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Snack food revenue on the rise

Screen Shot 2015-04-07 at 11.06.54 AMVolatile 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, however, product innovation and aggressive marketing is expected to help boost demand over the next five years, according to a new report by IbisWorld.

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 per cent to total $2.4 billion. In 2014-15, revenue is expected to increase by 1.6 per cent.

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 per cent of domestic demand in 2014-15,” said Lin.

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.

According to IbisWorld, t industry displays a medium level of market share concentration, with major players including Frito-Lay Australia and Snack Foods Limited.

IbisWorld predicts product innovation and aggressive marketing strategies will boost demand over the next five years.

Despite significant industry consolidation, enterprise numbers are expected to remain steady, with consolidation offset by smaller niche producers entering the industry.

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