7.4 million tonnes of chocolate were consumed globally in 2008, which Rabobank estimates had a retail value of around AUD127 billion. This has been growing as a category for a number of years and in the GEC has continued to prove robust – after all what’s better when you’re feeling down than a chocolate bar.
One of the contributing factors in the growth of chocolate sales has been the ‘premiumisation’ trend which really took off in the late 90’s. This largely fueled the growth of chocolate in travel retail too, where it started to become a legitimate quality gift as well as a wonderful personal indulgence as the duty free price difference was significant enough to matter.
The issue at the moment is that whilst overall chocolate sales are up, the premium market is suffering somewhat from trading down. This is benefiting mainstream manufacturers like Nestle & Mars but not the premium & boutique brands.
In travel retail, global sales for 2008 were up on 2007 but only by around 5% once you discount currency effects. This performance is further discounted by the fact that in early 2008, chocolate brands were forced to increase their prices by 10-15% due to increasing raw material costs. In volume terms, chocolate & sugar confectionery only grew 1.2% in 2008 to just a little under 100,000 tonnes through travel retail. Far from its prior double digit growth rates.
In 2009, Rabobank expects the global chocolate volume to decline modestly, mostly at the upper end of the market, which can only be bad news for travel retail.
Its doesn’t have to be bad though, it all depends on how travel retailers approach the situation. If they doggedly hold to premium brands then yes they’re likely to suffer. However, it is possible to capitalise on the mid-market brands and actually benefit from the trading down particularly if they can add further value propositions via duty free, bulk pack sizing etc.
