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Nestlé might not be the first brand you turn to when you’re on the hunt for fine chocolate – it certainly isn’t for me – but, as the appetite for luxury grows, this may no longer be the case. More and more manufacturers (and retailers) are jumping on the single-origin label, which promises profitability as well as meeting consumer demand for more value-added and responsible products. As the world’s largest packaged food player, Nestlé is predictably en route to taking this request on board. The company recently announced plans for its new chocolate moulding and packing line in Ecuador, which will use the country’s award-winning Arriba cocoa beans to make value-added chocolates for export and domestic consumption. A bold venture, one may argue, given that the company does not have any premium brands to go with fine chocolate, but single-origin could well be the answer to Nestlé’s long overdue premiumisation conundrum.
A growing number of consumers seek more than just a product – something that offers “one minute of pure delight” or their “daily luxury”, as Barry Callebaut puts it. This trend is driving the demand for premium chocolate. Chocolate unit prices are rising globally, a trend that is expected to continue well into the next five years. Premium chocolate is growing very fast in the US, where negative volume growth is being outstripped by positive constant value growth in chocolate confectionery as a whole, as well as Brazil, which is expected to be the largest contributor to global chocolate confectionery value growth during 2014-2019. With its recent acquisition of Russell Stover, Lindt is setting the stakes higher still, betting on the sustained triumph of high-end chocolate in the US, the world’s largest confectionery market.
Source: Euromonitor International
It is not just premium companies that are contributing to this trend. Mondelez is capitalising heavily on the Indian market, with its Toblerone and Bournville brands positioned as perfect gift options. Nestlé’s premiumisation of KitKat in Japan has resulted in consumers queuing for blocks outside its “Chocolatory” store in Tokyo, and both Hershey’s and M&M’s have their own premium stores in a number of different countries across the world where they sell hand-made lines.
The appetite for luxury is also reflected in the surge in single-origin products. In the UK, Tesco’s launch of its private-label single-origin chocolate is helping the retailer offer quality products at competitive prices. Australia has its first single-origin chocolate producer, Daintree Estates, which grows expensive beans, rich in polyphenols and antioxidants, for its high-end brand. It all makes sense. After all, single-origin equates simplicity with quality, naturalness with health. It also caters to today’s growing responsible consumer base that is asking for more ethical products, as witnessed by the rising demand for fair-trade coffee.
Ecuador grows some of the world’s finest cocoa beans. There are studies showing that cocoa originated in Ecuador, which was the world’s largest cocoa producer up to the 20th century, when production moved to Africa in tandem with colonisation. Described by its proud farmers as “black gold”, Ecuadorian cocoa also reflects the country’s diversity in terrain and its unique location on the equator, which gives the beans diverse flavours, with some tasting more like fruits, while others have a nutty flavour. The quality of the country’s cocoa has not gone unnoticed. Ecuadorian cocoa production jumped from US$94.3 million in 2008 to US$299 million in 2013, adding an impressive US$205 million to global cocoa production, almost equivalent to Brazil’s annual production. Both local and international companies are investing heavily in Ecuador’s cocoa beans, driven by the rising demand for fine flavour cocoa, which is an important ingredient not only for chocolate but also coffee. In addition, Ecuador is strategically placed in between the US and Brazil, the fastest-growing chocolate confectionery markets, which together account for 25% of total global value growth, more than the forecast growth in the whole of Asia-Pacific.
Although Nestlé’s investment in Ecuadorian cocoa may appear contradictory given Ecuador’s limited population and income, considering the rising demand for premium and ethically sourced chocolate in the US and Brazil and the ongoing quest for daily luxuries, Ecuador might be just the perfect origin for fine flavour chocolate. One potential risk with this investment might be Nestlé’s lack of premium brands to go with fine chocolate. Perhaps this could be the right moment to consider launching or acquiring one?
For further information on confectionery, please see the newly published global briefing: ‘Global Confectionery Overview: Key Categories, Countries and Trends to 2019’