Cereal Breakfast Industry in Australia
Introduction
Most consumers consider breakfast as the most important meal in every day. Companies that offer a multiple product range to different target groups with added benefits of cholesterol-lowering and additional fiber properties are likely to excel. The breakfast cereals market is made up of retail sales of ready-to-eat cereals and hot cereals. Between 2014 and 2018, the Australian breakfast cereals recorded moderate growth. The market is also expected to grow in the forecast period 2018-2023 due to the increased public awareness concerning health and nutrition. Despite being a popular choice for most Australian consumers, many parents are avoiding cereals due to the high sugar content to protect their children. The market consumption volume is, however, is increasing and is expected to reach 231.9 million kilograms by the end of 2023 (Youl, 2020, p. 15). With a compound annual growth rate of the market of 4.5% in the period 2014-2018, it is a clear indication that businesses in this industry will make more sales in the future.
Macro-Environment Analysis
Companies in the food industry operate in a macro environment of trends and forces which they cannot control. Some of these forces include global influences that are likely to affect food preferences. Companies must be prepared to adapt and react to the political, technological, economic, cultural, demographic factors, which may present challenges or opportunities.
Demographic Environment
In the breakfast cereal industry, demographic attributes are key factors in food knowledge, opinions, tastes, and choices. Australia is one of the most populous countries in the world, and its population is expected to reach about 25,695,200 by May 2020 (Youl, 2020, p. 13). Most of its population is concentrated in urban areas and is projected to exceed 28 million by 2030. Melbourne and Sydney have the largest population of above 5 million, while Bendigo and Ballarat have the lowest population. The life expectancy in Australia is about 83.2 years. According to the Australian Bureau of Statistics, most of the people in Australia are between the ages of 15-64, followed by the age group of 0-14 years old (Youl, 2020, p. 9). The literacy rate is 99%, which is an indication that the Australian people acknowledge the importance of healthy food choices.
The class distribution among the Australian population makes it possible to promote premium breakfast cereal products to the general public since most of the people are high class. Niche marketing can be used to promote cereal products in regions where class distribution among the population is uneven. This can be the case in New South Wales, Victoria, and Queensland.
Economic Environment
Although breakfast is an essential meal in everyday life, there are trends that might affect the purchasing power of the consumers. Factors such as debt and credit availability, and income distribution and saving will determine if the consumers will consider breakfast cereals as a luxury item or a necessary meal (Youl, 2020, p. 3). Consumers will only spend if they have disposable income. The key factors in this environment are employment and income levels, the global economy, and the value of the Australian dollar. The income structure of most people keeps on changing, and this is likely to affect their purchasing power (Wu et al., 2015, p. 449). The disposable incomes of people living in South Australia and Tasmania had average disposable incomes that were 19% below the national average. The cost of living is increasing, and most families have to adapt by having the women return to work to increase the income for the families. As a result of the rising cost of living, most consumers are changing their buying efforts as they try to save money.
The general economic climate in Australia is at a stable for the production and consumption of cereal products. The inflation rates for consumer goods are very low, and this means that it is easy for a company s breakfast cereal products to thrive in. The buyer power is high since the chances of retailers switching prices for buyers are low. The buyer power has also been maintained by the presence of breakfast cereal products of varying prices and qualities. The supplier power, on the other hand, is weakened by the various competitors who source their ingredients from different suppliers.
The economic system that is currently operating in the breakfast cereals industry is likely to encourage newcomers despite being very competitive. Australia has a highly developed market economy, and this helps in determining how the food industry is likely to perform in the future. The general stability of the Australian economy leads to the stability of its currency, and this will attract investors.
It is important to note that the COVID-19 pandemic has resulted in the loss of jobs for many people in Australia. This has severely affected the breakfast cereal industry in Australia, as large proportions of the products are currently experiencing sharp declines in demand in the domestic market. There is a likelihood of a sharp drop in the prices of breakfast cereal products due to the decreased demand. Most people currently have limited disposable income due to the decreased economic performance in Australia. The demand for these products is expected to rebound after the COVID-19 has been contained.
Political Environment
The chances of survival and profitability of a company dealing with breakfast cereal products are high due to the political stability in Australia. The government has been making decisions that have created a peaceful environment for doing business (Sussman et al., 2019, p. 1604). The government has been enforcing favorable business laws that encourage a company to provide breakfast cereal products to operate.
The levels of taxation are likely to motivate new businesses since they will be projecting higher profits. Due to the commitments under the World Trade Organization regarding domestic support for agricultural products, tariffs, and tariff quotas, and export subsidies, the government has some restrictive programs that might affect the effectiveness of a firm in the breakfast cereal industry.
The minimum wage requirements are high in Australia. Since the breakfast cereals industry is labor-intensive, firms are likely to experience decreased profitability over time. There are health and safety laws, intellectual property laws, and discrimination laws placed by the government, which all firms in the breakfast cereal industry should adhere to. Abiding by most of these regulations might be expensive and may drastically affect the profitability in the industry.
Social Environment
The social factors that affect the breakfast cereals industry are a direct reflection of Australian society and encompass values, beliefs, culture, and attitudes of most of the people living in Australia. Since the differences in the educational background in Australia are limited, most people will choose healthy lifestyles, and this will affect what they choose to eat (Fayet-Moore et al., 2019, p. 175). It will also be important for a company operating in this industry to be aware of how the Australian people react to environmental conservation to be successful.
Technological Environment
Technological changes have the power to dismantle the competitive landscape and price structure of a firm operating in the Australian breakfast cereal industry. The technology in this industry is consistently and constantly innovative and is aimed at cost reduction and profit maximization. Companies that fail to use the latest technology in the breakfast cereal industry are likely to have their revenues significantly dismantled. Once ne firm introduces new technology, most of the competitors quickly copy the new technological features to avoid making losses.
Environmental Factors
Climate change has negatively affected how most of the firms operate in Australia. The current weather conditions, for instance, make it difficult to transport raw materials and finished products. Most of the customers and the government support the use of renewable energy. This might be very expensive for firms in this industry.
How Consumer Behaviors Issues Influence the Australian Breakfast Cereals Industry
The increasing number of health-conscious consumers is boosting the consumption of cereals at breakfast. Over the past five years, most Australians are careful with their food intake, and this is making them more conscious of the amounts of fat and sugar and ingredient quality when buying processed food products. This shift in consumption trends has forced firms in the breakfast cereal industry to come up with innovative products that are healthier. Most of the consumers are looking for the most convenient food products since they have limited time to make breakfasts every day (Louie et al., 2012, p. 466). Consumers are demanding functional foods such as sugar-reduced and nutrient-enriched products, and this has led to product innovation in the breakfast cereal industry. These consumer behavior issues have supported the industry’s revenue growth since premium products attract higher prices.
References
Fayet-Moore, F., McConnell, A., Cassettari, T. and Petocz, P., 2019. Breakfast choice is associated with nutrient, food group and discretionary intakes in Australian adults at both breakfast and the rest of the day. Nutrients, 11(1), p.175.
Louie, J.C.Y., Dunford, E.K., Walker, K.Z. and Gill, T.P., 2012. Nutritional quality of Australian breakfast cereals. Are they improving?. Appetite, 59(2), pp.464-470.
Sussman, R.L., McMahon, A.T. and Neale, E.P., 2019. An audit of the nutrition and health claims on breakfast cereals in supermarkets in the Illawarra region of Australia. Nutrients, 11(7), p.1604.
Wu, J.H., Neal, B., Trevena, H., Crino, M., Stuart-Smith, W., Faulkner-Hogg, K., Louie, J.C.Y. and Dunford, E., 2015. Are gluten-free foods healthier than non-gluten-free foods? An evaluation of supermarket products in Australia. British Journal of Nutrition, 114(3), pp.448-454.
Youl, T., 2020. Cereal, Pasta and Baking Mix Manufacturing in Australia. IBISWorld.