topic analysis of confectionery market in 2021

The confectionery market before Tet holiday is a typical example, looking at theoverview at the end of 2021, it is summarized that: sweet products price increase, consumptionmarket decre

FPT UNIVERSITY – CAMPUS HO CHI MINH

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TOPIC: ANALYSIS OF

CONFECTIONERY MARKET IN 2021

GROUP ASSIGNMENT [ECO111]

Name member Code

1 Đặng Ngọc Hảo SS170782

2 Nguyễn Toàn Anh SS170758

3 Nguyễn Thảo Tiên SS170768

4 Nguyễn Khánh Linh SS170771

5 Nguyễn Mai Hoàng Khanh SS170742

Tháng 7, Thành phố Hồ Chí Minh

I INTRODUCTION 2

II ANALYSIS 2

OVERALL ANALYSIS OF SITUATION 2

DETAILED ANALYSIS 3

DEMAND AND SUPPLY 3

Demand 3

Supply 4

Supply and Demand Together 5

TAX 6

Tax on Buyers 7

Tax on Sellers 8

THEORY OF CONSUMER 9

The budget constraint 9

Perfect Substitutes and Perfect Complements 11

Change in price and income 12

FIXED COST AND VARIABLE COST 13

Companies decision 14

III CONCLUSION 14

Reference: 14

LIST OF FIGURES Figure 1 : Shift in the demand curve 4

Figure 2 : Shift in the supply curve 5

Figure 3 : A shift in both supply and demand 6

Figure 4 : Tax on buyers 8

Figure 5 : Tax on sellers 9

Figure 6 : Shifts in the consumer’s budget constraints 11

Figure 7 : Perfect substitutes and perfect complements 11

Figure 8 : A change in price 12

Figure 9 : changes in prices and income 13

At the end of 2021, due to the impact of Covid-19, Vietnam's economy and market faced many fluctuations and difficulties in both the consumer market and labor market The disruption of the supply chain causes several input shortages, especially in the food products industry which can be easily affected by external factors Surely, the consumption which is dependent on the labor market also changes The confectionery market before Tet holiday is a typical example, looking at the overview at the end of 2021, it is summarized that: sweet products price increase, consumption market decreases and domestic goods are prioritized (Khanh Huyen, 2021) In this paper, we only focus on the microeconomics factors that have an impact on the market, which comprises overall analysis and detail analysis

II ANALYSIS

OVERALL ANALYSIS OF SITUATION

The Tet confectionery market is produced and consumed as cakes and candies within a certain period

of time on each Tet holiday every year

Imported goods are also less than last year because of the impact of the covid 19 epidemic, sellers are worried that buyers will buy less than every year, consumption of Tet confectionery also decreases because buyers have less money to pay for products for Tet as every year because of fighting with the covid 19 epidemic and the price of products also increased

Because the situation is becoming more and more complicated, to ensure the health of the people, the government has closed the trade That causes less goods to be imported and goods to become more expensive

During the epidemic period, most people practice social distancing, some people even have to cut staff when companies face difficulties, so their income will decrease, which means that the purchasing power of bakery products will be reduced Tet sweets also decreased, the revenue of Tet confectionery shops also decreased compared to the previous year

Rising prices reflect the fact that sellers and buyers have less interaction with each other Buyers decrease, so the price of goods increases, along with the scarcity of production and import of confectionery from stores, so the value of that item increases And in order to be able to buy the same confectionery products as in 2020, customers have to spend more money to pay more for each product The price is as follows: the price of confectionery products increases slightly from 2,000 to 8,000 VND with different items packaging boxes for Tet with paper boxes and increasing from VND 10,000 to VND 30,000 for Tet packaging boxes with tin boxes.(cafef, 2021)

Also due to the epidemic situation, buyers now tend to buy goods online In order to reach more customers and to increase purchases, distributors have launched many promotions and vouchers when customers buy up to a certain value This may stimulate demand, but distributors and agents must accept a slight reduction in profits from the business For example: From January 15 to 30,

2021, at 22 supermarkets across the country, with every Danisa order from 1 million VND, customers will immediately receive a shopping voucher worth 50,000 VND (afamily, 2020) In addition, at the system of 7 supermarkets Big C, Aeon, EMart, Mega Market, Vin Mart, and Lotte mart, customers can participate in the lucky draw program "Experience Royal dinner with family at guests' home." 5-star hotel" for any Danisa purchase (except 200g products) Besides, when shopping online at the official Mayora store on Lazada, customers also have many other special offers or participate in the sweepstakes

Many customers have a short-term trade-off behavior, thinking that Tet is only once a year and this is also an occasion for family gatherings They are willing to spend money to shop for Tet in exchange for joy and a happy atmosphere

The price of confectionery in the market increased massively, causing an imbalance in prices Therefore, according to the article, Ms Tran Phuong Lan informed: "Currently, large enterprises have started to market many Tet products and do not raise prices high in order to share with people's difficulties To ensure market control on the occasion before, during and after Tet, the Department of Industry and Trade will set up working groups to ensure that goods do not increase in price suddenly, lack of goods, and lack of goods

Along with the tastes and needs of customers, the confectionery market has expanded not only domestically but also abroad Depending on the purpose of use, the market is also divided into 2 types:

For the purpose of enjoying and receiving guests, customers choose to buy domestic products As a result, the output of products produced and consumed increases, boosting the domestic economy

For the purpose of giving to others, customers choose to buy imported goods Therefore, the output of products consumed in the country decreased

DETAILED ANALYSIS

DEMAND AND SUPPLY

Therefore, to have a panoramic view, analyzing demand and supply is indispensable

Demand

There are many factors that can shift the demand curve - ‘a graph of the relationship between the price of a good and the quantity demanded’ (Mankiw, 2020), including income, prices of related goods, tastes, expectations, number of buyers In this case, the pandemic has a huge impact on most of them, particularly income and price of related goods

First of all, it can be clearly realize , sweet items are normal goods as there will be and increase in demand when they have higher income While COVID 19 pandemic damages the economy seriously, the income of each buyer also has been affected Overall, their income had decreased ( especially workers, moderate income class), due to the slower development

of the economy This decrease had led to the shift in the curve demand to the left

Besides, the number of comsumers also afftect to the change in demand There are not many people willing to pay for sweet goods have led to the decrease in demand

In addition, the prices of related goods is a point that we have to consider in this change In this case, we assess that domestic products and import products are the substitutes, which influences each other For the reason that the supply chains are disrupted to prevent the spread of COVID 19 virus, foreign goods became extremely expensive because of the cut in the amount of products, which led to markets becoming more dependent on domestic production As a result, the increase in price of imported goods entails the demand curve of sweet domestic goods will shift to the right

Supply

Besides, the demand curve-’a graph of the relationship between the price of a good and the quantity supplied’ (Mankiw, 2020) is also an important part that we have to consider Although COVID 19 has an influence on many variables that can shift the supply curve, the input prices and number of sellers are only concentrated

Initially, it is unavoidable that the disruption of the supply chains would have an adverse impact on input prices The increase in price of input for production became an extreme pressure on many producers They can not produce on a mass scale as normally because the scarcity of ingredients plus the difficulty of custom post had put the price up many times Consequently, the supply curve shifts to the left as a reduction in supply

While the input prices are variable, the number of sellers also went down In a considerable period of time, because of a temporary shut-down command from the government, many sellers could not adapt and exit the market Surely, the result of the fall in number sellers is the decrease in supply ( the supply curve shifts to the left)

Supply and Demand Together

at which those curves intersect, called equilibrium (Mankiw, 2020) All the variables will lead

to the changes in equilibrium, and our conclusion often stems from the analysis of this point

In the case that we have mentioned, it is assumed that all sweet goods have the same prices and are similar to each other

Due to the impact of COVID 19 pandemic, both supply and demand curve must shift to the left In detail, the expensive input prices and the reduction in the number of sellers have entailed the decrease in supply, while their income has been seriously influenced which causes a fall in demand

fall in demand, it is just a small part (the demand of sweet goods for Tet holiday is enormous)

in comparison with the large decrease in supply As a result, we have the increase in price from P1 to P2 and the reduction in quantity from Q1 to Q2

In a nutshell, from the model supply curve and demand curve we can clearly understand the panoramic view and the result of the article as well

TAX

Consumers' demand for confectionery on Tet holidays is increasing day by day Therefore, for each supply chain, investors must make specific decisions to make the price reasonable, tax reasonable, suitable to the income of each region and each household on the land country As we all know, in terms of microeconomics, the study of small problems of socio-economics, from the small to understand the big ones, micro here means the small things like the price and demand for goods market The stories in the market in Vietnam are related to microeconomics and a lot of knowledge has been applied in articles to be applied to the market

The issue of price control today is strictly considered by the government and the market According

to state regulations, confectionery is not banned from import, so businesses will register to check how products are imported Regarding tax issues on products that sellers as well as buyers payable when doing business and carrying out economic activities This is called a compulsory collection of the state for individuals in order to meet the common needs and interests of society and the people Regarding taxes, there are many types, especially for confectionery tax, levied on such types as income tax, including consumption property, levied on corporate tax, levied on the needs and income

of sellers and consumers use The state will divide the average income of the people, thereby setting the tax rate for each product on the market In the Tet confectionery market, the state focuses on taxing the import and export of products

According to state regulations, confectionery is not banned from import, so businesses will register

to check how imported products are Next is considering the main part of taxation, we have 2 separate and fixed tax rates that are import tax and value added tax, when imported to Vietnam, these

Normally, import tax is 10%

but when it comes to Tet holidays, the tax can be increased by several percent compared to normal days That is completely reasonable because revenue and income increase on Tet holiday, tax must

import tax rate has been strongly exploited on imports and preferential treatment for confectionery products according to the current state regulations at 13-14% and depending on each commodity code different candies

If we assume that today's pancakes are imported from countries that have FTAs (Free Trade Agreements) with Vietnam, it is possible that manufacturers' goods will have a high percentage of being eligible for preferential tariffs, but with The requirements of this agreement are specifically stated to be clear provisions on the route or period of application for tax reductions, usually lasting less than 10 years Each type of goods, not only confectionery, will have different tax cuts Accordingly, it is necessary to ensure the fairness of benefits between economies across countries, create new development opportunities, and at the same time import and export confectionery products according to that opportunity Understanding the advantages and disadvantages, thereby increasing import and export confectionery products, attracting foreign investors Therefore, businesses cannot help but pay attention to tax policies when importing and exporting so as not to miss the incentives they receive when exporting confectionery to other countries and from other countries to their own countries Therefore, depending on income and import and export process to tax reasonably Let's learn about examples and charts to better understand the tax on confectionery

Tax on Buyers

For example, the current market price of confectionery according to the article is 25,000 VND per box of ordinary cakes and tax will be imposed on the buyer When the tax rate is 10%, the demand curve moves down 10% from D1 to D2 The equilibrium point will be reduced from 30 to 20 The price the seller receives from 26000 VND to 25000 VND The price the buyer has to pay includes tax increases from 26000 VND to 27500 VND

Figure 4: Tax on buyers

Tax on Sellers

If considering the case of the seller's tax Taxes are levied 10% on sellers, the supply curve moves up 10% from S1 to S2 Equilibrium quantity decreased from 30 to 20 boxes of confectionery The price the buyer had to pay increased from 26000 VND to 27000 VND The price that the seller receives after paying the tax is reduced from 26000 VND to 25000 VND

In both case, it is concluded that “taxes levied on sellers and taxes levied on buyers are equivalent”, both of them have shared the burnden of taxes

THEORY OF CONSUMER

The budget constraint

A budget limit is the maximum amount of income and expenses that a person or organization can have(Mankiw, 2020) It details the organization's income range so that when an activity is carried out

or a good or service is produced, it depends on the budget that the person or organization has Individuals or organizations must take steps to boost revenue in order to reach an acceptable budget and avoid running into problems with it

Due to the long-lasting impacts of the COVID 19 pandemic and significant expenditure issues, firms are required to contribute billions of dong to the anti-epidemic, even temporary shut down Dealing with money and improving a company's resources and offerings is a delicate matter that takes a long time to address As a result, the majority of domestic candy production facilities experience significant consumption challenges, and retailers worry that they won't be able to sell their products when they return home.According to data, the overall retail sales of goods and services in November

2021 declined 12.2 percent when compared to 2020 before the pandemic started, despite an increase

of 6.2 percent from October of the same year out ( Khánh Huyền, 2021) A market study revealed that the cost of confectionary items as a whole increased marginally from 2,000 to 8,000 VND, and that the cost of paper box packaging increased marginally from 10,000 to 30,000 VND at the same price as other boxes.( Khánh Huyền, 2021 ) Users think the price is rather expensive, so they

hesitate to buy, making the sale unfavorable The product makes the price when the retailers take the items to sell, meaning they won't be sold ( Khánh Huyền, 2021 )

To analyze deeply, We assume a table of data

Confectionery A

Confectionery B

Confectionery A

Confectionery B

Total Spending

The set of things that the buyer can purchase within their means are displayed by the budget limitation Here, the customer purchases confectionery A and confectionery B in packages The graph and tabular display what the customer can afford if her monthly salary is $2,000, confectionery A costs $20, and confectionery B costs $4 in three case:

 Her income decreases to 1000$ because she can not work for the company 6 days per week and both goods that she consumes have an increase in price

 The only good B increases the price, her income stays the same

 The only good A increases the price, her income stays the same

And all three cases lead to the the adjustment of the optimum point