Product and Service
Companies included in salad dressing/sauce/dips sector usually produce salad dressing &sauce& vegetable and fruit dips.
Demand for Product and Service
The demands for salad dressing/sauce/dips have been weak in the past two years but present a rebounding trend in 2018 driven by demand from foodservice industry.
Sector’s current, trend, causes behind trend, and future
Current and Trend
- Demand in this sector was strong and grown at about 4% per year between 2015 and 2016. And then get weak in 2017 while companies continued to raise the price to offset increased raw-materials costs.
- Demand in this sector may be rebounding back driven by strong increase in foodservice industry.
Causes behind the trend
- We believe the fundamental nature of what are driving the food industry is something behind the organic increases in this sector. What are happening in food industry include slow growth under economy and demographic changes and shifting to more natural and healthier food under changes in consumers’ lifestyle. In US market, the increasing demands in this sector may be contributed to consumers’ preference for healthier food.
We think the trend in demands for salad dressing/sauce or vegetable and fruit dips will keep going stronger and those companies who can be more flexible in product innovation will be able to take full advantage of this growth.
General Financial Performance of Companies In the Sector
Our data indicates that organic demands for salad dressing, sauce, vegetable and fruit dips both from household consumers and food service companies was strong before 2016 (4% growth annually). Demand went weak since then (0% growth) but may be being boosted by increasing demand from foodservice industry currently.
On the basis of strong demands, while the raw-materials costs swing year and year companies have been able to manage to improve their margins by passing on the costs to price. Therefore, the increased profits enable companies to spend on products innovation so that the new innovated, more value-added products, in return, brought higher margins to the companies.
The typical gross margin, operating margin, and cash flow margin are currently 25%, 14%, and 9% down from 2016 due to increasing raw materials costs. According our analysis, a typical ratio of enterprise price/adjusted EBI is 42 with no debt burden.