CORRELATING FORCES: THE ROLE OF PREMIUM AND

SUSTAINABLE IN DRIVING GROWTH WITHIN CHOCOLATE

CONFECTIONERY
ALAN ROWNAN
ICCO 2016

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Passport Research

Ingredients

Passport
Ethical
Labels

Euromonitor International

Packaged
Food

THE CHALLENGES FACING CHOCOLATE

CONFECTIONERY

DIVERSIFYING TO ANSWER DEMAND

A SUSTAINABLE FUTURE?

THE CHALLENGES FACING CHOCOLATE CONFECTIONERY

Chocolate confectionery dominates, but better growth elsewhere?

Cocoa Ingredients: Global Volume and Growth by Application 20102015
1,600,000
5
1,400,000

1,000,000

800,000

Tonnes

1,200,000

600,000
400,000

200,000
Chocolate Ice Cream and
Confectionery
Frozen
Desserts

Sweet
Biscuits
Volume (2015)

Chocolate
confectionery
45%
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Pastries

Cakes

Hot Drinks

Dairy

% CAGR 2010-2015

Ice cream and

frozen desserts
15%

Sweet biscuits
10%
5

THE CHALLENGES FACING CHOCOLATE CONFECTIONERY

Growth prospects and constraints

Cocoa Ingredients: Absolute Growth by Main Applications
and by Region 2015-2020
Hot Drinks

Asia Pacific
Middle East and Africa

Cakes

Latin America

Dairy

Western Europe

Sweet Biscuits

Australasia
Pastries

North America

Ice Cream and Frozen

Desserts

Eastern Europe
-20,000

20,000

60,000

100,000

140,000

180,000

Chocolate Confectionery

Tonnes

Euromonitor International

THE CHALLENGES FACING CHOCOLATE CONFECTIONERY

Traditionally reliable markets faltering.

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THE CHALLENGES FACING CHOCOLATE CONFECTIONERY

Chocolate market in Middle East ripening?

UAE

Turkey

Saudi Arabia

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THE CHALLENGES FACING CHOCOLATE CONFECTIONERY

Category characteristics..
Chocolate Confectionery: Growth by Value and Volume 2015-2020
(constant terms)
2,500

2,000

1,500
2

000 tonnes

1,000
1

500

-1
Tablets

Countlines

Chocolate
Pouches and
Bags

Volume (2015)

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Boxed
Assortments

% CAGR (Value)

Seasonal
Chocolate

Other Chocolate Chocolate with

Confectionery
Toys

% CAGR (Volume)

THE CHALLENGES FACING CHOCOLATE CONFECTIONERY

Overcoming the lack of affordability challenge

Sugar confectionery vs.

chocolate confectionery
in China
Other categories
continue to be mainstay
of Chinese snacking

Until this is addressed,

opportunity remains
limited

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10

THE CHALLENGES FACING CHOCOLATE CONFECTIONERY

Consumers In Many Countries Buy More Sugar Than Is Recommended

Grams per capita per day

Daily sugar purchases compared to recommended intake,

2014
140
120
100
80
60
40
20
0

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Sugar (g)
5% WHO recommended intake
10% WHO recommended intake

11

The challenges facing chocolate

Diversifying to answer demand
A sustainable future?

DIVERSIFYING TO ANSWER DEMAND

Cocoa price increases place pressure on unit prices

4,000

40

3,000

30

2,000

20

1,000

10

-1,000

% y-o-y growth

US$ per metric tonne

Cocoa Prices (US$ per Tonne) and Chocolate Confectionery Unit Prices (US$ per Kg)
2002-2016

-10

-2,000

-20
2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

Cocoa Price - US$ per tonne

% Y-o-Y Growth
Chocolate Confectionery Unit Price % Y-o-Y Growth
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13

DIVERSIFYING TO ANSWER DEMAND

Premium the name of the game in the West

Single origin

Diverse
flavours (eg.
mint, chilli)

High cocoa
content (70-90%)

Private Label stealing

market share

Big companies to
redevelop and/or
acquire
Premium private
label products

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Niche products
(eg truffles) and
manufacturers
14

DIVERSIFYING TO ANSWER DEMAND

Mars: Extending the Snickers brand into the road less travelled
Conventional Snacks

Snack Replacements

Many chocolate confectionery brands have

extended their brands into other snack
categories such as snack bars and ice cream.
Few, however, have ventured into dairy drinks
or yoghurt. Snickers is perhaps the best case
example in how far a brand can extend and
has successfully leveraged it brand familiarity
in snack replacement products.

Rest of Packaged
Food

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15

The challenges facing chocolate

Diversifying to answer demand
A sustainable future?

A SUSTAINABLE FUTURE?

Sample strategies
Expansion

Innovation

Cost Leadership

Sustainable Cocoa

Euromonitor International

Develop long-term outsourcing agreements and supply partnerships.

Accelerate growth in Gourmet & Specialties Products business.

Continually improve current portfolio of products and recipes.

Focus on health properties of the cocoa bean and develop products
accordingly.

Improve operational efficiency, with a target of reducing

manufacturing costs.

Increase focus on mid- and long-term sustainability of the cocoa

supply chain, securing the volume and quality of cocoa for the
company.
Achieved through sustainability initiatives to improve farming
practices, farmer education and farmer health.

17

A SUSTAINABLE FUTURE?

Supply chain issues present long-term problems

Climatic
/political
instability

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Demand

growth

Unattractive
employment

Long-term
supply-side
instability

18

A SUSTAINABLE FUTURE?

The divergence of CSR and Packaging claims

70%

250

60%

200

50%

150

40%
30%

100

20%
50

10%

Year-on-Year growth

US$ billion, fixed exchange rates

Fairtrade, UTZ Certified and Other Sustainable Trade and Farming

Schemes 2015-2020

0%
2015

2016

2017

2018

2019

2020

Claims in CSR Reports

Claims on Packaging

Claims in CSR Reports

Claims on Packaging

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19

 Euromonitor International

0%

I do not buy fresh food

None of the above

High price

Supports a charity or charitable

Specialty or new variety

Supports local communities

Strong or well-known brand

Ready to cook

Fair trade

Grass fed/pasture raised

Sustainably produced or raised

Environmentally conscious or eco-

100% organic

Hormone free

Low price

Free range

Health and nutritional properties

Locally sourced or manufactured

Non-GMO (genetically modified

Superior taste

All natural

Value for money

A SUSTAINABLE FUTURE?

What are consumers looking for?

60%

50%

40%

30%

20%

10%

20

A SUSTAINABLE FUTURE?

The Future of Sustainability Claims?

QR Code

Consumers

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CSR

21

A SUSTAINABLE FUTURE?

Clean label confectionery

US$ million RSP

Chocolate confectionery in Western Europe, clean label

claims
2,500
2,000
1,500
1,000
500
0
No Artificial

The emergence ofColours

a
hierarchy

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No Artificial
Preservatives

No Artificial
Flavours

All Natural

No Artificial
Additives

22

A SUSTAINABLE FUTURE?

A world of increasing sustainability credentials

Sustainable Trade and Farming Labels in Chocolate Confectionery Globally (US$
million)

US$ million

45,000

40,000

Chocolate with Toys

35,000

Seasonal Chocolate

30,000

Chocolate Pouches and

Bags

25,000

Tablets

20,000

Boxed Assortments

15,000

Countlines

10,000
5,000
0
2015

2016

2017

2018

2019

2020

The future of sustainability?

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23

A SUSTAINABLE FUTURE?

What next for chocolate confectionery?

Chocolate faces a tipping point

Greater competition from new snacks provides
threat in the West
Chocolate will continue to have a limited audience in
the Middle East and Asia

Sustainability strategy could be the difference between

success and stagnation

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24

THANK YOU FOR LISTENING

Alan Rownan Ethical Labels Analyst

@Emi_ARownan
www.blog.Euromonitor.com
www.Euromonitor.com