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Stuffed
The British seem to be going off chocolate, but some bits of the market are doing deliciously well. It’s usually nice to top an international league, but perhaps not this one. In the matter of chocolate consumption, Britain is the most self-indulgent country among the world’s big economies.
That may not last. Perhaps brow-beaten by the obesity scaremonger^, perhaps disgusted by their inability to see their toes, the British seem to be going off chocolate. The market has been static for five years and this is troubling Nestle, Cadbury and Master-foods, the three firms that dominate the British industry. "It's a saturated market,” says Jeremy Cunnington, an analyst for Euro monitor, a market research agency. "Penetration has gone as far as it can.” Mintel, another market research firm, agrees, predicting a slight drop in sales volume by 2006. With profits constrained by tight pricing on supermarket shelves, firms will focus more and more on extending a few super brands with lasting appeal, subsuming existing products into them and trying to improve sales value rather than volume.
If they do, it will continue a trend towards emphasising established brand names instead of new ones. Cadbury has stopped selling its Caramel products under their old names, bundling them under the Dairy Milk brand instead. Nestle has been tinkering with its own big name, Kit Kat. A new version of the snack, Chunky, was launched in 1999, followed by bite-sized Kubes in 2003. There was even talk recently of a lemon cheesecake flavour — apparently popular with the Japanese and the Germans.
Not all the news is gloomy, though. There are lively niche markets, where consumers’ sharpening social consciences and growing fondness for luxury have been lifting sales.
Clever companies satisfy both at once. Green & Black’s, a small firm that sells expensive, organic GM-free chocolate, has seen its sales rise five-fold since 1999 to £23.4m in 2003. The firm has recently been moving away from its green roots to focus on its premium credentials, but “organic” and “premium'’ arc linked in many people’s minds.
The "fair trade” segment is another impressive performer. Such organizations guarantee producers in poor countries a minimum price, shielding them from the ups and downs of the world cocoa market. Figures from the Fair Trade Foundation show that Britain ate just over 1,000 tonnes of their chocolate in 2003, up from 82 tonnes in 1998 — a 12-fold increase in five years, albeit from a very low base. The big players are beginning to cotton on, with the Co-op, a supermarket chain, announcing in 2002 that it would source all its own-brand chocolate from "fair trade” suppliers. Most British supermarkets now offer some sort of “fair trade" chocolate.
So wall posh, socially responsible chocolate conquers the market? Unlikely, says Mr. Cunnington. Luxury firms do not compete directly against the big companies — indeed their products have little in common. Most British chocolate contains vegetable solids, and tastes quite different from the “real" chocolate that the luxury firms offer. As for “fair trade”, higher prices for producers mean higher prices for consumers, limiting its appeal to a cost-conscious public. Although the two sectors are expected to continue growing strongly, they are unlikely to escape from their niches. The cocoa-leaf readers see a future of consolidation, limited innovation and a gentle decline in sales volume. Lemon cheesecake Kit Kats all round, then.