Chocolate sector grapples with consumer health fears

While chocolate is still the big winner among snack food consumers, future trends in the sector will suit companies who can meet the growing demand for healthier confectionary.

Global Market

Global chocolate industry revenues reached $117 billion in 2014 and on a typical day, more than one billion people on the planet consume some chocolate. The rising demand for chocolate as a snack food is partially driven by busier lifestyles and chocolate’s inclusion as an ingredient in foods that people can eat on-the-go.

Chocolate and other confectionaries make up the largest portion of the $46.5 billion snack category in Europe. In the Middle East and Africa, the market is growing, but off a much smaller base of $1.9 billion, according to a 2014 report from Nielsen N.V.

Emerging Markets

The wealthier emerging markets are driving the increase in chocolate consumption. The chocolate market in the UAE is projected to experience CAGR of around 6 percent between 2014 and 2019.

Mars GCC, Nestle Middle East FZE, Cadbury Middle East FZE and Lindt &Sprungli Group are the major chocolate companies operating in the Emirates.

These players are offering their chocolate products to consumers through hypermarkets, supermarkets, and convenience stores and also specialist chocolate and candy speciality retail outlets.

Luxury

Luxury chocolatiers such as Godiva are expanding their presence in the UAE and Saudi Arabia, to capitalise on the region’s demand for luxury chocolate. Godiva has 17 outlets in the UAE and Saudi Arabia and plans to double that number over the next six to twelve months.

Table 1: Distribution of Chocolate Confectionery by Format in the global market: % Value 2008-2013

 20082013
Grocery Retailers9798.4
Modern Grocery Retail49.955.1
Convenience4.35.1
Forecourt1.82.1
Hyper Markets17.219.4
Supermarkets26.628.5
Traditional Grocery Retailers47.143.3
Food/Drink/Tobacco Specialists19.320.7
Independent Small Grocery2621
Other Grocery1.81.6
Non Grocery Retailers2.91.4
Non store based (vending)0.10.2

Source: Euromonitor report, 2013

Trends

Globally, there are two important trends emerging in the global chocolate market. The first is the drive towards smaller unit sizes of chocolate, towards “fun sizes,” a trend that is driven by manufacturers and retailers, according to a recent report by Euromonitor.

The demand for small size chocolate is also derived from the trend towards healthier eating and the perception that standard-size chocolate snacks contribute to obesity.

Another important trend is the increasing popularity of dark chocolate, due to emerging evidence that it is healthier than milk chocolate. In the US, almost 20 percent of chocolate sales are for dark chocolate. According to a study published in the prestigious Nature scientific journal, milk and other dairy products inhibit the body’sability to absorb the protective compounds in chocolate. In the study, only subjects who ate dark chocolateshowed a temporary increase in their antioxidant levels after consuming chocolate.

From a consumer perspective, the consumer demand for dark chocolate may be driven by the increase in lifestyle-related diseases such as obesity and diabetes and the increasing trend among consumers to read the labels on the packaging of consumer items.

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