Assignment on Australian Cereal Industry

Introduction of Australian Cereal Industry

The Australian cereal industry is quite broad and it presents both opportunities and threats to new businesses. Actually, the market includes retail sales of ready-to-eat cereals and hot cereals. The segment of hot cereals includes traditional products, ready-to-heat products, and instant mixes. The segment of ready-to-eat cereals includes breakfast cereals of families and children like muesli and flakes. In accordance with RSP or retail selling price, the market is valued and it involves applicable taxes as well. In this report, the Australian cereal industry is analysed and it will be determined whether the industry is suitable for a new business or not (Market Line, 2019). 

Market Analysis of Australian Cereal Industry

During the period of 2014-18, moderate growth was recorded by the Australian market of breakfast cereals. Over the period of 2018-23, it is determined that market growth will accelerate. In association with nutrition and health, increasing public awareness is actually driving the purchase decisions of Australian customers. Considering the fact that cereals are quite a famous and popular form of breakfast and that public awareness has increased, the demand and need for premium types of cereals have increased significantly. Therefore, marketers are focusing extensively on marketing strategies and premiumisation. Because of the high content of sugar in a large variety of breakfast cereals, parents are seemingly avoiding them actively for protecting their children. 

In 2018, the breakfast cereals market of Australia seemed to have 1,334 million dollars in revenues and it representing CAGR or compound annual growth rate of 4.5 percent in between 2014-18. Actually, in comparison, Chinese and Japanese markets expanded or grew with 7.3 and 1.1 percent of CAGR, over the same period of time for reaching respective values of 796.9 and 466.9 million dollars in 2018. The volume of market consumption increased with 4.0 percent of CAGR in between 2014-18 for reaching a net volume of 195.1 million kilograms. The volume of market is determined to increase to 231.9 million kg by 2023. In Australian market for breakfast cereals, ready-to-eat cereals seemed to account for highest value with overall sales of 1,166.3 million dollars which is equal to 87.4 percent of the overall value of the market. In comparison to it, hot cereals’ sales reached 167.7 million dollars, equivalent to 12.6 percent of the net value in market.

Over the next five years, the performance of market is actually expected to increase with 4.8 percent of CAGR. It is also determined to drive the market to 1,684.6 million of value by 2023. It is quite important to note that ready-to-eat cereals make up the largest segment of Australian cereals market as it accounts for 87.4 percent of the net value of market. Meanwhile, the segment of hot cereals account for 12.6 percent of remaining part of market. 

PESTLE Analysis of Australian Cereal Industry

Political: Actually, the political environment in Australia is quite supportive for cereal businesses, which means that there are issues in terms of rules and laws.

Economic: Economic fluctuations greatly influence the customer demand. However, if the brand becomes popular, it will not be really affected by it.

Social: Australians are quite cautious about health and that is the reason there is a significant opportunity for a healthy cereal brand to be successful in the market.

Technological: It would not be wrong to say that the technological aspect of Australia is quite high because a lot of investments are made by the nation in R&D or research and development area. Therefore, it is important for a new cereal company to invest in technology.

Legal: Australian legal aspect are quite supportive of cereal companies. Hence, there are legal hurdles.

Environmental: There are no major environmental problems. However, it is important for any business in Australia to ensure that its processes are not harmful to the environment and that these processes are sustainable (Perera, 2017).

Porter’s 5 Forces Analysis of Australian Cereal Industry

In general, when it comes to the analysis of industry, Porter’s 5 Forces analysis is considered quite important as it seems to reveal deep insights into the chosen or specific industry. 

Buyer Power of Australian Cereal Industry

Supermarkets and hypermarkets are considered the predominant purchasers in the breakfast cereal market of Australia, as they account for 74.5 percent of the complete market. In fact, buyer power is quite high among large retailers because switching costs for purchasers are not that high. 

Supplier Power of Australian Cereal Industry

Generally, suppliers to the market of breakfast cereals include grain traders and farmers, who seem to trade and grow in barley, oats, and wheat crops. Mostly, these are independent operators and they have little influence on the market. Still, it is important to note that there is a large number of input important and necessary for specific brands. Another important thing to note is that quality and healthy raw materials are necessary if a cereal business hopes to thrive and be efficient in the market.

New Entrants of Australian Cereal Industry

When it comes to the entry of this market, entry is possible through the development of a new firm or when an already active organisation diversifies its functions and operations into the production of cereal. The market of Australia is seemingly regulated by the strict food standards. It is possible that a high regulation might act as a barrier. Therefore, the threat of new entrants is moderate.

Threat of Substitutes of Australian Cereal Industry

It is possible for a breakfast include yoghurt drinks, croissants, cheese, bagels, toast, cereal bars, and fruit with coffee. In Australia, a renowned and popular breakfast form is represented by cereals. From the perspective of customers, the threat posed by substitutes is moderate because they might not offer similar nutritional benefits or advantages. 

Degree of Rivalry of Australian Cereal Industry

The market of breakfast cereals in Australia is dominated by Nature First, Sanitarium, Cereal Partners Worldwide, and Kellogg Company. For instance, the last two organisations seemed to account for 52.2 percent of the net market share in the year of 2018. Even though the last company dominates the market, other companies have diversified their products and also expanded to other locations in efforts of easing the competition. Therefore, it can be said that there is moderate rivalry in Australia (Porter, 2008).

Consumer Behaviour Issues of Australian Cereal Industry

Following are the consumer behaviour issues which are influencing the industry of breakfast cereals in Australia:

Health Awareness of Australian Cereal Industry

In the recent years, there has been a significant rise in the awareness of public about health and nutrition. It means that customers have turned to premium products in hopes of finding those cereals which are capable of benefitting them in terms of health and nutrition. For instance, it would not be wrong to say that customers are not seeking those products and cereals which have higher nutritional and health benefits. In order to purchase such types of cereals, customers are willing to pay even a high cost for such cereal products. This presents both an opportunity and a challenge for new businesses that are willing to enter the cereal industry because for being competitive, considering the strong competition, they will have to produce those products which offer greater or at least the same nutritional and health benefits as the products of cereal giants at the same or lower price for attracting customers and being efficient and successful in the market. Otherwise, it will not be possible for new businesses to be successful in the market.

Competitive Prices of Australian Cereal Industry

As it has been explained above, customers are willing to pay even higher prices for products that offer higher nutritional value than other cereal products. However, it does not mean that prices can be more very high. It is important for a new business to find a balance between the quality produced and the price or cost of the products. In this manner, an effective marketing mix will be designed which will help and play an important role in attracting customers in the Australia market for breakfast cereals. Thus, it is quite important for new businesses to consider this aspect.

Conclusion of Australian Cereal Industry

Overall, it can be said that the cereal market in Australia presents both opportunities and threats for a new business. For a new business to be competitive in the market, it is more than just a little important to ensure that its products offer high nutritional and health benefits to Australians because look for these benefits in cereal products. In addition to the production of such healthy cereals, it must choose a price which can allow it to compete effectively with the competitors as they are the dominators of cereal market in Australia.

References of Australian Cereal Industry

Market Line, 2019. Breakfast Cereals in Australia. A Progressive Digital Media business.

Perera, R., 2017. The PESTLE analysis. s.l.:Nerdynaut.

Porter, M. E., 2008. The five competitive forces that shape strategy. Harvard business review, 86(1), pp. 25-40.