Demand in the small goods category has been buoyed by the development of new products that cater to rising consumer trends focused on healthy eating and convenience.
According to a market update from IbisWorld, industry revenue for operators in the cured meat and smallgoods manufacturing industry in Australia is forecast to grow by 2.3 per cent in 2014-15, with innovative new products such as low-fat smallgoods and more efficient single serve packaging for consumers’ convenience.
“Domestic demand has also been supported by the increasing availability of pig meat imports, but these only account for a marginal proportion of overall domestic demand,” said IbisWorld industry analyst, Ryan Lin.
The industry has faced volatile input costs, climatic uncertainties and nutritional concerns, which have affected the consumption of high-fat smallgoods. As a result, IbisWorld expects the industry revenue to decrease by an annualised 1.1 per cent over the five years through 2014-15, to $3.3 billion.
Despite favourable consumer trends, low profitability and volatile conditions have contributed to significant consolidation over the past five years. In 2009, Hans Continental Smallgoods, which had been placed into administration, was sold in part to one of the largest industry players, Primo Meats.
“This reduced the market to two large national players and a host of much smaller manufacturers,” said Lin. This level of vertical integration allows producers to achieve economies of scale and reduce costs and their dependence on labour. The industry displays a medium level of market share concentration. Major players include JBS Australia and Food Investments.
In February this year the ACCC approved JBS’ $1.45 billion proposed acquisition of Primo Group.
Domestic prices are forecast to rise over the next five years for smallgoods and other prepared meat products, and new products will be introduced that focus on health and convenience. IbisWorld attributes this to recovering consumer sentiment and rising demand for sophisticated smallgoods produce. Much of the demand increase will be due to value-added products and products that capitalise on changing consumer trends, with convenience becoming a decisive factor in smallgoods consumption.
