July 2, 2008
Sweet Success Against the Odds
By Bainbridge, Jane
Everyday chocolate sales are doing well in spite of obesity concerns and fiscal belt-tightening. By Jane Bainbridge THE BACKGROUND Chocolate is a food with special powers, not least its ability to defy prevailing economic and social conditions. People buy it for many, often complex, reasons beyond simple enjoyment and snacking; while it is associated with pleasure, as shown by the 'Sex or chocolate?' strapline on Galaxy's ads tying in with last month's release of the Sex and the City movie, it is can equally be viewed as a sinful indulgence, an innocent treat, or even a comfort in tough times. This multifaceted appeal has helped the sector remain buoyant despite healthy-eating trends and the credit crunch.
Despite its main constituents being fat and sugar, chocolate has survived better than many other less healthy foods, mainly thanks to its status as an indulgent treat and its dark variants' perceived health benefits.
Value sales of chocolate confectionery are estimated to have risen more than 11% from 2003 to 2007, when the market was worth Pounds 2. lbn, according to Mintel. However, this is a difficult market to measure - manufacturers are reluctant to reveal sales and distribution channels are fragmented. In its data, Mintel includes chocolate bars, countlines where chocolate is a main ingredient, and selflines (bags and tubes), along with Kit Kat (but not multipacks of the two- and four-fingered variants). The latter is often classed as a biscuit, but occupies something of a grey area as it is often sold alongside regular chocolate bars.
While adults may justify their intake with more sophisticated health arguments, this sector is closely associated with children - a link that has brought problems. As the population ages, the number of children is on the decline. On top of this, Ofcom's advertising restrictions now limit how manufacturers of foods deemed unhealthy for children can target young consumers. In schools, meanwhile, unhealthy snacks have been banned from vending machines.
Many sectors in competition with chocolate for a share of the children's snacks market, including sweet biscuits, cereal bars, fruit, dried fruit, seeds and nuts, are experiencing growth as a result.
The popularity of dark chocolate is growing, its high antioxidant content justifying consumption in a similar way to red wine. This makes it a more permissible treat for many adults, even those watching their weight and diet. This has helped sales of dark variants outperform overall chocolate blocks by growing 96% since 2005. The 'quality over quantity' argument has also benefited fairtrade and organic brands.
Manufacturers have faced a number of PR issues in the past couple of years. Cadbury was hit by the salmonella crisis in 2006, which led to it taking Im bars off the shelves, and it mis-labelled some bars by omitting nut allergy warnings, leading to a further recall. Mars was forced into a U-turn after it sparked a consumer outcry by introducing animal rennet to some of its products, making them unsuitableforvegetarians.
The brand and choices on offer to chocolate-loving UK consumers is wide and varied. This means it can be a difficult market for new brands to crack, but not impossible.
Green & Black's is one brand that made inroads, building a strong and loyal following for its high-quality chocolate. Cadbury's purchase of the brand in 2005 gave it a good footing in the growing luxury sector, as well as its core milk chocolate market. Despite Cadbury's contamination scare, it has tried to rebuild confidence among consumers and was behind one of the most talked-about TV ads of the past few years - the 'Gorilla' spot, created by Fallen for Cadbury Dairy Milk. The manufacturer also resurrected its 'Flake girl' concept this year with ads starring singer Joss Stone, although the previously heavily seductive tone was played down.
At the start of this year Cadbury announced a Pounds 44m investment to support cocoa farmers in Ghana and protect the company's future cocoa supplies.
Mars is number two in the market and has a strong record on NPD, most recently with brands including Mars Planets. It, too, has extended into the luxury end of the sector with its seeds of Change organic chocolate bars, and reacted to obesity concerns by introducing calorie-controlled portions of some of its leading brands under the cents little bit of banner, as well as low- calorie countline Mars Delight.
There are a number of players in the growing luxury and ethical categories. Divine Chocolate is an independent Fairtrade company, 45% of which is owned by a bean-growing Ghanaian co-operative. Originally known as the Day Chocolate Company, it changed the name of its brand for better awareness. It also redesigned its packaging early last year to reflect the origins of its ingredients.
Brands including Lindt, Guylian and Kshocolat operate at the luxury end and Thorntons continues to operate shops selling its chocolates as well as branching out into cafe formats.
The popularity of chocolate bars remains stable, but other chocolate confectionery have fared less well over the past couple of years. Almost 89% of consumers have eaten chocolate bars at least once in the past year, according to TGI, but those most likely to consume the greatest volumes are becoming fewer as moderation is adopted.
Although food inflation means that many predicted growths in these sectors turn into a decline in real terms, chocolate is not affected in this way. Mintel predicts a 17% value rise over the next five years to take the sector to Pounds 2.6bn growth of 2% in real terms.
Chocolate: fragmented market is difficult to measure, but upward sales trend persists
Cadbury: dominates with 35.3% share
Mars: NPD response to obesity concerns
Copyright Haymarket Business Publications Ltd. Jun 11, 2008
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