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Chocolate will be the driving force behind confectionery in 2013. Of the 80 markets covered by Euromonitor International’s research, chocolate is set to register the strongest volume and value performance in 36. Sugar confectionery will be the best performing category in eight markets and gum in nine. In the remaining 27 markets, the results will be ‘mixed’. Even in those, chocolate will grow fastest in value terms in more than a third of the total. Testament to the role that value is playing in chocolate is the fact that the category will outperform at global level all other confectionery products between 2013 and 2018.
Source: Euromonitor International
Value growth is being driven by a number of factors, for example health innovation, more visible branding strategies, certification, sophisticated packaging or simply a taste for indulgence. Crucially, these factors are driving demand for chocolate not only in mature markets but also emerging ones.
Health, for instance, is driving added-value strategies in countries with severe obesity and diabetes issues, like Saudi Arabia. Innovation is tapping into this trend. Klingele Chocolade NV, a Dutch manufacturer, introduced its brand Balance in 2012, a chocolate tablet with no added sugar, largely available in supermarkets and hypermarkets. According to the International Diabetes Federation, Saudi Arabia and Egypt have the highest prevalence of diabetes in the Middle East.
The battle for value is also raging in China. Ferrero China, for instance, increased its retail value share by one percentage point in 2012. Ferrero’s products have a premium image, using gold coloured packaging and advertising to convey a high-end lifestyle to consumers. In India, plain tablets are losing share to filled chocolate tablets, which saw a three percentage point value share increase in 2012 following a 45% value sales gain. The rapid growth in filled chocolate tablets is in line with a growing preference for premium chocolate, which is usually filled with nuts.
The quest for value is particularly apparent in mature markets. Value growth in North America is set to rise by 8% between 2013 and 2018, while volume sales will be stagnant. Even in Western Europe, which is expected to be mired in recession for some years to come, value growth will be incrementally higher than volume growth. A need for differentiation from private label is a recurrent theme in these markets. Natra, a Spanish chocolate and ingredients manufacturer which supplies retailers in Europe and the US, announced in mid-May its commitment to 100% certified cocoa by 2020. Certified chocolate is typically regarded as premium and fetches a higher price than standard chocolate.
Private label has been instrumental in the success of fairtrade-certified chocolate in the UK. Retailers like Sainsbury’s and Tesco offer a wide range of these products. They are competitively priced and are often sourced by cocoa origin, a feature which further boosts their premium credentials. Other European retailers are lagging behind and offer, if any, a very limited range of fairtrade-certified chocolate products. If they take a leaf out of the UK’s book, they will significantly increase the growth potential of certified chocolate in their respective markets. In addition, brand manufacturers intent on maintaining differentiation from private label will expand significantly the number of certified lines available. As many of them have an international presence, certification is set to extend gradually to emerging markets where their global brands have a significant presence. The case for certified brands will become more global than ever.
These projections are not set in stone but are based on consensus. Consensus, however, is based on recent evidence. The evidence for chocolate manufacturers is that consumers across the globe are happy to pay more if they receive added value. The consensus is that this trend will continue over the next five years and so success means taking action now through added-value strategies such as chocolate certification. Failure will be to do nothing.