Upcoming global trends in Chocolate 2018
This month we ask Industry experts to help us get us up to speed on evolving trends in the chocolate industry since January 2018
According to Mintel, chocolate still remains as one of the most exciting consumer goods in the world. While many products become stale and settle into a pattern of steady growth, chocolate continues to progress. In the Western markets, dark tablets filled with nuts, and flavours such as salted caramel, chilli, and fruits are becoming popular. In Asia, the Middle East and Africa, milk forms the bulk of sales, in part to improve heat resistance. This is an exciting time for the chocolate confectionery market, they say; but only as a result of the difficulties it faces – the perpetual slowdown in the West is now being imitated in some markets such as China. Companies are slowly dealing with the challenges they face, but can expect a low growth environment for some time to come.
Confectionery faces competition from other food products
Both Mintel and Euromonitor claim that there is also a greater competition from new snacks and the growth of being consumer conscious. These both will provide an existential threat to chocolate in the West. The negative health connotations of chocolate will continue, it’s argued and will undermine sales in Western Europe and North America. There is a wealth of new snacks such as energy bars, nuts and meat snacks, which have managed to attract audiences looking for healthier alternatives to confectionery. These products are here to stay and will make it difficult for chocolate to grow, unless it can tap into local health trends. Mintel add that there is also a far broader umbrella of what can be considered as snacks. Not only are products such as snack bars and meat snacks rising in prominence, but products that have not traditionally been associated with snacking – such as cereals and yoghurt products – are now being transformed into products which can be consumed on the go.
Affordability around the world
Another threat, says Mintel, is that this market will continue to have a limited audience in the Middle East and Asia. Relative to other snacks, chocolate is beyond the price range of many in markets such as India, China and the Middle East and this will not change any time soon. Chocolate in China is mostly popular with middle and upper-class audiences because of a standard bar of chocolate roughly equates to 19 minutes of work with the average worker’s hourly wage. Players with a small presence will need to target second- and third-tier cities, where newly-formed middle classes have developed, in order to gain market share. Manufacturers will also need to counteract this problem by setting up local manufacturing facilities and lowering unit price of their products.
Global sales in chocolate
Sales of chocolate are still predominantly from Western markets, particularly Western Europe and North America. Interestingly, Euromonitor indicate that affordability is also an issue. However they told Kennedy’s that their forecast model indicates that rises in average GDP per capita is likely to be a major contributor in China, Mexico, Indonesia, Turkey and India. They are expected to be some of the fastest volume growth markets in chocolate over the next five years. Given the relative lack of affordability of chocolate in many of these markets, the product’s volume growth is likely to come from new and emerging middle-class groups.
Adverse weather and fragile crops
"It has been stated earlier this year by FD Copeland, that adverse weather conditions for crops for the industry’s essential oils like Orange, Tangerine, Mandarin, Lemon, Peppermint and Ginger have been for some time effected by adverse weather conditions and harvest shortages around the globe. The vanilla market for example has been hampered by ongoing droughts. As a result, the price of vanilla confectionery soared by nearly 150% last year its reported. This has been largely driven by poor quality harvests and lower quality beans. The vanilla pod shortage is a challenge for food producers, who have inflated prices to content with. Subsequently, many companies have developed a host of strategies to avoid sourcing the more expensive vanilla. Andrew Fellows, Director of FD Copeland warns of ‘unavoidable’ price increases if crops continue to be effected. In addition Cacao plantations are in regions where the average temperatures have become more volatile a recent study by the International Center for Tropical Agriculture (CIAT) warns that farmers may begin to experience a decrease in cocoa production by 2030."
Euromonitor however report on new opportunities. For example, after the VAT rate fell from 20% to 19% on 1 January 2017 in Romania, fast growth in salaries further pushed up the spending capacity of the population: in March 2017 salaries were also up 14% as compared with March 2016, with the growth in minimum income from 1 February benefiting all employees across the economy. Chocolate confectionery was one of the main beneficiaries of this windfall, as it had yet to establish itself as a category that consumers regularly purchase and remained highly sensitive to income fluctuations. With extra money in their pockets, consumers indulged more often and were more willing to upgrade from low-end products to premium brands.
Growth in Asia
Euromonitor report that Asia remains a strong market for confectionery. Asia Pacific continues to be the strongest market for cocoa ingredients, with a forecast CAGR of 4.5% over 2015-2020 compared with 1.7% for the world as a whole. This growth has made it the second largest region by volume, ahead of North America. Despite the growth in Asia Pacific, the large chocolate confectionery category in Western Europe and North America means they remain very important to the cocoa industry. Growth is weak, but opportunities lie outside chocolate confectionery.
Kennedy’s believes that the chocolate market will be effected by weather, sugar and health issues and the potential media’s treatment of adverse publicity on child labour. On the positive side, there are a very large amount of people that don’t consume chocolate and new markets – like Romania for example. But Interesting times lie ahead for producers who will face mixed blessings this year. But one thing is still for sure – we all still love chocolate and we believe this is and always will be the single biggest driving factor in the industry!