Subject: Australian confectionery industry

market analysis

Course: Marketing: Stand & Deliver

Student Name:

Due date: September 22, 2019

Student ID:

Lecturer:

Word Count: 1395

1 Contents
1. Executive Summary .................................................................................................. 3
2. Market Description ................................................................................................... 4
2.1. Market Size ........................................................................................................ 4
2.2. Market Leaders .................................................................................................. 4
2.3. Market Concentration ....................................................................................... 5
2.4. Market Distribution ........................................................................................... 5
2.5. Industry Growth ................................................................................................. 6
3. SWOT Analysis .......................................................................................................... 7
3.1. Detailed Description of SWOT Analysis ............................................................. 7
a. Strengths ............................................................................................................ 7
b. Weakness ....................................................................................................... 7
c. Opportunities ..................................................................................................... 8
d. Threats............................................................................................................ 8
4. Macroenvironment Analysis..................................................................................... 9
4.1. Economic ............................................................................................................ 9
4.2. Sociocultural ...................................................................................................... 9
4.3. Political and Legal .............................................................................................. 9
4.4. Technological ................................................................................................... 10
5. Segmentation and segmentation variables ............................................................ 11
5.1. Segmentation variables ................................................................................... 11
a. Demographic .................................................................................................... 11
b. Geographic ................................................................................................... 11
c. Behavioural ...................................................................................................... 12
6. Conclusion .............................................................................................................. 13
7. Recommendation ................................................................................................... 14
8. References .............................................................................................................. 15
1. Executive Summary

The Australian confectionery industry has been increased in the recent years over
the estimated growth rates. Moreover, the revenues are exceeding the $4 billon which
makes all investment consideration in the market highly profitable. This market research
addresses the confectionery market in Australia and the possible factors that would
influence in future investments.
2. Market Description

In 2018, the Australian confectionery industry has reported sales for account of
$2,429.8 million. Confectionery industry comprises most but no limited to, chocolate,
sugar confectionery and gum among others (MarketLine, 2018). In addition, chocolate
is the confectionery product largest consumed in Australia according to a study by the
Australian and New Zealand Journal of Public Health, 2018. The Australian confectionery
market has been growing over the last years due the demand from middle-class
consumers.

Table 1 Australian confectionery industry revenues and market segmentation (MarketLine, 2019)

2.1. Market Size

The Australian confectionery industry has reported a $4.4 billion of retail sales
across all channels in 2017-18 (Australia Industry Group, 2018). Moreover, the
consumption of confectionery products in Australia has been increasing in recent years,
Australia has been remained in top 20 of countries of major consumption of chocolate,
from an estimate intake of 4.9 Kg. per capita in 2014 (B Wolf, 2016).

Market consumption had an increase 2.1% in the Compound Annual Growth

Rate (GAGR) since 2014 to 2018 which represents 224.0 million kilograms by 2018
(MarketLine, 2019). Furthermore, it is expected an expansion to 247.4 million kilograms
by the end of 2023, this increase would represent a CAGR of 2.0% for the 2018-2023
period (MarketLine, 2019).

2.2. Market Leaders

The Australian confectionery market is leading by three major competitors,

Mondelēz International with 33% market share, Mars Wrigley Confectionery Australia
with 25%, Nestlé Australia with 15%, who combined represent the 73% of the market
capture. However, there are some other competitors as Ferrero Australia and Lindt &
Sprungli with 4% of market share and growing (IBISWorld 2018).

Australian confectionery market leaders: % share, by value, 2018

Nestle SA Chocoladefabriken
Mars, Incorporated 15% Lindt & Sprüngli
25% AG
5%
Mondelez International, Inc

Mars, Incorporated

Nestle SA

Chocoladefabriken Lindt &

Mondelez Other
Sprüngli AG
International, Inc 22%
33% Other

Figure 1 Australian confectionery market leaders: % share (IBISWorld, 2018)

2.3. Market Concentration

The Australia confectionery industry has a moderate level in the market share
concentration with possibilities of investment and expansion.

2.4. Market Distribution

The grocery stores are the distribution channel with represents the most sale
shares with 60.7%. Thereupon, convenience with 13.2%, discounters 7.5%, traditional
trade with 9.3%, internet 2.9% and other different channels with 6.4% according to
Australia Industry Group, (Ai Group, 2018).
 Australian confectionery martek distribution: % share, by value,
2018
Other channels
Internet
6.40%
2.90%
Grocery stores
Traditional trade Grocery stores Convenience
9.30% 60.70%
Discounters

Discounters Traditional trade

7.50% Internet
Other channels
Convenience
13.20%

Figure 2 Australian confectionery market distribution: % share, by value, 2018 (MarketLine, 2019)

2.5. Industry Growth

By 2017, the confectionery manufacturing industry in Australia had an annual

growth estimation of 1.3% for the period 2018-23 and reported a revenue of $849.1
million in the same year. However, in 2018, the Australian confectionery market had
revenues for value of $3,450.8 million, with these results is predicted a Compound
Annual Growth of 3.9% for the industry in the period 2018–23 (MarketLine, 2019)

Figure 3 Australia confectionery market value: $ million, 2014-18 (MarketLine, 2019)

3. SWOT Analysis

Strengths Weakness

- Australian confectionery market - Lack of technology innovations

growth projected 3.9%
- Unstable price of raw materials
- Asia-Pacific confectionery market
growth projected of 6.2%

Opportunities Threats

- Marketing of differentiated - Supply of cacao and raw materials

products.
- Sugar tax establish by
- Development of new products. governments.

- Growth of China confectionery

industry

3.1. Detailed Description of SWOT Analysis

a. Strengths

- The Asia-Pacific Confectionery Market is estimated to growth of 6.2% at CAGR

between period 2019-2024 (Mordor Intelligence, 2019).

- The Australian confectionery market is projected to growth at CAGR in 3.9%

forecast period 2018-2023 (MarketLine, 2019).

b. Weakness

- Competitors are increasing investment in healthy confectionery market, for

example among acquisitions in the snacks market (Business News Australia,
2019).
- According to a recent research from the University of Melbourne, Chocolate
packaging can evoke emotions, affect willingness to purchase (confectionery
news, 2019)

c. Opportunities

- The change in the consumers habits are pursuing a healthy confectionery

industry which open investment opportunities in a market estimated of $1
billion.

- Australian consumers have purchasing power and wiling to buy premium

products (Confectionery News, 2019).

d. Threats

- China confectionery industry growth has increased among many innovative

chocolate products that were launched in China and it is rising the customers
demand among the Asia -Pacific zone (Confectionery News, 2019).

- An increase in the demand of cocoa around the world and the gap to supply this
demand by the production which made unstable the prices from this raw
material (MarketWatch, 2019).
4. Macroenvironment Analysis

4.1. Economic

According to Ai Group, 2016, Australia is consider establishing a tax in sugar in order

to follow the recommendations of the World Health Organization report of 2016 which
argued an increase in rates of people with obesity and repeating the actions taken by
other countries as Mexico and Iceland.

The essential raw materials used in confectionery production sugar and cocoa.
However, cocoa prices are unstable and can be influenced by a series of different factors
among other things extreme weather, political instability, and pests & disease.
Moreover, the rise in supply demand gap of cocoa used in the chocolate industry has
increased (MarketWatch, 2019).

4.2. Sociocultural

Australian consumers have purchasing power and are willing to pay the fees which
they considered fair in order the product satisfy their quality requirements. In addition,
according to a research from University of Melbourne of 2019, Australian customers pay
special attention to packaging of products and this factor would affect their decision to
repeat purchase (Confectionery News, 2019).

Conversely, due to increase in obesity rates, consumers buying habits are changing
and adopting a healthy consciousness, for example, the consumption of Coca-Cola and
related sugary drinks has been decreasing in the past decade (ABC, 2019). Furthermore,
this recent adoption of healthy habits allowed the creation of a new market for healthy
confectionery with an estimated value of $1000 million by 2018 according to Ai Group,
2018.

4.3. Political and Legal

The Korea-Australia Free Trade Agreement (KAFTA) subscribed in 2014 brought

benefits for Australian exporters as the reduction in tariffs of exports to Korea that will
be eliminated in around 99.7% (AUSTRADE, 2016). Furthermore, this arrangement
provides the conditions for The Australian confectionery market to export and compete
with companies from USA., EU, Chile and the Association of Southeast Asian Nations
(AUSTRADE, 2016).

4.4. Technological

In terms of production technology, the industry has not experienced big changes.
However, most of the innovations correspond to product alterations, such as sugar-free
confectionery. Moreover, future innovations are related to the using of new and
improved ingredients (IBISWorld, 2018).
5. Segmentation and segmentation variables

According to MarketLine 2019, the Australian confectionery market is mostly

predominated by the chocolate with the 70% of sales share, subsequently is a variety of
sugar confectionery with 22% and finally the gum with 8%.

Australian confectionery industry market category

segmentation
Gum
8%

Sugar
confectionery
22%
Chocolate
Sugar confectionery
Gum

Chocolate
70%

Figure 4 Australian confectionery industry market category segmentation (MarketLine, 2019)

5.1. Segmentation variables

a. Demographic

According to The Australia Bureau of Statistics, 2016, the 32% of Australia

population consume different confectionery products, these percentage is divided in
children aged 4 to 8 years (2%), 9 to 13 years (408%). Chocolate and chocolate-based
confectionary was overall the most popular type of confectionary with 17% of people
consuming. Other confectionery (mainly consisting of lollies) were consumed by 11% of
the population, but children aged less than 14 years were the most likely consumers
with 17-18% consuming.

b. Geographic

According to IBISWorld 2018, the Victoria and New South Wales concentrate the
65%.
 Figure 5 Market concentration shares for distribution. (IBISWorld 2018)

c. Behavioural

Australians value healthy products and are willing to pay more for these goods.
Australian customers are divided in three segments, baby boomers, millennials and
family parents. The first group, are mostly engaged with a brand, the second group are
whiling to prove between different brand and tend to impulse purchasing, the last group
takes its time to searching, comparing and buying (Glow Feed, 2017).
6. Conclusion

Due to the growth in the Australian confectionery industry, customers are searching
for more options that satisfy their quality requirements and they are willing to test new
kind of products. This provide opportunities to invest in the confectionery industry.
7. Recommendation

I. It is recommended to invest in the development of healthy confectionery

products and capture a market share of growing healthy food market.

II. It is recommended, the development of a product line of premium

confectionery, this market has experienced a significant increase.

III. it is recommended to establish agreements with cocoa producers in order to

prevent shortages of supply.

IV. It is recommended develop an aggressive marketing strategic with special

emphasize in the packing design with purpose of engaging and create a positive
perception by customers.
8. References

Wolf, B. 2016, ‘Confectionery and Sugar-Based Foods’, School of Biosciences, The

University of Nottingham, DOI. 10.1016/B978-0-08-100596-5.03452-1

MarketLine, 2019, ‘Confectionery in Australia, February 2019’, Available at

https://store.marketline.com/report/ohme5544--confectionery-in-Australia.

Gupta, A, Smithers, L, G, Braunack-Mayer, A, Harford, J 2018, ‘How much free sugar do

Australians consume? Findings from a national survey’, Australian and New Zealand
Journal of Public Health, DOI: 10.1111/1753-6405.12836.

Ogg, M 2019, ‘Business News Australia, 2019. Acquisitions give Darrell Lea owners chunk
of $1B healthy snack market’, Business News Australia, Viewed 20 September 2019,
<https://www.businessnewsaus.com.au/articles/acquisitions-give-darrell-lea-owners-
chunk-of--1b-healthy-snack-market.html>.

Australian Industry Group 2018, ‘Five Year Review of the Health Star Rating -
Consultation Paper: Options for System Enhancement’, viewed 20 September 2019,
<cdn.aigroup.com.au/Submissions/General/2018/FINAL_HSR_system_enhancement_s
ubmission_Ai_Group_Submission-Dec_2018.pdf>

Confectionery News 2018, ‘Yowie chocolates expands across the US with plans for
Australia, New Zealand & Asia’, viewed 20 September 2019,
<https://www.confectionerynews.com/Article/2018/04/17/Yowie-chocolate-expands-
across-the-US>

Gunaratne, M, Fuentes, S, Gunaratne, T, Torrico, D, Francis, C, Ashman, H, Gonzalez

Viejo, C, Dunshea, F 2019, ‘Effects of packaging design on sensory liking and willingness
to purchase: A study using novel chocolate packaging’, School of Agriculture and Food,
Faculty of Veterinary and Agricultural Sciences, The University of Melbourne,
DOI.10.1016/j.heliyon.2019.e01696

Mordor Intelligence 2019, ‘Asia-Pacific confectionery market - growth, trends and

forecasts (2019-2024)’, viewed 15 September 2019.
ABC 2019, ‘Confectioners chew on changing customer tastes for healthier lollies’,
viewed 16 September 2019, <https://www.abc.net.au/news/2019-06-28/health-push-
changing-chocolate-and-lollies/11261178>

Confectionery News 2019, ‘Chocolate packaging can evoke emotions, affect willingness
to purchase: study’, viewed 14 September 2019,
<https://www.confectionerynews.com/Article/2019/06/28/Chocolate-packaging-can-
evoke-emotions-affect-willingness-to-purchase-study>.

Australian Industry Group 2016, ‘NSW Legislative Council Standing Committee on Social
Issues Inquiry into Childhood Overweight and Obesity’, viewed 18 September 2019,
<https://www.parliament.nsw.gov.au/lcdocs/submissions/56141/0008%20Australian
%20Industry%20Group.pdf>.

MarketWatch 2018, Confectioneries/Sweets Market – Global Industry Analysis, Size,

Share, Growth, Trends and Forecast 2018 – 2023, viewed 18 September 2019,
<https://www.marketwatch.com/press-release/confectioneriessweets-market-global-
industry-analysis-size-share-growth-trends-and-forecast-2018---2023-2018-10-31>.

GlowFeed 2017, ‘An insight into the current grocery habits of Australian consumers’,
viewed 20 September 2019, <https://www.glowfeed.com/2017/11/08/an-insight-into-
the-current-grocery-habits-of-australian-consumers>.