Resources and Suppliers

Characteristics	Current situation	Future trend
What are the most important resource markets used by this industry?	The main raw materials required for chocolate production are cocoa beans, milk and sugar, while for sugar confectionery they are sugar and glucose. The resource markets are: Russian market which produces natural dyes, favoring materials, decorations, mix for baking, cereals, nuts, dried fruits etc. African countries - Cote d'Ivoire and Ghana, the world's largest cocoa-bean exporters. Raw material prices influence a confectionery manufacturer’s profitability. Prices of these raw materials can be volatile, given the direct influence of weather patterns, crop yields and stockpiles on these commodities, especially cocoa and sugar.	There is a trend of using resources for “healthy sweets” – e.g. nuts, crushed cocoa beans, cereal flakes, wheat bran, fruit purees, buckwheat flour, lecithin, beta carotene, xylitol, sorbitol, candied fruit, flax, sunflower, sesame, concentrated juices, dry pellet, wheat, oat and corn flour, whey powder, etc.
Are these markets concentrated? Who has more market power at these markets: buyers or sellers?	Markets are concentrated enough, but Russian manufacturers are still worse in terms of standards of quality. Sellers have more market power in terms of prices offering. Under the current general situation in Russia, with a sharp rise in energy prices and nearly in all product groups, prices won’t remain the same. Mostly, they’ll grow on foods that contain grains and oilseeds.	More manufacturers of ingredients are expected in the future. The tendency with market power will change as confectionery producers will be pay more attention to quality of raw components, and will tend to choose suppliers with production facilities for laboratory monitoring of input raw materials and finished products, with certified management quality system.
Do firms in the industry purchase relatively small volumes relative to other customers of supplier? To sales of typical supplier?	No, industry firms are the biggest customers of suppliers. Output of numerous confectionaries is smaller in volume than sales of typical supplier	Trend will not change, because suppliers are few and customers are numerous
Are there substitutes for these resources?	For cocoa beans no substitutes, for sugar - there are substitutes	No change is expected
Credible threat of forward integration	Horizontal integration: it is unlikely, because suppliers live in different countries Vertical integration: it is low and insignificant too because of political and agricultural risks	The trend is likely to stay
Are suppliers able to price discriminate?	Some manipulation of price on the level of the producing countries is possible, but unlikely on the global commodity markets	No change

Conclusion

Дата добавления: 2015-11-16