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

TOPIC: ANALYSIS OF

CONFECTIONERY MARKET IN 2021GROUP ASSIGNMENT [ECO111]

Name member Code

1 Đặng Ngọc Hảo SS1707822 Nguyễn Toàn Anh SS1707583 Nguyễn Thảo Tiên SS1707684 Nguyễn Khánh Linh SS1707715 Nguyễn Mai Hoàng Khanh SS170742

Tháng 7, Thành phố Hồ Chí Minh

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

LIST OF FIGURESFigure 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 manyfluctuations and difficulties in both the consumer market and labor market The disruption of thesupply chain causes several input shortages, especially in the food products industry which can beeasily affected by external factors Surely, the consumption which is dependent on the labor marketalso changes 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 decreases and domestic goods are prioritized (Khanh Huyen, 2021) In this paper, we onlyfocus on the microeconomics factors that have an impact on the market, which comprises overallanalysis and detail analysis.

II ANALYSIS

OVERALL ANALYSIS OF SITUATION

The Tet confectionery market is produced and consumed as cakes and candies within a certain periodof time on each Tet holiday every year.

Imported goods are also less than last year because of the impact of the covid 19 epidemic, sellersare worried that buyers will buy less than every year, consumption of Tet confectionery alsodecreases because buyers have less money to pay for products for Tet as every year because offighting 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, thegovernment has closed the trade That causes less goods to be imported and goods to become moreexpensive.

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

Rising prices reflect the fact that sellers and buyers have less interaction with each other Buyersdecrease, so the price of goods increases, along with the scarcity of production and import ofconfectionery from stores, so the value of that item increases And in order to be able to buy the sameconfectionery products as in 2020, customers have to spend more money to pay more for eachproduct The price is as follows: the price of confectionery products increases slightly from 2,000 to8,000 VND with different items packaging boxes for Tet with paper boxes and increasing from VND10,000 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 morecustomers and to increase purchases, distributors have launched many promotions and voucherswhen customers buy up to a certain value This may stimulate demand, but distributors and agentsmust 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) Inaddition, at the system of 7 supermarkets Big C, Aeon, EMart, Mega Market, Vin Mart, and Lottemart, customers can participate in the lucky draw program "Experience Royal dinner with family atguests' home." 5-star hotel" for any Danisa purchase (except 200g products) Besides, when shoppingonline at the official Mayora store on Lazada, customers also have many other special offers orparticipate in the sweepstakes.

Many customers have a short-term trade-off behavior, thinking that Tet is only once a year and this isalso an occasion for family gatherings They are willing to spend money to shop for Tet in exchangefor 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 enterpriseshave started to market many Tet products and do not raise prices high in order to share with people'sdifficulties To ensure market control on the occasion before, during and after Tet, the Department ofIndustry 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 onlydomestically but also abroad Depending on the purpose of use, the market is also divided into 2types:

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

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

DETAILED ANALYSIS

DEMAND AND SUPPLY

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

There are many factors that can shift the demand curve - ‘a graph of the relationship betweenthe price of a good and the quantity demanded’ (Mankiw, 2020), including income, prices ofrelated goods, tastes, expectations, number of buyers In this case, the pandemic has a hugeimpact 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 andincrease in demand when they have higher income While COVID 19 pandemic damages theeconomy seriously, the income of each buyer also has been affected Overall, their incomehad decreased ( especially workers, moderate income class), due to the slower developmentof 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 thedecrease in demand.

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

Besides, the demand curve-’a graph of the relationship between the price of a good and thequantity 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, theinput prices and number of sellers are only concentrated.

Initially, it is unavoidable that the disruption of the supply chains would have an adverseimpact on input prices The increase in price of input for production became an extremepressure on many producers They can not produce on a mass scale as normally because thescarcity 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 considerableperiod of time, because of a temporary shut-down command from the government, manysellers could not adapt and exit the market Surely, the result of the fall in number sellers isthe 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 leadto 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 pricesand are similar to each other.

Due to the impact of COVID 19 pandemic, both supply and demand curve must shift to theleft In detail, the expensive input prices and the reduction in the number of sellers haveentailed the decrease in supply, while their income has been seriously influenced whichcauses 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 pricefrom 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 thepanoramic view and the result of the article as well.

Consumers' demand for confectionery on Tet holidays is increasing day by day Therefore, for eachsupply 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, interms of microeconomics, the study of small problems of socio-economics, from the small tounderstand 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 knowledgehas 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 Accordingto state regulations, confectionery is not banned from import, so businesses will register to checkhow products are imported Regarding tax issues on products that sellers as well as buyers payablewhen doing business and carrying out economic activities This is called a compulsory collection ofthe 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 asincome tax, including consumption property, levied on corporate tax, levied on the needs and incomeof sellers and consumers use The state will divide the average income of the people, thereby settingthe tax rate for each product on the market In the Tet confectionery market, the state focuses ontaxing the import and export of products.

According to state regulations, confectionery is not banned from import, so businesses will registerto check how imported products are Next is considering the main part of taxation, we have 2separate 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 normaldays 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 confectioneryproducts according to the current state regulations at 13-14% and depending on each commoditycode different candies.

If we assume that today's pancakes are imported from countries that have FTAs (Free TradeAgreements) with Vietnam, it is possible that manufacturers' goods will have a high percentage ofbeing eligible for preferential tariffs, but with The requirements of this agreement are specificallystated to be clear provisions on the route or period of application for tax reductions, usually lastingless 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 confectioneryproducts according to that opportunity Understanding the advantages and disadvantages, therebyincreasing 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 tomiss the incentives they receive when exporting confectionery to other countries and from othercountries to their own countries Therefore, depending on income and import and export process totax 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 perbox of ordinary cakes and tax will be imposed on the buyer When the tax rate is 10%, the demandcurve moves down 10% from D1 to D2 The equilibrium point will be reduced from 30 to 20 Theprice the seller receives from 26000 VND to 25000 VND The price the buyer has to pay includes taxincreases from 26000 VND to 27500 VND.

Figure 4: Tax on buyersTax on Sellers

If considering the case of the seller's tax Taxes are levied 10% on sellers, the supply curve moves up10% from S1 to S2 Equilibrium quantity decreased from 30 to 20 boxes of confectionery The pricethe buyer had to pay increased from 26000 VND to 27000 VND The price that the seller receivesafter 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 canhave(Mankiw, 2020) It details the organization's income range so that when an activity is carried outor 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 budgetand avoid running into problems with it

Due to the long-lasting impacts of the COVID 19 pandemic and significant expenditure issues, firmsare required to contribute billions of dong to the anti-epidemic, even temporary shut down Dealingwith money and improving a company's resources and offerings is a delicate matter that takes a longtime to address As a result, the majority of domestic candy production facilities experiencesignificant consumption challenges, and retailers worry that they won't be able to sell their productswhen they return home.According to data, the overall retail sales of goods and services in November2021 declined 12.2 percent when compared to 2020 before the pandemic started, despite an increaseof 6.2 percent from October of the same year out ( Khánh Huyền, 2021) A market study revealedthat the cost of confectionary items as a whole increased marginally from 2,000 to 8,000 VND, andthat the cost of paper box packaging increased marginally from 10,000 to 30,000 VND at the sameprice 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 theitems to sell, meaning they won't be sold ( Khánh Huyền, 2021 )

To analyze deeply, We assume a table of data

Confectionery A

 Her income decreases to 1000$ because she can not work for the company 6 days per week andboth 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.