toy and sporting good manufacturing in australia industry report

2 About this Industry2 Industry Definition

2 Main Activities

2 Similar Industries

2 Additional Resources

3 Industry at a Glance

4 Industry Performance4 Executive Summary

4 Key External Drivers

5 Current Performance

7 Industry Outlook

9 Industry Life Cycle

11 Products & Markets11 Supply Chain

11 Products & Services

12 Demand Determinants

13 Major Markets

14 International Trade

15 Business Locations

17 Competitive Landscape17 Market Share Concentration

17 Key Success Factors

17 Cost Structure Benchmarks

18 Basis of Competition

19 Barriers to Entry

20 Industry Globalisation

21 Major Companies21 Pacific Brands Limited

22 Rip Curl Group Pty Ltd

24 Operating Conditions24 Capital Intensity

25 Technology & Systems

25 Revenue Volatility

26 Regulation & Policy

26 Industry Assistance

28 Key Statistics28 Industry Data

28 Annual Change

28 Key Ratios

29 Jargon & Glossary

IBISWorld Industry Report C2942Toy and Sporting Good Manufacturing in AustraliaMay 2011 Claudia Burgio-Ficca

Behind the eight ball: The industry is struggling to remain competitive against imports

www.ibisworld.com.au | (03) 9655 3881 | [email protected]

www.IBISwOrLd.COM.Au Toy and Sporting Good Manufacturing in Australia May 2011 2

Operators in this industry manufacture of sporting equipment (except vehicles, clothing or footwear) and toys made from all materials except fur and leather. Toy

and sporting good manufacturers buy raw materials, design samples, undertake production and then market the finished goods to wholesalers and retailers.

The primary activities of this industry are

Archery equipment manufacturing

Canoe manufacturing

Cricket set manufacturing

Hang-glider manufacturing

Fishing tackle manufacturing

Rucksack manufacturing

Skateboard manufacturing

Surfboard manufacturing

Toy manufacturing

Tricycle manufacturing

Industry definition

Main Activities

Similar Industries

Additional resources

The major products and services in this industry are

Sporting goods

Toys

About this Industry

C2221 Textile Product Manufacturing in AustraliaManufacturers in this industry produce sails, tents and sleeping bags.

C2822 Boatbuilding in AustraliaOperators in this industry manufacture dinghies and small boats other than canoes and sailboards.

C2260 Leather and Leather Substitute Product Manufacturing in AustraliaBusinesses in this industry manufacture toys made of fur or leather.

For additional information on this industry

www.abs.gov.au Australian Bureau of Statistics

www.aigroup.com.au Australian Industry Group

www.pc.gov.au Productivity Commission


Market SharePacific Brands Limited 14.0%

Rip Curl Group Pty Ltd 9.5%

Key External driversSport participationNumber of primary school studentsreal household disposable incomeTrade-weighted index

Key Statistics Snapshot

Industry at a GlanceToy and Sporting Good Manufacturing in 2011

revenue

$521.0mProfit

$36.5mExports

$132.0mBusinesses

1,100

Annual Growth 11-16

-1.5%Annual Growth 06-11

-3.7%

Industry Structure Life Cycle Stage Decline

Revenue Volatility Low

Capital Intensity Medium

Industry Assistance Low

Concentration Level Low

Regulation Level Medium

Technology Change Low

Barriers to Entry Medium

Industry Globalisation High

Competition Level High

FOR ADDITIOnAL STATISTICS AnD TIME SERIES SEE THE APPEnDIx On PAGE 28

Uni

ts

3.4

1.8

2.2

2.6

3.0

1602 04 06 08 10 12 14Year

Sport participation

SOURCE: WWW.IBISWORLD.COM.AU

% c

hang

e

5

−15

−10

−5

0

1703 05 07 09 11 13 15Year

Revenue Employment

Revenue vs. employment growth

Business locations

40%NSW

3%TAS

25%QLD

1%ACT

0.5%NT

17%VIC

9%WA

4.5%SA


p. 21

p. 4



Key External drivers Sport participationSport participation affects demand for specific types of sporting goods. For individuals, sport participation for many sports declines as people age. Sport participation will increase over 2010-11 due to the growing importance of general fitness and health among Australian consumers. This is a potential opportunity for manufacturers to boost their new orders following increased demand at the retail level.

Number of primary school studentsToys are principally purchased for very young children. Sport participation is minimal among very young children and then is high up to early adult years. It then typically declines as people reach an older age (although this varies between

sports). The number of primary school students will increase over 2010-11 due to a rise in the birth rate.

Real household disposable incomeThe level and growth in household disposable income affects demand for industry products. As income rises, consumers are able to purchase more expensive goods or increase the quantity of purchases. Alternatively, a fall in income causes consumers to constrain discretionary spending. Real household disposable income will increase over 2010-11 due to falling unemployment and a rise in wages.

Trade-weighted indexPrice is an important base of competition, and the value of the Australian dollar

Executive Summary

Toy and sporting good manufacturers encountered more snakes than ladders over the past five years, with revenue falling 3.7% per annum. Fuelling the contraction was an influx of imported goods, which affected the price competitiveness of domestically produced merchandise, slashed product margins and led to a decline in profitability. Sales volumes were also influenced by trends in real household disposable income, sport participation rates, the number of primary school students (the target market for industry manufacturers) and exchange rate fluctuations.

This industry is highly seasonal, with consumers making a large proportion of toy purchases during the traditional holiday season (i.e. Christmas). These seasonal purchasing patterns heighten the risk industry participants face whereby an under or overproduction of products leads to production volumes not matching consumer demand. Additionally, as retailers manage their inventories, the industry receives cyclical ordering patterns for products and product lines that may lead to varied sales from period to period. Traditionally,

this industry competed with homework, reading, outdoor play, movies, radio, TV and music. However, changing technology and innovation resulted in increased competition and the industry now competes against electronic goods like DVDs and MP3 players.

Industry revenue will decline 2.5% to $521.0 million in 2010-11. The decline in sales will reflect the tough trading landscape facing industry operators during the year. A rise in the Australian exchange rate will make imported goods more affordable for domestic operators, but new orders will suffer due to weak demand at the retail level. Demand will also be affected by a modest rise in the number of primary school students and sport participation.

The industry’s revenue is expected to fall 1.5% per annum over the five years through 2015-16 to reach $483.1 million. Over the period, sales will continue to be influenced by increasing import competition and fluctuating exchange rates. Revenue will also continue to be affected by other factors like disposable income levels, sport participation rates and trends in the number of primary school students.

Industry PerformanceExecutive Summary | Key External drivers | Current Performance Industry Outlook | Life Cycle Stage


Industry Performance

Import competition grows

This industry has come under mounting pressure from imports over the past five years. An influx of goods from Asian countries has largely been fuelled by mounting consumer demand for lower-priced merchandise that is often produced to resemble original goods. Growth in import volumes has also been affected by a shift in domestic manufacturing facilities to overseas locations, particularly China due to the lower cost of production. The rise in imports has effectively reduced product margins for operators, cut profitability and altered the overall mix and quality

of products available to consumers. Faced with such competition, many smaller operators were forced out of the industry over the past five years, leading to a decline in enterprise numbers (especially within the non-employing segment of the industry). Import volumes for this industry were also affected by fluctuations in the trade-weighted index. Rising from 63.1 in 2005-06 to 72.9 in 2010-11, growth in the trade-weighted index has made overseas goods more affordable for Australian buyers. Further, domestic merchandise became more expensive for

Current Performance

Toy and sporting good manufacturers played a tough game over the past five years. Increasing competition from imported goods, particularly from China, has affected the competitiveness of domestically produced merchandise, slashed product margins, reduced profitability and altered the quality of products available to consumers. The

resulting impact is an expected 3.7% per annum decline over the five years through 2010-11. Consumer demand for toy and sporting merchandise has also been affected by trends in real household disposable income, sport participation rates, the number of primary school students and exchange rate fluctuations.

Key External driverscontinued

affects the cost of imported goods. Manufacturers in this industry purchase many input materials from overseas, thus, a rise in the index makes inputs more affordable. The trade-weighted index will decrease over 2010-11, as a recovery across global markets will

decrease the interest rate differential with Australian and hence reduce demand for the Australian dollar. This is a potential threat to the industry, as it will increase the cost of imported inputs for manufacturers.

'000

2200

1850

1900

1950

2000

2050

2100

2150

1501 03 05 07 09 11 13Year

Number of primary school students


Uni

ts

4.00

1.50

2.00

2.50

3.00

3.50

1602 04 06 08 10 12 14Year

Sport participation



Import competition growscontinued

foreign buyers, leading to a 4.0% per annum decline in industry exports.

Along with rising import competition, industry manufacturers faced changing consumer trends and preferences for toy and sporting goods. Within the toy segment, the industry experienced a shift in the type of toys demanded. Age compression within society has led to children demanding more adult-like toys at a younger age and effectively outgrowing the target age market. The

resulting shift from traditional toys at an earlier age towards technologically interactive games like Nintendo or PlayStation initially created supply issues for manufacturers who were slow to respond with replacement goods. Manufacturers also realised that simply introducing a new product was not enough to secure sales; instead, they were required to continue making advances in product design and technology to ensure the survival of the product.

Slippery sales Industry sales are expected to fall 2.5% to $521.0 million in 2010-11. Industry performance for the year will benefit from a rise in the Australian dollar and stronger income growth. Growth in sport participation and an increase in the number of primary school students will also aid new orders. However, despite the positive flow-on effects of these factors, overall trading conditions across the industry will remain volatile due to continuing import competition.

Industry revenue declined 2.9% over 2009-10. Weak income growth and a rise in unemployment created challenging retail conditions that affected the number of new orders placed at the manufacturing level. While the staging of the World Cup Soccer in South Africa during June 2010 renewed interest in sport participation among consumers,

trade volumes were influenced by the rate of recovery across global markets following their collapse in 2008-09. Sales fell 4.1% in 2008-09 due to unprecedented market conditions following the collapse of global financial markets and mounting uncertainty surrounding the stability of domestic conditions. While disposable income levels rose 6.0% for the year following the release of government stimulus payments, much of the extra income was allocated to debt reduction as opposed to retail spending. Manufacturing orders were also hindered by continued imported-based competition. Trading conditions remained volatile between 2005-06 and 2007-08. Over this period, the industry experienced successive years of declining sales due largely to strong import competition and age compression.

Consumers get fit Despite the gloom caused by rising import competition and age compression, consumer demand for sporting goods was boosted over the past five years by changing attitudes towards exercise and fitness. Increasing consumer awareness about the health benefits associated with regular exercise and the importance of a healthy diet boded well for sporting good manufacturers. In addition, changing consumer trends and preferences for different types of sporting activities was supported by rising income levels,

which enabled consumers to join sporting associations or gyms. Rising 3.8% per annum, the steady increase in disposable incomes over the past five years was reflected through increased consumer demand for different types of toys and sporting goods. Demand for toy and sporting goods was also fuelled by the number of primary school students, which are regarded the key market for this industry. From babies to tweens, the toy segment relies on young consumers to drive sales and support continued demand for new products.



Imports remains high Continued shifts in manufacturing facilities overseas and the lower costs of production of these external manufacturers will heighten import competition. Demand will also be driven by consumers seeking cost-effective goods to match domestically produced merchandise. To this end, an anticipated decline in the trade-weighted index from 72.9 in 2010-11 to 69.0 in 2011-12 will make imports of input materials more expensive for toy and sporting good manufacturers. However, over the remaining four years, the trade-weighted index is expected to post a solid recovery, rising to about 72.5 by 2015-16. This rise will make overseas goods more affordable to Australian buyers, meaning manufacturers will have access to more affordable material inputs, which will affect the final price paid by consumers.

At the retail level, manufacturing orders for toy and sporting goods will benefit from anticipated growth in real household disposable income of 3.6% per annum. The rise in income will stem from stronger economic growth as the domestic economy starts to emerge from the recessionary conditions that plagued it during 2008 and 2009. Following a solid recovery in 2010-11, income will post steady growth over the remaining

four years through 2015-16. The gradual rise in incomes will enable consumers to demand a broader selection of toy and sporting goods, which will bode well for both new and replacement purchases.

The performance of toy and sporting good manufacturers over the five years through 2015-16 is also set to be affected by trends in sport participation. Despite increased awareness within the community and particularly across schools about the importance of maintaining a healthy lifestyle and exercising regularly, recreational activities, such as playing computer games, will continue to affect the

Industry Outlook

Toy and sporting good manufacturers will run a tough race over the five years through 2015-16. With revenue expected to fall 1.5% per annum, sales will continue to be influenced by increasing import competition and fluctuating exchange rates. The

decline in revenue from $510.1 million in 2011-12 to $483.1 million in 2015-16 will also be affected by other factors such as disposable income levels, sport participation rates and trends in the number of primary school students.

Consumers get fitcontinued

Alternatively, the teenage and young adult market is regarded as key category for the sporting good segment, with many consumers turning to sport participation at a young age.

Structurally, toy and sporting good manufacturing has resembled a shrinking market over the past five years. Falling

0.9% per annum, the contraction in enterprise numbers has stemmed from mounting import-based competition. While employing operators remained a viable option for manufacturers, smaller non-employing businesses faced a tough market and as a result, numbers contracted by about 3.0% per annum.

% c

hang

e

5

−15

−10

−5

0

1703 05 07 09 11 13 15Year

Industry revenue




Imports remains highcontinued

demand for some toys and sporting goods. The modest fall in participation will also be attributed to annual employment levels and income fluctuations. However, the increasing demand for computer and video games by teenagers and young adults is expected to have the greatest impact on sport participation. Demand for

electronic and interactive toys will be boosted by the availability of advanced technology, making such goods cheaper and hence more affordable to consumers. The resulting shift in leisure time activities from sports to indoor games will have a detrimental impact on the number of consumers choosing to participate in physical activity.

Age compression Due to ‘kids are getting older younger’ (a commonly used term to denote the growing trend of children that are becoming increasingly sophisticated in their consumption of complex entertainment and technology at younger ages), manufacturers will ultimately shift the industry’s product structure over the coming decades as they attempt to meet the changing needs of the major customer demographic. Furthermore, the impact of toys and games on society has been debated over the past decades, as the complexity of toys and games, particularly video games, increased, including criminal and sexual content. Some have argued that the toys and games have been affecting the children in a negative way by contributing to violence in society. However, the sociologists are generally opposed to this view. Sociologists argue that it has not been the toys but the environment at home, the way the family and caregivers relate to children that shape the children’s nature and determines children’s partialities.

Some Australian manufacturers of

sporting goods have been able to successfully leverage their sporting equipment brand names by diversifying into clothing fashion items (Rip Curl and Mambo from surfboards to surf fashion clothing) and have successfully marketed these fashion products internationally. By targeting a similar market segment (teenage or young adult males), the sporting goods and clothing businesses can leverage marketing opportunities off the same brand name (the careful expansion of products under the same brand name can also reduce marketing costs as a percentage of sales revenue).

This industry is the decline phase of its life cycle and this is expected to continue over the next five years. Continued strong import-based competition will restrict the number of players this industry can sustain, leading to a contraction in enterprises of 0.7% per annum and a fall in establishments of 0.6% per annum over the five years through 2015-16. Employment will suffer as a result, falling by about 1.4% per annum, while wage costs will contract 0.8% over the period.


Industry PerformanceCompetition from imports has affected the viability of domestic operators and led to the demise of many players

Weaker growth in industry value added than overall Australian GDP is indicative of an industry in decline

The industry’s product market is stable and clearly segmented

Technological processes and systems have been subject to slight cosmetic changes

Life Cycle Stage


30

25

20

15

10

5

0

–5

–10–10 100 20–5 155 25 30

% G

row

th o

f pro

fi t/G

dP

% Growth of establishments

declineCrash or Grow?

Potential Hidden GemsFuture Industries

Quality GrowthHigh growth in economic importance; weaker companies close down; developed technology and markets

Time wastersHobby Industries

MaturityCompany consolidation;level of economic importance stable

Shake-out

Shake-out

Quantity GrowthMany new companies; minor growth in economic importance; substantial technology change

Key Features of a decline Industry

Revenue grows slower than economyFalling company numbers; large fi rms dominateLittle technology & process changeDeclining per capita consumption of goodStable & clearly segmented products & brands

Textile Product Manufacturing

Toy and Sporting Good wholesaling

Sponge, Hoses, Belts and Other rubber Product Manufacturing

Leather and Leather Substitute Product Manufacturing

Sport and Camping Equipment retailing

Toy and Sporting Good Manufacturing



Industry Life Cycle Increasing competition from imported goods has affected the manufacture of toy and sporting goods over the past decade. Once regarded as a key manufacturing industry for Australia, the gradual shift in production facilities by industry players to overseas location has altered the domestic market and its level of competitiveness on the global field. Value added contracted by 2.5% in the five years through 2010-11 and is poised to fall a further 1.2% over the five years through 2015-16. The contraction, compared with stable growth in overall Australian GDP, can be attributed to an erosion of product margins in the face of strong competition from imports. Manufactured at a lower overall cost compared with domestic goods, imported merchandise has

contributing to an overall fall in enterprise numbers and a loss of market share by dominant products.

Total enterprise numbers have declined by 0.9% in the five years through 2010-11 and are set to fall 0.7% per annum over the five years through 2015-16. While employing operators have continued to remain viable, non-employing operators have contracted by 3.0% per annum, due to an increase in cost pressures and a squeeze on market shares. Technological applications for this industry have appeared to stabilise following resurgence in the industry due to the development of electronic and interactive toys. While such products and technology required continued investment and upgrading, the resulting impact on the industry is not sufficient to spur another growth phase.

This industry is declining


Products & Services The two primary categories of products manufactured by this industry are toys and sporting goods. Of these, the toy segment experienced the largest change in product mix over the past decade. This change stemmed from a number of factors, including age compression, whereby children outgrow traditional toys at a younger age; the development and introduction of electronic and interactive toys; and continued advances in product design,

technology and functionality. Consumers have largely been the driving force behind such changes due to their changing tastes and preferences. In comparison, production of sporting equipment has been relatively stable over the past 10 years. While technology continued to result in the implementation of modest product enhancements, the overall product mix for this segment remained virtually unchanged.

KEy BuyING INduSTrIES

F4793 Toy and Sporting Good wholesaling in Australia Wholesalers are a major distribution channel for toy and sporting good manufacturers.

G5241 Sport and Camping Equipment retailing in Australia Retailers are a major distribution channel for sporting equipment.

G5242 Toy and Game retailing in Australia Retailers are a major distribution channel for toys and games.

N Education Education providers purchase toys and sporting equipment.

O8710 Child Care Services in Australia Child care centres purchase toys for use at their establishments.

P9210 Libraries in Australia Libraries purchase toys and games for their library collections.

P9312 Gyms, Sports Grounds, and Other Facilities in Australia Organisations like gyms, sporting ground facilities and other centres demand a range of sporting equipment for use by members and the general public.

P9319 Sport Organisations and Other Sports Services in Australia Sport organisations demand a range of sporting equipment.

KEy SELLING INduSTrIES

C2260 Leather and Leather Substitute Product Manufacturing in Australia Items of leather or substitute leather used in toy and sporting goods are sourced from this industry.

C2559 Sponge, Hoses, Belts and Other rubber Product Manufacturing in Australia A variety of rubber products are used in the production of toy and sporting goods.

C2565 Plastic Foam Product Manufacturing in Australia Plastic foam is used in helmets, protective equipment and some water-sport equipment.

C2566 Plastic Injection Moulded Product Manufacturing in Australia Operators in this industry supply a range of moulded goods to toy and sporting good manufacturers.

Products & MarketsSupply Chain | Products & Services | demand determinants Major Markets | International Trade | Business Locations

Supply Chain


Products & Markets

demanddeterminants

Demand for toy and sporting good manufacturers depends on the level of activity from downstream retailers and wholesalers. Demand for toys and sporting goods at the retail level is linked to trends in consumer preferences, changes in disposable income levels, the growth and age structure of the population, seasonal factors and leisure time availability.

Income is the key determinant of demand, as it influences consumer spending on industry merchandise and hence has the capacity to affect production levels. Trends in real household disposable income determine the quantity, quality and frequency of toy and sporting good purchases. As the level of real household disposable income increases, the purchases of toys and sporting goods will rise, as consumers have greater discretionary power. Further, the purchase of substitute goods like arts and crafts may actually increase as household disposable income decreases, as consumers become more price conscious and engage in cheaper do-it-yourself activities rather than toys and sports that require equipment. When household income increases, expenditure by households with young children tends to increase, with parents more likely to

purchase new and more expensive toys for their children. Linked to this is consumer preference, which plays a major role in determining the demand for the industry’s products. For instance, the greatest impact on toy sales is global ‘fads’, which are usually linked to popular cartoons or films. Older children are turning away from general toys, and are seeking electronic and video games.

Trends in the growth and age structure of the population affect the demand for toys. The youth market is the major market for toys. As adults grow older, they are less likely to participate in sporting activities. Any slowdown of growth in the younger population would have an adverse effect on demand for toys and sporting goods.

Seasonal factors affect demand for products in this industry. Over 45% of toy retail sales occur in the fourth quarter, in the build up to Christmas. Furthermore, seasonality for toys can be summarised by product types such as outdoor games in spring and summer, travel games for summer holidays and indoor games in winter. The amount of leisure time available to people also influences the time available to participate in sporting activities. Participation rates in the range of sports affect relative demand for

Products & Servicescontinued

Products and services segmentation (2011)

Total $521.0m

60%Sporting goods

40%Toys



Products & Markets

Major Markets Local manufacturers of toy and sporting goods sell mainly to wholesalers, and general and specialist retailers. In the sporting goods segment other customers include sporting associations and clubs. In the toy goods segment other customers include schools, child care centres, play groups and libraries.

The final purchasers of toys and sporting equipment could be segmented by gender, ethnic background, age, geographic area of residence, household size and household income. Males who

are in their teenage and early adult years and who live in households with above average income are a major market for many sporting goods. However, the characteristics of consumers vary from product to product (and sport to sport). The demand for some sporting goods is significantly influenced by geographic area. For example, demand for rugby sporting goods is strongest in New South Wales and Queensland where the sport is most popular.

demanddeterminantscontinued

equipment available for specific sports. For example, industry sources report a decline in the popularity of ‘traditional Australian’ sports like tennis and cricket and an increase in interest in ‘American’

sports like basketball and baseball. Participation is influenced by the level of promotion of sport (as a fun and healthy activity). The level of school-based sporting activities also influences it.

Major market segmentation (2011)

Total $521.0m

50%Retailers

1%Child care centres

40%Wholesalers

5%Sporting associations

2%Libraries

2%Schools



Products & Markets

Imports From...

Total $1.7bn

69%China

17%Other

8%United States of America

4%Taiwan

2%Denmark

Exports To...

Total $132.0m

55%New Zealand

30%Other

7%United States of America

4%Japan

4%United Kingdom

Year: 2011SIZE OF CHARTS DOES NOT REPRESENT ACTUAL DATA SOURCE: ABS

International Trade International trade in toy and sporting goods has remained high over the past five years. Driven by a shift in production facilities to Asian countries (due to their lower cost of production), China has dominated import volumes, often accounting for over 65% of total annual imports. The majority of imported goods include stuffed toys, plastic toys, articles and equipment for sport and outdoor games, and articles of fun fair, table or parlour games and casino games. Albeit from a lower base, export volumes for toy and sporting goods have also been high over the past five years. Major export items during this time have included water-skis, surfboards, sailboards and other water-sport equipment,

gymnastics equipment, fishing equipment, golf equipment (including golf heads), and coin or disc-operated games.

Level & Trend Exports in the industry are High and Increasing

Imports in the industry are High and Increasing

$ m

illio

n

800

−2400

−1600

−800

0

1703 05 07 09 11 13 15Year

Exports Imports Balance

Industry Trade Balance



Products & Markets


TAS3.0

wA9.0

QLd25.0

VIC17.0

NSw40.0

NT0.5

SA4.5

ACT1.0

Establishments (%)

Cold Zone (<10) <25 <50 Hot Zone (<100) Not applicable

Business Locations 2011


Products & Markets

Business Locations Driven by their proximity to global export markets, New South Wales and Queensland account for the majority of toy and sporting good operators, at 40% and 25%, respectively. In particular, the concentration of players in Queensland may be attributed to its proximity to transportation harbours, with almost half of the industry’s manufactured goods being exported overseas. Queensland’s main exports and niche industries are surfboards, water skis and water-sports equipment. The concentration of operators in these two states, along with Victoria, may also be linked to the fact that they are the largest states in Australia, with growing populations.

Perc

enta

ge

50

0

10

20

30

40

WA

ACT

NSW N

T

QLD SA TA

S

VIC

EstablishmentsPopulation

Distribution of establishments vs. population



Cost Structure Benchmarks

Increasing competition from domestic and imported goods affected profit for industry operators over the past five years. While returns vary between players depending on the size of the distribution facility in operation, most operators have faced declining product margins due to the influx of cheaper imported goods into the domestic market. Profit has also been affected by the cost of inputs purchased from vendors (domestic or international) along with change in exchange rates, which have affected the overall cost of production for manufacturers and affected the final sale price to wholesalers. Growth in the relative cost of inputs over the past five years along with fluctuating exchange rates have effectively made domestically produced goods more expensive and hence less price competitive than

imported merchandise.Industry wages costs have fallen at an

average annual rate of 4.3% over the past five years, largely due to a reduction in employment along with continued implementation of automated processes, which has reduced the demand for labour input in production. Wage costs for this industry are derived through the need to employ staff to manufacture toys and sporting goods. In addition, labour is required to unload stock from manufacturers and pack orders for customers in addition to providing customer service. IBISWorld estimates that in 2010-11, wage costs will account for 15.9% of industry revenue. Superannuation and leave entitlements provided to workers are mandatory additional labour costs. These costs vary

Key Success Factors Having contracts that are favourable to purchaserAccess to low-cost materials, either locally or through imports, is important.

Establishment of brand namesBrand name and image are important or agreements to supply major companies with these attributes.

Management of seasonal productionMany goods manufactured have a short selling season (e.g. Christmas or winter) and require strategies to manage resources in on- and off-season

Production of premium goodsProduct quality or patented technology can be important when competing with imported products.

Level of competition existing in the marketIt is beneficial to produce goods that are not subject to significant import competition.

Development of new productsSome toys and sporting goods cater to fads and therefore have short life cycles, necessitating new product development.

Market Share Concentration

Concentration in this industry is low. The industry’s two largest players, Pacific Brands and Rip Curl, together hold less than 30% market share. The level of concentration in the industry has been held down by significant international competition. Despite being regarded wholesalers within the Australian market, Mattel and Hasbro control numerous branded merchandise and they have developed strong consumer

awareness. Demand for locally manufactured goods have also suffered due to the influx of Asian-made products into the domestic market. Due to the dominance of international products in the domestic market, Australian industry players have been unable to expand their market shares. As a result, IBISWorld estimates industry concentration has experienced little change over the past five years.

Competitive LandscapeMarket Share Concentration | Key Success Factors | Cost Structure Benchmarks Basis of Competition | Barriers to Entry | Industry Globalisation

Level Concentration in this industry is Low

IBISWorld identifies 250 Key Success Factors for a business. The most important for this industry are:


Competitive Landscape

Basis of Competition This industry is subject to both internal and external competition. Internally, players in this industry compete with other industry players, whether domestic or international. Local manufacturers compete against imports based on price and brand name. In addition, players are subject to external competition from operators outside the industry, such as mass merchandisers and discount retailers.

InternalCompetition between players in this industry is intense and primarily based on quality, play value and price. Additionally, product range, promotion, service, advice and location are important competitive factors in the industry.

At the retail level, price is a key basis for competition. At peak shopping times, such as Christmas, retailers often engage in vigorous price promotions to attract customers and build traffic. Price and

Cost Structure Benchmarkscontinued

with the number of workers employed and their employment status, whether part-time, casual or full-time.

Rent expenditure for operators in this industry has been associated with the cost of leasing premises, production facilities and equipment required for the manufacture of toy and sporting equipment. While operators who have moved production facilities to overseas locations have experienced a decline in rent costs due to lower costs of production, these manufacturers have faced increased transportation costs in re-importing merchandise back into Australia for sale to wholesalers. Overall, rent costs for this industry are estimated to have posted a modest rise over the past five years due to a gradual increase in the cost of production. Utility costs, including gas, water and electricity used in the production process are estimated to have risen over the five years through 2010-11, owing to the continued implementation of

automated processes by operators. Despite offering greater efficiency and an increase in production volumes, automation has also increased this industry’s reliance on equipment and machinery that required continued maintenance and replacement. The rise in production automation in the industry has also affected depreciation costs over the past five years. A rise in the number of plant, equipment and machinery purchased by operators for use in production lines has resulted in higher depreciation costs.

Advertising expenditure has remained a small cost for this industry. The established brand awareness and reputation of operators has largely reduced the focus on advertising by operators. As a result, advertising costs have remained relatively stable over the past five years. Other costs for this industry include selling and general administrative expenses such as insurance, freight, legal and security expenses.

Industry Costs and Average Sector Costs■ Profi t■ rent■ utilities■ depreciation■ Other■ wages■ Purchases

Industry Costs (2011)

Average Costs of all Industries in sector (2011)

0 100%

7.0Profit

60.015.98.1

3.0

3.0

13.3Profit

58.412.89.3

4.0 SOURCE: WWW.IBISWORLD.COM.AU

3.0

1.60.5

Level & Trend Competition in this industry is High and the trend is Increasing



Barriers to Entry The single largest barrier to face new entrants over the past five years has been the capital investment required to establish operations in this industry. Such expenditure includes the cost of purchasing or constructing manufacturing facilities and the cost of equipment and machinery. Other expenditure, such as raw material and labour costs, may hinder the successful entry of new players.

Prospective operators planning to enter this industry have also been hindered by the lack of product differentiation among players. Despite often choosing to operate in a niche market, players have faced a well-developed and often saturated product market across both the toy and sporting good segment. New players have also been hindered by the cost of establishing brand names and product image in the marketplace, which is particularly important in this industry. Local manufacturers are generally disadvantaged by other difficulties like obtaining international exposure associated with establishing a brand name. Some sporting equipment brands have entrenched positions through longstanding historical ties with sporting bodies.

Although not a formal barrier to entry,

new players face strong competition due to the level of market dominance held by key players in this industry. Industry players have posed as a barrier to entry in terms of the breadth of locations in which they operate and the range of products they offer. In addition, new players have also been exposed to strong competition from imports.

Over the past five years, obtaining the copyrights and licences of movie or cartoon characters (often toys emerge out of children’s film and TV productions, with the intellectual capital retained by the film producer) has been an increasing trend giving very successful results financially to industry players. Therefore, obtaining new licences (they are usually very costly) could well pose a barrier to entry to potential entrants to the industry.

Basis of Competitioncontinued

product differentiation (such as product quality and marketing) are important, with the relative importance of these factors varying between market segments. Product quality factors can be real and perceived and include durability, safety, performance enhancing attributes (for sporting equipment) and educational attributes in toys. Brand marketing is more important in some market segments, particularly for higher-priced goods. Price is a more important competitive factor when selling to lower-income families.

ExternalThis industry competes with several large toy companies and smaller toy companies, and to a lesser extent, with children’s book publishers. Industry operators also compete with computer and computer equipment manufacturers; telecommunications, broadcasting and transceiving equipment manufacturing; electric equipment manufacturing; book and other publishing; and recorded media manufacturing and publishing.

Barriers to entry checklist Level

Competition HighConcentration LowLife cycle stage DeclineCapital intensity MediumTechnology change LowRegulation & policy MediumIndustry assistance Low


Level & Trend Barriers to Entry in this industry are Medium and Steady



Industry Globalisation

The level of globalisation in the industry grew strongly over the past decade. This largely stemmed from the volume of goods imported into Australia from overseas, particularly China. In 2010-11, exports will account for 25.3% of total industry revenue, compared with 25.7% in 2005-06. Overall, the decline suggests domestic production has decreased in importance for the industry and is increasingly being replaced by imported products. This is supported by data indicating imports as a share of domestic demand have increased from 79.0% in 2005-06 to 81.2% in 2010-11. These factors are strong evidence suggesting domestic manufacturing in this industry is declining. Imports are mainly from the low-cost, mass-producing Asian manufacturing centres, as well as from countries that have developed strong brand names and access to low-cost

plastic raw materials.Globalisation has also been supported

by the dominance of foreign-owned players in the domestic market. Mattel and Hasbro are both foreign owned. Mattel Pty Ltd, based in Melbourne, is a subsidiary of the USA-based Mattel Inc., a worldwide leader in the design, manufacture and marketing of toys, while Hasbro Australia Limited is a subsidiary of Hasbro Inc., the second-largest toymaker in the world behind Mattel. At the domestic level, analysis indicates that there is little foreign market operation undertaken by domestic players within the industry. However, Rip Curl does operate licences that enable foreign operators to purchase a licence from Rip Curl, which enables them to manufacture and sell products in the United States, France, South Africa, Japan, Indonesia, Brazil, Argentina, Peru and Chile.


Trade Globalisation Going Global: Toy and Sporting Good Manufacturing 2000-2011

Expo

rts/

reve

nue

Expo

rts/

reve

nue

200

150

100

50

0

200

150

100

50

0

Imports/domestic demand Imports/domestic demand0 040 4080 80120 120160 160

International trade is a major determinant of an industry’s level of globalisation.

Exports offer growth opportunities for fi rms. However there are legal, economic and political risks associated with dealing in foreign countries.

Import competition can bring a greater risk for companies as foreign producers satisfy domestic demand that local fi rms would otherwise supply.

Export ExportGlobal Global

ImportLocal ImportLocal


2000

2011

Level & Trend Globalisation in this industry is High and the trend is Increasing


Player Performance Established in 1893, Pacific Brands Limited operates as a manufacturer and wholesaler of ‘everyday essential brands’. Company operations are segmented into underwear and hosiery, workwear, homewares and footwear, outerwear and sports.

Considered the largest operating group for the company, the underwear and hosiery segment’s key brands include Bonds, Berlei, Holeproof, Rio and Razzamatazz. Products are available across Australasia and selected international markets. The footwear, outerwear and sports segment’s key brands include Volleys, Clarks (footwear), Mosimmo, Superdry (streetwear), Slazenger (sportswear) and Malvern Star, (bicycles, parts and accessories). Workwear brands include Hard Yakka, KingGee, Can’t Tear ‘Em, Dowd, NNT, Stylecorp and Stubbies. The homewares business is a manufacturer and marketer of beds, pillows, quilts, bedlinen, towels, carpet underlay and foam. Brands in this segment include Sheridan, Tontine, Sleepmaker, Dunlopillo, Simmons, Dunlop.

Company sales over 2009-10 fell

11.1% to $1.7 billion due to structural changes which led to lost revenue from divested businesses and discontinued brands. The difficult and changing retail environment also affected Pacific Brands’ performance. The footwear, outerwear and sport segment’s sales declined 18.7% for the year due to the exit of clothing and footwear operations in the United Kingdom and China. Sales were also affected by a downturn in discretionary spending.

Pacific Brands experienced unprecedented market conditions over 2008-09, leading to a fall in sales of 5.5% to $2.0 billion. Revenue was affected by a fall in stock keeping units (SKUs), the closure of four factories and a reduction in the company’s workforce of 800 people. Additionally, a sharp increase in the unit cost of imported products (due largely to the collapse of the Australian dollar) further affected company performance throughout the year. Sales by the outerwear and sports segment fell 2.3% to $641.3 million.

Pacific Brands posted steady sales growth for 2007-08, with revenue up 16.3%. Australian operations posted

Major CompaniesPacific Brands Limited | rip Curl Group Pty Ltd | Other

Major players(Market share)

76.5%Other

Pacific Brands Limited 14.0%

rip Curl Group Pty Ltd 9.5%


Pacific Brands Limited Market share: 14.0%

Pacifi c Brands Limited – fi nancial performance

yearrevenue

($ million) (% change)NPAT

($ million) (% change)

2005-06 1,624.9 6.8 101.2 0.3

2006-07 1,820.7 12.0 106.0 4.7

2007-08 2,116.6 16.3 116.6 10.0

2008-09 1,959.8 -7.4 -234.5 n/C

2009-10 1,742.4 -11.1 52.7 n/C

SOURCE: IBISWORLD


Major Companies

Player Performance Established in Victoria in 1969, Rip Curl Group operates as a manufacturer of wetsuits and a wholesaler and retailer of surf and snow apparel, wetsuits, watches, footwear and accessories. In its early days, the company manufactured surfboards, which did well in a highly competitive market. In 1970, the company ventured into wetsuit manufacturing, which at the time was serviced by only two companies. By the mid-1970s, the company’s involvement in competitive surfing was clearly evident and by 1977 the company was producing wetsuits for windsurfers, sailors and water skiers as well as surfers.

Global demand for the company’s products led to the establishment of Rip Curl International. The company decided to establish license agreements whereby it would sell its technology, designs and ideas to various countries, rather than trying to manufacture the

goods in Australia and export them overseas. This led to the establishment of the company’s first corporate licensee, Lowers, in Southern California in 1981. This was followed by the establishment of Frogs, a new company that began making Rip Curl products in Hossegor, France in 1985. Since that time, the company has expanded to nine corporate licences that manufacture and sell products in the United States, France, South Africa, Japan, Indonesia, Brazil, Argentina, Peru and Chile.

Rip Curl’s sales averaged a decline of 1.3% per annum in nominal terms over the five years through 2009-10. This compares with weak growth of just 0.5% per annum in total industry sales over the same period. IBISWorld estimates sales growth over this period was affected by fluctuations in real household disposable income, consumer sentiment, retail spending patterns and international imports.

Player Performancecontinued

growth of 2.5%, while operations in New Zealand experienced a difficult year. Sales by the outerwear and sport segment rose 80.7%, owing to the first full year of operations by the Yakka and Brand Collective businesses.

Pacific Brands posted a solid performance during 2006-07, with sales up 15.3%, growth in gross margin of 13.5% and a rise in company profitability of 6.0%. During 2006-07,

the outerwear and sport segment generated revenue of $363.2 million, representing an increase of 45.8% compared with 2005-06. Strong brand positioning across the lifestyle category, the implementation of structural changes, a strategic review of the business and strong sales growth across the King Gee and Everlast brands aided the performance of the outerwear and sport segment.

rip Curl Group Pty Ltd Market share: 9.5% Industry Brand Names Rip Curl

rip Curl Group Pty Ltd – fi nancial performance

yearrevenue

($ million) (% change)NPAT

($ million) (% change)

2005-06 356.7 13.2 12.1 n/C

2006-07 387.5 8.6 22.8 88.4

2007-08 415.5 7.2 14.4 -36.8

2008-09 439.1 5.7 33.9 135.4

2009-10 395.0 -10.0 n/C n/C

SOURCE: IBISWORLD


Major Companies

Other Companies This industry comprises operators that are mainly engaged in the manufacture of toys and sporting goods. However, a number of other players have a significant impact on Australia’s manufacturing industry, even though these players are not directly involved in manufacturing activities. Mattel and Hasbro are primarily engaged in the importation and wholesale of goods from foreign suppliers. In doing so, they affect the competitiveness of the local manufacturing market via the entry of cheaper imported goods.

Mattel Pty LimitedMattel Pty Limited is a subsidiary of the US-based Mattel Inc., a worldwide leader in the design, manufacture and marketing of toys. On a global scale, Mattel posted revenue of almost $6.0 billion in 2007 and employed about 31,000 people. Mattel is believed to supply about 20% of the Australian toy market. Company brands wholesaled within Australia include Barbie Dolls, Fisher Price, Masters of the Universe, Hot Wheels, Matchbox cars and Rainbow

Brite. Mattel also wholesales action figures and toys based on Walt Disney movies and the Harry Potter children’s books. Barbie Dolls account for approximately 30% of Mattel’s business each year.

Hasbro Australia LimitedHasbro is a subsidiary of Hasbro Inc. and is regarded the second-largest toymaker in the world behind Mattel. Globally, Hasbro Inc. generated sales of about $3.8 billion in 2007 and employed 5,900 people. In early 1991, Hasbro Inc. acquired Tonka Corporation in the United States (Hasbro was represented by Milton Bradley in Australia), resulting in Hasbro Australia becoming one of the largest toy companies in Australia. Hasbro Australia’s brands include Kenner Parker games, Tonka trucks, Cabbage Patch Dolls, Play Doh, GI Joe, Playskool, and Milton Bradley games and puzzles. In early 1995, Hasbro Inc. purchased the games division of Waddington PLC whose brands included Monopoly, Cluedo and Subbuteo.


Capital Intensity Capital expenditure has remained a vital part of operations for toy and sporting good producers over the past five years. In fact, capital expenditure is estimated to have increased owing to advances in automation techniques leading to a rise in efficiency and output volumes. Capital expenditure for this industry comes in the form of expenditure on machinery and equipment required for manufacturing. Larger manufacturers in this industry have the financial ability to invest in more sophisticated capital equipment and defray the cost of this of this equipment across a larger sales base. Alternatively, smaller-based operators are better equipped to cater for the specific needs of smaller clients. However, these smaller and often privately owned businesses are more

labour intensive. The medium level of labour intensity

reflects this industry’s need for labourers, technicians and designers that are actively involved in the

Operating ConditionsCapital Intensity | Technology & Systems | Industry Volatilityregulation & Policy | Industry Assistance

Tools of the Trade: Growth Strategies for Success


Labo

ur In

tens

ive Capital Intensive

Change in Share of the Economy

New Age Economy

recreation, Personal Services, Health and Education. Firms benefi t from personal wealth so stable macroeconomic conditions are imperative. Brand awareness and niche labour skills are key to product differentiation.

Traditional Service Economy

wholesale and retail. Reliant on labour rather than capital to sell goods. Functions cannot be outsourced therefore fi rms must use new technology or improve staff training to increase revenue growth.

Old Economy

Agriculture and Manufacturing. Traded goods can be produced using cheap labour abroad. To expand fi rms must merge or acquire others to exploit economies of scale, or specialise in niche, high-value products.

Investment Economy

Information, Communications, Mining, Finance and real Estate. To increase revenue fi rms need superior debt management, a stable macroeconomic environment and a sound investment plan.

Textile Product Manufacturing

Sponge, Hoses, Belts and Other rubber Product Manufacturing

Leather and Leather Substitute Product Manufacturing


Capital intensity

0.5

0.0

0.1

0.2

0.3

0.4


Dotted line shows a high level of capital intensity

Capital units per labour unit


ManufacturingEconomy

Level The level of capital intensity required is Medium


Operating Conditions

revenue Volatility Trends in real household disposable income play a significant role in consumer demand for toy and sporting goods. Rising 3.8% per annum over the past five years, the steady rise in incomes enabled consumers to demand a broader selection of industry merchandise. As a result, the industry has experienced a low level of revenue volatility over the past five years.

Sport participation rates also play a pivotal role in the level of consumers

demanding equipment from industry operators. Participation rates, have to some extent, been aided by growing consumer awareness about the health benefits of regular exercise along with the importance of a healthy diet. Hence, the rise in participation over the past five years boded well for manufacturers, leading to a continuous stream of demand for sporting goods.

Consumers aged under 30 are regarded the largest market for toy and sporting

Technology& Systems

The influence of technology in this industry is relatively low, and the use of manual labour is high. This has seen production move to low wage-cost countries. In this industry, new technologies are applied in developing new products and new systems to manufacture products. In some sporting segments, product performance is very important and new technologies can render existing products obsolete in a short period of time. In these segments, research and development capabilities

can be a significant success factor in this industry.

Plastic toys are principally manufactured using injection-moulding processes. This involves forming melted material under pressure into a cavity and ejecting the finished part when the material has solidified. Mould design and toolmaking are important skills that affect the quality and design of final plastic products. Some injection-moulded plastic product manufacturers outsource this activity to specialist die makers.

Capital Intensitycontinued

production. Within this industry, there exist numerous small markets for a range of products. As a result, these operations use small production runs and a high level of labour input. This

‘small production-high labour manufacturing model’ is synonymous with imported manufactured goods, where wage costs are low compared with the domestic market.

Level The level of Technology Change is Low


Volatility vs growth

reve

nue

vola

tility

* (%

)

1000

100

10

1

0.1

Five year annualised revenue growth (%)–30 –10 10 30 50 70

Hazardous

Stagnant

rollercoaster

Blue chip

* Axis is in logarithmic scale


A higher level of revenue volatility implies greater industry risk. Volatility can negatively affect long-term strategic decisions, such as the time frame for capital investment.

When a fi rm makes poor investment decisions it may face underutilised capacity if demand suddenly falls, or capacity constraints if it rises quickly.

Level The level of Volatility is Low



Industry Assistance The general import tariff on toys and sporting goods is set at 5%. Examples of goods subject to the import tariff include wheeled toys ridden by children (tricycles and scooters), dolls, puzzles, water-skis, surfboards, sailboards and other water-sports equipment, golf clubs and other golf equipment, balls, table-tennis goods, construction toys and construction sets,

billiard goods, playing cards, ice-skates, roller skates and fishing rods and reels.

IBISWorld estimates that if the tariff on these goods were reduced then the volume of imported toys and sporting goods would increase, which would benefit the importers. As a result, local manufacturers would need to become more competitive in quality and style.

regulation & Policy Standards Australia, a federal government commission, establishes safety standards for toys. Virtually all toy packages include suggested ages for use. The child’s chronological age, physical size, skill level and maturity, as well as safety, are taken into consideration in developing age labels for different types of toys. To help manufacturers achieve a greater degree of consistency in age-grading practices and age-labelling toy packages, a set of age grading guidelines has been included in AS/NZ 8124. Required cautionary labelling requirements imposed by AS/NZ 8124 cover such products as crib gyms, electrically operated toys, chemistry sets, swim-aids and such toy features as functional points and edges (paper doll

scissors and toy sewing kits needles, for example). Cautionary labels must be bold, legible and conspicuous, and printed in contrasting colour.

Australian copyright laws have given companies the exclusive right to import and distribute a particular brand, usually upmarket, into Australia. However, as of 1 January 2000 the parallel import restrictions were repealed. The lifting of restrictions means that the large retailers are able to source a large range of branded goods from overseas manufacturers rather than the licensed Australian distributors. The change to the copyright law has increased the bargaining power of retailers to push for better wholesale prices from their domestic and international suppliers.

revenue Volatilitycontinued

good manufacturers. Within the toy segment, a myriad of toys are manufactured and marketed to meet the entertainment and educational needs of babies, toddlers, preschoolers, young children and tweens. The children, young adult and adult market is also catered for via the manufacture of more comprehensive games such as computer and video games along with electronic and interactive toys. Age compression, whereby children outgrow toys at a younger age than the target age or demand more adult-like toys, has effectively altered the product mix and created some volatility within industry revenue.

Fluctuations in exchange rates also play an important part in the overall cost of producing toy and sporting goods and

the resulting cost to wholesalers in purchasing final products. With the exception of 2008-09, growth in the trade-weighted index over the past five years affected the cost of inputs for manufacturers, contributing to trends in industry volatility.

Volatility has been influenced by increasing competition from merchandise imported from overseas. Growth in the volume of toy and sporting goods imported into Australia over the past five years affected the competitiveness of domestically produced goods and altered the product mix available to wholesalers. Strong competition also influenced product gross margins, profit and overall sales volumes.

Level & Trend The level of Regulation is Medium and the trend is Steady

Level & Trend The level of Industry Assistance is Low and the trend is Steady



Industry Assistancecontinued

Furthermore, the retail price of imported toys and sporting goods and locally manufactured goods containing imported components would need to decrease.

Other than the presence of Australian Standards, there is no other significant industry-specific protection. A commonwealth government sponsored program run by Australian Sports International (ASI) promotes the international marketing efforts of its sports-related business participants. ASI and Austrade also work with participants on the potential supply of sporting

goods. Australian Toy Association is the relevant association in the industry that provides representation for the industry, organises annual fairs, provides networking and maintains public relations in the industry.

Key tariffsGoods Low rate High rate

General import 5 5

SOURCE: CUSTOMS


Key Statisticsrevenue

($m)

Industry Value Added

($m) Establishments Enterprises EmploymentExports

($m)Imports

($m)wages ($m)

domestic demand

($m)2001-02 841.2 202.1 1,439 1,230 4,000 200.7 1,539.4 113.3 2,179.92002-03 744.6 217.9 1,377 1,175 3,855 202.4 1,603.2 121.2 2,145.42003-04 698.8 199.1 1,325 1,128 3,492 166.3 1,515.2 114.9 2,047.72004-05 635.6 192.8 1,340 1,140 3,171 153.8 1,608 118.6 2,089.82005-06 629 181.4 1,350 1,149 2,979 161.8 1,758 102.8 2,225.22006-07 594.7 183.3 1,342 1,146 2,820 148.9 1,755.2 95.2 2,2012007-08 574.1 176.1 1,330 1,140 2,700 135.8 1,688.9 90.1 2,127.22008-09 550.3 167.7 1,313 1,122 2,600 121.6 1,598.4 86.4 2,027.12009-10 534.2 163.5 1,301 1,109 2,525 129 1,645.9 84.4 2,051.12010-11 521 160 1,287 1,100 2,470 132 1,680 82.7 2,0692011-12 510.1 157.1 1,278 1,095 2,423 134.8 1,708.6 81.2 2,083.92012-13 501.4 154.8 1,271 1,087 2,382 137.1 1,734.2 80 2,098.52013-14 493.9 152.9 1,268 1,082 2,346 139.1 1,756.7 78.9 2,111.52014-15 487.9 151.5 1,260 1,072 2,318 140.9 1,781.3 79.8 2,128.32015-16 483.1 150.5 1,249 1,063 2,299 142.5 1,809.8 79.3 2,150.4Sector rank 129/147 124/147 20/147 19/147 106/147 73/141 26/141 130/147 84/139Economy rank 475/508 469/508 248/508 215/507 425/508 124/215 38/196 475/508 118/193

IVA/revenue (%)

Imports/demand (%)

Exports/revenue (%)

revenue per Employee

($’000)wages/revenue

(%)Employees

per Est.Average wage

($)

Share of the Economy

(%)2001-02 24.03 70.62 23.86 210.30 13.47 2.78 28,325.00 0.022002-03 29.26 74.73 27.18 193.15 16.28 2.80 31,439.69 0.022003-04 28.49 74.00 23.80 200.11 16.44 2.64 32,903.78 0.022004-05 30.33 76.95 24.20 200.44 18.66 2.37 37,401.45 0.022005-06 28.84 79.00 25.72 211.14 16.34 2.21 34,508.22 0.022006-07 30.82 79.75 25.04 210.89 16.01 2.10 33,758.87 0.022007-08 30.67 79.40 23.65 212.63 15.69 2.03 33,370.37 0.012008-09 30.47 78.85 22.10 211.65 15.70 1.98 33,230.77 0.012009-10 30.61 80.24 24.15 211.56 15.80 1.94 33,425.74 0.012010-11 30.71 81.20 25.34 210.93 15.87 1.92 33,481.78 0.012011-12 30.80 81.99 26.43 210.52 15.92 1.90 33,512.17 0.012012-13 30.87 82.64 27.34 210.50 15.96 1.87 33,585.22 0.012013-14 30.96 83.20 28.16 210.53 15.97 1.85 33,631.71 0.012014-15 31.05 83.70 28.88 210.48 16.36 1.84 34,426.23 0.012015-16 31.15 84.16 29.50 210.13 16.41 1.84 34,493.26 0.01Sector rank 65/147 10/139 34/141 129/147 77/147 146/147 138/147 124/147Economy rank 275/508 12/193 53/215 329/508 270/508 459/508 400/508 469/508

Figures are inflation-adjusted 2011 dollars. Rank refers to 2011 data.

revenue (%)

Industry Value Added

(%)Establishments

(%)Enterprises

(%)Employment

(%)Exports

(%)Imports

(%)wages

(%)

domestic demand

(%)2002-03 -11.5 7.8 -4.3 -4.5 -3.6 0.8 4.1 7.0 -1.62003-04 -6.2 -8.6 -3.8 -4.0 -9.4 -17.8 -5.5 -5.2 -4.62004-05 -9.0 -3.2 1.1 1.1 -9.2 -7.5 6.1 3.2 2.12005-06 -1.0 -5.9 0.7 0.8 -6.1 5.2 9.3 -13.3 6.52006-07 -5.5 1.0 -0.6 -0.3 -5.3 -8.0 -0.2 -7.4 -1.12007-08 -3.5 -3.9 -0.9 -0.5 -4.3 -8.8 -3.8 -5.4 -3.42008-09 -4.1 -4.8 -1.3 -1.6 -3.7 -10.5 -5.4 -4.1 -4.72009-10 -2.9 -2.5 -0.9 -1.2 -2.9 6.1 3.0 -2.3 1.22010-11 -2.5 -2.1 -1.1 -0.8 -2.2 2.3 2.1 -2.0 0.92011-12 -2.1 -1.8 -0.7 -0.5 -1.9 2.1 1.7 -1.8 0.72012-13 -1.7 -1.5 -0.5 -0.7 -1.7 1.7 1.5 -1.5 0.72013-14 -1.5 -1.2 -0.2 -0.5 -1.5 1.5 1.3 -1.4 0.62014-15 -1.2 -0.9 -0.6 -0.9 -1.2 1.3 1.4 1.1 0.82015-16 -1.0 -0.7 -0.9 -0.8 -0.8 1.1 1.6 -0.6 1.0Sector rank 128/147 107/147 103/147 99/147 123/147 50/141 75/141 106/147 92/139Economy rank 460/508 420/508 411/508 391/507 463/508 77/215 98/196 409/508 128/192

Annual Change

Key ratios

Industry data



Jargon & Glossary

BArrIErS TO ENTry Barriers to entry can be High, Medium or Low. High means new companies struggle to enter an industry, while Low means it is easy for a firm to enter an industry.

CAPITAL/LABOur INTENSITy An indicator of how much capital is used in production as opposed to labour. Level is stated as High, Medium or Low. High is a ratio of less than $3 of wage costs for every $1 of depreciation; Medium is $3-$8 of wage costs to $1 of depreciation; Low is greater than $8 of wage costs for every $1 of depreciation.

dOMESTIC dEMANd The use of goods and services within Australia; the sum of imports and domestic production minus exports.

EArNINGS BEFOrE INTErEST ANd TAX (EBIT) IBISWorld uses EBIT as an indicator of a company’s profitability. It is calculated as revenue minus expenses, excluding tax and interest.

EMPLOyMENT The number of working proprietors, partners, permanent, part-time, temporary and casual employees, and managerial and executive employees.

ENTErPrISE A division that is separately managed and keeps management accounts. The most relevant measure of the number of firms in an industry.

ESTABLISHMENT The smallest type of accounting unit within an Enterprise; usually consists of one or more locations in a state or territory of the country in which it operates.

EXPOrTS The total sales and transfers of goods produced by an industry that are exported.

IMPOrTS The value of goods and services imported with the amount payable to non-residents.

INduSTry CONCENTrATION IBISWorld bases concentration on the top four firms. Concentration is identified as High, Medium or Low. High means the top four players account for over 70% of revenue; Medium is 40 –70% of revenue; Low is less than 40%.

INduSTry rEVENuE The total sales revenue of the industry, including sales (exclusive of excise and sales tax) of goods and services; plus transfers to other firms of the same business; plus subsidies on production; plus all other operating income from outside the firm (such as commission income, repair and service income, and rent, leasing and hiring income); plus capital work done by rental or lease. Receipts from interest royalties, dividends and the sale of fixed tangible assets are excluded.

INduSTry VALuE AddEd The market value of goods and services produced by an industry minus the cost of goods and services used in the production process, which leaves the gross product of the industry (also called its Value Added).

INTErNATIONAL TrAdE The level is determined by: Exports/Revenue: Low is 0-5%; Medium is 5-20%; High is over 20%. Imports/Domestic Demand: Low is 0-5%; Medium is 5-35%; and High is over 35%.

LIFE CyCLE All industries go through periods of Growth, Maturity and Decline. An average life cycle lasts 70 years. Maturity is the longest stage at 40 years with Growth and Decline at 15 years each.

NON-EMPLOyING ESTABLISHMENT Businesses with no paid employment and payroll are known as non-employing establishments. These are mostly set-up by self employed individuals.

VOLATILITy The level of volatility is determined by the percentage change in revenue over the past five years. Volatility levels: Very High is greater than ±20%; High Volatility is between ±10% and ±20%; Moderate Volatility is between ±3% and ±10%; and Low Volatility is less than ±3%.

wAGES The gross total wages and salaries of all employees of the establishment.

Industry Jargon

IBISworld Glossary

AGE COMPrESSION The trend whereby children demand more adult-like toys at a younger age. Also known as ‘children getting older younger’.

INJECTION-MOuLdING PrOCESSES The production of good through the injection of heated plastic into moulds.

PLAy VALuE The perceived value of a toy. For instance, if the toy is engaging and fun for children, it is deemed to have play value.

disclaimer

This product has been supplied by IBISWorld Pty Ltd. (‘IBISWorld’) solely for use by its authorised licenses strictly in accordance with their license agreements with IBISWorld. IBISWorld makes no representation to any other person with regard to the completeness or accuracy of the data or information contained herein, and it accepts no responsibility and disclaims all liability (save for liability which cannot be lawfully disclaimed) for loss or damage whatsoever suffered or incurred by any other person resulting from

the use of, or reliance upon, the data or information contained herein. Copyright in this publication is owned by IBISWorld Pty Ltd. The publication is sold on the basis that the purchaser agrees not to copy the material contained within it for other than the purchasers own purposes. In the event that the purchaser uses or quotes from the material in this publication – in papers, reports, or opinions prepared for any other person – it is agreed that it will be sourced to: IBISWorld Pty Ltd

At IBISWorld we know that industry intelligence is more than assembling factsIt is combining data with analysis to answer the questions that successful businesses askIdentify high growth, emerging & shrinking marketsArm yourself with the latest industry intelligenceAssess competitive threats from existing & new entrantsBenchmark your performance against the competitionMake speedy market-ready, profit-maximising decisions

who is IBISworld?We are strategists, analysts, researchers, and marketers. We provide answers to information-hungry, time-poor businesses. Our goal is to provide real world answers that matter to your business in our 500 Australian industry reports. When tough strategic, budget, sales and marketing decisions need to be made, our suite of Industry and Risk intelligence products give you deeply-researched answers quickly.

IBISworld MembershipIBISWorld offers tailored membership packages to meet your needs.

Copyright 2011 IBISWorld Pty Ltd

www.ibisworld.com.au | (03) 9655 3881 | [email protected]