attempting to stimulate sales growth in a mature and stagnant market. For these reasons, industry research firm IBISWorld has updated its report on the Snack Food Manufacturing industry in Australia.
Volatile input prices, changing consumer trends and a saturated market are just some of the changes facing operators in the Snack Food Manufacturing industry in Australia. Over the five years through 2014-15, trends expected to constrain industry revenue growth include volatile commodity prices, rising competition and increasingly health-conscious consumers switching to healthier alternatives. Over the five years through 2014-15, industry revenue is expected to increase by an annualised 1.3 percent to total $2.4 billion. In 2014-15, revenue is expected to increase by 1.6 percent.
According to IBISWorld industry analyst Ryan Lin, “the industry's major players have endured falling profit margins, increased competition from private-label products and stagnating domestic demand, particularly in the salty snacks segment, which has historically been the most profitable.”
Consumer tastes and lifestyles have changed due to increased health awareness, which is one of the most important factors driving consumption choices. This has prompted product innovation, as operators attempt to stimulate sales growth in a mature and stagnant market.
The Snack Food Manufacturing industry is similar to many other manufacturing industries in Australia, in which high production costs often hamper price competitiveness and open up the market to cheaper products from nations with lower production costs.
“Snack food imports are estimated to account for 10.8 percent of domestic demand in 2014-15,” Lin said. However, the depreciation of the Australian dollar is expected to assist the industry slightly, as imports become more expensive for the local market, while exports become more competitively priced in international markets. The industry displays a medium level of market share concentration. Major players include Frito-Lay Australia Holdings Pty Limited and Snack Foods Limited.
Product innovation and aggressive marketing strategies are expected to boost demand over the next five years. Potato chips, which make up the industry's largest product segment, are one of the most widely consumed product ranges within the industry. Despite significant industry consolidation, enterprise numbers are expected to remain steady, with consolidation offset by smaller niche producers entering the industry.
Companies in the industry mainly manufacture snack food products such as potato chips, corn chips, savoury snacks, nuts, pretzels and other similar snacks. The manufacturing process includes buying raw materials such as milled corn, wheat, potatoes, food extracts, flavourings, preservatives and sugar, for processing into snack foods. The finished products are then packaged and sold to wholesalers and retailers.
For more information, visit IBISWorld’s Snack Food Manufacturing industry in Australia report page.