According to Snack Food Manufacturing in Australia, a report by research firm IBISWorld, industry revenue over the past five years is estimated to have declined at about 0.3 per cent a year to total AU$2.9bn.
Industry dampened by external pressures
The report said that major players have faced lowered profit margins and stagnating domestic demand, particularly in the salty snacks segment.
Amongst external drivers hitting food manufacturers’ profit margins are the high world sugar price and fluctuations in wheat prices due to oversupply and natural factors, the report said.
It also noted that industry is heavily influenced by demand from retailers, driven by customer preferences that correlate to disposable income and dietary patterns.
The report predicted some niche growth opportunities in the market's future, especially in nutritious snacks, which could gain traction as consumers become increasingly time-poor and health-conscious.
“The trend of the increasingly health conscious consumer has important implications for the snack food industry as changing dietary preferences require manufacturers to alter their product offerings,” the report said.
Time-poor, health conscious
Rising numbers of women in the workforce and the growth of double-income households have changed traditional eating patterns and increased the frequency of snacking or grazing intermittently during the day, the report said.
This reflects the growth of the time-poor consumer segment, it said, and manufacturers have already begun to seek out corresponding point-of-sale locations or snack-size packaging.
Major players have introduced snack-size packets, including Arnott’s savoury Shapes range, while Nestle introduced a range of snack and yoghurt bars such as Milo and Ski D’Lite, the report said.
A health-first trend in the market has been evidenced by a growing range of low-fat and low-carbohydrate versions of popular snack foods like crisps, as well as growth in the nutritious snacks segment, including pretzels and nuts.
According to the report, this 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 this demand for healthier snacks are likely to lose market share, as other producers begin to service this growing segment,” the report said.
Slow growth
According to the report, the Australian snack food manufacturing industry is likely to grow at an annualised rate of 1.3 per cent over the five years through 2016-17, with revenue totalling an expected AU$3.1 bn.
“Strong brand loyalty, combined with new product innovations and aggressive marketing strategies, will help the industry ride the current wave of stagnation and economic turbulence with relative ease,” it said.
It added that the current climate of lower discretionary spending and consumer confidence is expected to increase in-home food consumption, which will be supported by the trend of snack foods becoming meals in themselves.
“It is also likely that industry players will seek to expand their operations through mergers and acquisitions, which will eventually result in the rationalisation of some product segments over the next five years,” the report said.