Product and Service
Companies included in canned vegetables sector in packaging food industry primarily produce canned vegetables and packaged fruits for retail private label or food services.
Demand for Product and Service
Demand for canned vegetables has been weak as indicated by the fact that sales volume has been very sensitive to upward changes in price. Sales volume of companies has been seen continuous decrease as price increased resulted from pressure of margin in a situation where costs continued to go up. Companies must find other way, such as renovation or productivity, to keep their profitability.
Sector’s current, trend, causes behind trend, and future
Current and Trend
- Demand for canned vegetables has been weak and under pressure as price continued to go up.
- Demand seems to be still sensitive to decrease in price but companies seem to have no space for further lowering price as costs increased.
- There are many uncertainties in growth in a long run and competition will speed the process of shrinking of profitability for many companies.
Causes behind the trend
- Changing eating habit, which is shifting to more natural and healthier food, forms negative impacts on consumers in choosing canned food.
- Facing increasing competition and pressure on generation of cash inflow, existing companies have to turn to product renovation to maintain growth.
General Financial Performance of Companies In the Sector
It seems that the demand for canned vegetables have been weak and very sensitive to changes in price in the past several years as indicated by the typical company in this sector that sales volume have continued to decline while accompanying with increase in average selling price caused by increasing costs and product mix’s shifting.
As labor costs and steels costs increased and deleveraging of decreasing volumes, gross margins of companies came down back to a lower level than what they were in 2015, after which margins had ever gone up as a result of increased price and reduced costs. Our data indicates that the typical gross margin now is about 5% with operating margin of 2%.
According our analysis, companies’ enterprise price/sales ratio is around 0.5.