Snacks have become a convenient and relatively cheap substitute for goodies formerly baked at home, with increased disposable incomes combining with product development to result in significant sector growth.
Australia’s snack food manufacturing has grown at a moderate rate during the past five years as a result of changed consumption and dietary trends and lifestyle, as well as a growing number of time-poor consumers. As a result, revenue for the industry is estimated to have grown by an average of 2% per annum.
Over the past few years there’s been a move toward healthier snack foods like health food bars and reduced cholesterol chips. In addition, the ethnic background of the population has influenced the demand for a range of products. These changes have presented both challenges and opportunities for industry participants.
The availability of snack food is a critical factor influencing purchases, as a majority is purchased on impulse. The retail presence and prevalence of convenience stores can drive demand, while vending machines also allow confectionery to be available at more locations. Driven by the growing proportion of food eaten outside the home, manufacturers have begun to seek out corresponding point-of-sale points and snack-sized packaging.
The health and nutrition trend is expected to intensify over the next five years as ongoing public education increases the health awareness of Australian consumers. Industry players that fail to respond to demand for healthier snacks are more than likely to be the big losers from this shift in consumption.
The prospects for the snack food manufacturing industry are positive, with a continuing trend of consumers snacking more often than in the past. The use of organic ingredients is expected to increase as consumers become more willing to try these products because of increased media awareness. The functional foods trend will also continue.
Australians are among the high consumers of confectionery in the world, with almost half of all snack foods consumed in Australia being confectionery products. Chocolate is the industry’s major product category, accounting for approximately 62% of retail sales volume.
The chocolate segment is characterised by a small number of well-established brands. IBISWorld forecasts moderate growth in the confectionery manufacturing industry over the outlook period. Industry revenue is projected to increase from $2,362.6 million in 2008-09 to $2,565 million in 2012-13. Growing by an average of 2.1% per annum, the industry’s future revenue will be a function of market conditions, production volumes, and average unit prices.
IBISWorld projects a moderate rise in the real price of confectionery over the outlook period. Price increases will largely stem from the introduction of higher valued product lines, reflecting the growing popularity of specialty and premium chocolates. Real confectionery prices are also set to rise as manufacturers pass on higher input costs to customers.
The coming few years should witness some changes to the distribution of production. Although confectionery manufacturing in Australia will continue to be dominated by a few major mass producers, scope does exist for the establishment and expansion of specialist confectionery producers. The next few years should also see the direct entry of a couple of existing importers.
Although chocolate will continue dominating local production, there’s likely to be changes in the confectionery product mix in the next five years. The chewing gum segment is forecast to increase as it outperforms chocolate and sugar confectionery in sales growth. This trend will reflect underlying changes in consumption patterns as consumers shift from traditional confectionery products toward functional and fortified food and healthy snacks.
Lena Zak is the editor of FOOD Magazine.