Business for Sale Industry Economics
2005 - 2021
2021 - 2027
In the Cereal Production industry, changing consumer trends and economic growth have translated into pressured demand for the Cereal Production market over the past five years to 2021. Low-carb diets have grown increasingly popular, limiting the number of consumers buying cereal, while other health-conscious consumers are only interested in cereals made with healthy ingredients.
Moreover, industry revenue has been pressured as consumers have leveraged their rising disposable incomes to indulge in premium breakfast foods, such as breakfast sandwiches from restaurants.
Consumer preferences are increasingly shifting toward convenient and portable foods as free time becomes more limited, also hampering demand for industry products.
Nevertheless, cereal popularity has grown in recent years, particularly amid stay-at-home orders during the COVID-19 (coronavirus) pandemic.
Consequently, industry revenue has increased at an annualized rate of 2.2% to $11.5 billion over the five years to 2021, including an increase of 0.7% in 2021 alone.
Economic conditions have largely guided the tempered revenue performance of the Cereal Production industry over the five years to 2021.
As the economy has grown and per capita disposable income has increased, individuals with relaxed budgets and scarce time have adopted more expensive breakfast habits, including buying food on the run at cafes or coffee shops.
In addition, many low-carb diets that limit or eliminate the grains used in cereal have grown increasingly popular.
Furthermore, as major brands have aimed to diversify and innovate their product offerings, industry revenue has increased at an annualized rate of 2.2% to $11.5 billion over the five years to 2021, including an increase of 0.7% in 2021.
Amid the coronavirus pandemic, revenue actually surged 4.7% as consumers returned to meals at home due to business closures, stay-at-home orders and other regulations to facilitate social distancing.
Over the five years to 2026, revenue performance in the Cereal Production industry is forecast to continue its upward trajectory, albeit at a slower pace.
As the economy continues to recover from the coronavirus pandemic, per capita disposable income is anticipated to increase, resulting in mixed demand for cereal products.
The growing economy will likely enable consumers to spend more on premium and branded products that come at a higher price.
Higher disposable incomes, coupled with the growing number of health-conscious consumers, will likely push companies to introduce healthy, price-premium products to spur demand.
However, higher disposable income combined with consumers returning to their normal schedules following the pandemic will also enable and encourage consumers to dine out more, tempering revenue growth.
As a result, revenue is forecast to increase at an annualized rate of 0.8% to $12.0 billion over the five years to 2026.
Operators in this industry acquire raw materials, such as corn, wheat, flour, sugar, malt extract and rice, that are processed into ready-to-eat and hot cereals.
They also purchase other raw materials, such as plastic and paperboard containers, from other manufacturers for packaging purposes.
The finished breakfast cereals are then sold to grocery wholesalers, retailers and food-service providers.
Protein, cereal, granola and energy bars are not included in this industry.
Cereal manufacturing demands significant investment in capital, which is a high capital intensity in the cereal business. However, with the manufacturer’s dimension, the amount of capital intensity fluctuates greatly.
Small to medium-sized enterprises do not have access to the financial resources needed to invest in new equipment and machines, thus relying more on production manpower than large businesses. In 2021, operators are predicted to spend $0.43 on capital expenditure for every $1.00 spent on salaries.
Modern production facilities demand major capital costs on technology and equipment to boost productivity without considerable additional manpower being required. This demand is evident in all important actors in the sector, who consistently spend large amounts of money.
In addition, the rising reliance on machines by operators is anticipated to result in an expenditure of rising concern to maintain and replace equipment.
The Cereal Production industry’s revenue volatility is low to moderate. The cost of raw commodities, such maize, energy and oils, climatic conditions, household incomes, and variations in downstream demand is the basis of oscillations as a mature sector.
Wheat, corn, sugar, and oils are examples of key inputs in the manufacturing process. While some producers have supply contracts with grain growers and processors, hedging does not always absorb huge price swings, and industrial goods are often priced sensitively.
Breakfast cereals are often cheaper than other breakfast alternatives and are therefore less vulnerable to price change than other breakfast goods. Nevertheless, price rises affect demand for a particular brand.
The increase in disposable per capita revenue throughout the five years until the year 2021 led to decreasing demand for cheap breakfast food, particularly for private labels and branded items, while choosing brand names or alternative meals.
When customers get more money they are more inclined to buy breakfast items from coffee shops and other places, including breakfast sandwiches or perfect yogurt, which lowers the demand for cereal items and consequently the income.
This has led to an increasing need for replacements, damping the revenue growth, as an economy has developed in the last five years and customers had larger discretionary income levels.
The growth in unemployment rates, as well as the additional breakfast in-house eating of more than 4.7 percentages in 2020, led to the COVID-19 (coronavirus) pandemic at the conclusion of the five-year period.