The Australian chocolate and confectionery industry has had a poor start to the new year with the collapse of two iconic local brands, but the sector is likely to remain resilient in the long run, according to an industry analyst.
Sixty-year-old confectionery maker Betta Foods collapsed into voluntary administration earlier this week – just months after being acquired by international investment firm Re:Capital.
The company, which owns liquorice brand Capricorn and supplies ice-cream cones, marshmallows and other lollies to major retailers, has annual revenue of approximately $40 million and employs 180 staff.
The week before Betta Foods collapsed, its sister company, 101-year-old chocolate manufacturer Ernest Hillier, was also placed into administration. The business employs 60 staff and turned over between $15 million and $25 million annually.
The collapses follow the demise of Darrell Lea in 2012, before being rescued by the Quinn family, and the administration of Chocolate Fare in 2013.
But despite the doom and gloom, the local confectionery market is expected to continue growing.
According to an IBISWorld report published in November last year, the Australian chocolate and confectionery manufacturing industry is forecast to grow at an annualised rate of 2.3% to reach $6.7 billion by 2019-20.
The industry is currently worth around $5.9 billion. The businesses with the largest market share include Mondelez Australia, with a 34.5% grip on the market, Nestle Australia with an 18.2% share and Mars Australia with 13.9%.
IBISWorld senior industry analyst Spencer Little told SmartCompany confectionery manufacturers in Australia have had to face a number of issues over the past five years.
“Over the past five years, increasing health consciousness has required many manufacturers to be a bit more innovative with their product lines and to adapt to consumer demand,” Little says.
“We’ve seen recently Nestle introduce a dark chocolate Kit Kat variety due to the health concerns. Other consumers have demanded organic and fair trade products.”
Little says the challenge for smaller confectionery manufacturers is how to stand out from the larger companies, who have strong brand loyalty and partnerships with supermarkets locally and overseas.
“The three major players in the industry alone account for 65% of the revenue, which gives you an idea of how much harder it is for smaller, niche players to stay relevant in the industry,” he says.
“This is the challenge we’ve faced over the past five years.”
Little says the dominant players in the confectionery market have been able to identify shifting consumer trends and have adapted their product lines accordingly.
“That’s another challenge for the smaller businesses,” he says.
“But nonetheless the industry is quite resilient and has still managed to grow.”
