Chocolate sales rise as consumers seek small treats
Sales of the essential mood-lifter are growing healthily
● Treats seem to be the answer for many South Africans who are feeling the pinch — chocolate companies are in a sweet spot with the market growing in value by 12% this year, and the festive season is expected to boost that growth.
For most of the year consumers satisfy their chocolate cravings with affordable brands, but over Christmas shoppers are inclined to spoil themselves with pricier, premium brands.
Anje du Plessis, a research analyst at market research provider Euromonitor International, says: “During the festive season we expect many in-store promotions driving volume sales.
“We also expect an increase in more premium brands like Lindt & Sprüngli and Ferrero Rocher as these items are often used as gifts.”
However, as the new year rolls on, consumers will revert to affordable options, Du Plessis says.
SA’s chocolate market is valued at about R6.4bn, according to Euromonitor’s “Confectionery Industry in SA 2019” report.
The value of the market may have grown by 12% in 2019, according to Du Plessis, but volume growth was only 3%.
Tablet-sized chocolate bars have been a firm favourite as consumers get more value for money in this category but tablet prices increased by 10%, while the prices for smaller bars have grown by 7%.
In-store promotions and combo deals are in some cases cushioning consumers against price increases and driving up volume sales.
Du Plessis says that in the past two to three years, chocolate package sizes have shrunk slightly though item prices per gram have increased so consumers are getting less chocolate for their rand, with the size of tablets shrinking from 100g to 80g
The bulk of the market is split between Mondelez (Cadbury), which has 42% of the tablet-size chocolate bar segment; Tiger Brands (Beacon), which has 12% of this segment; and Nestlé, which has 18%.
Du Plessis says Beacon was popular this year due to its lower prices.
Kanyisa Ndyondya, spokesperson for Tiger Brands, says sales of Beacon chocolate slabs grew 8.2% in volume terms and 10.3% in value terms after a packaging makeover, an advertising campaign and improvements to in-store visibility.
Nestlé business executive officer Alex Villela says demand for the company’s chocolates has grown, particularly KitKat, Bar One and Tex.
“The growth was driven by focused communication and innovation on these iconic brands,” Villela says.
Du Plessis says Lindt’s market share grew as wealthier consumers traded up.
The Swiss chocolatier entered SA in 2011 and has grown its presence to include 14 stores at malls across SA and two chocolate studios in Cape Town and Johannesburg.
A Lindt spokesperson says SA’s traditional chocolate market was initially a challenge for the almost 175-year-old chocolatier. This called for a creative strategy that led to the company establishing chocolate studios to stimulate demand.
“SA is the second country [where] we introduced the chocolate experience with the master chocolatier and its chocolate studios. This is very particular to SA,” the spokesperson says.
SA’s chocolate culture — people usually eat chocolate with friends or family in a social setting — is different to that in other countries, where it is often eaten as a dessert, she says.
“In terms of that shared experience, the chocolate studio was a good initiative to cater to this specific demand of the market.”
The studios offer master classes in how to make chocolate creations, from cupcakes to truffles and Lindt’s signature teddy bear.
Du Plessis says: “It is this new love for premium chocolate in particular that makes the South African market so attractive for Lindt and which also sustains [Lindt’s] double-digit growth rates.
“Employed millennials and generation Z tend to have more disposable income and enjoy more premium products, such as Lindt.”
Du Plessis says climate change is affecting the supply of cocoa beans, driving up prices and threatening the industry.
Higher sugar prices in SA have also pushed up chocolate prices.
Another growing area of competition is the artisanal or craft chocolate market, which Du Plessis describes as being “very niche”.
“However … we have seen numerous new product launches from economy brands. They positioned their new launches as a more premium offering,” she says.
Du Plessis cites Pick n Pay’s Indulgence collection and Nestlé’s L’Atelier offering as examples of how the mass-market brands are trying to exploit demand for premium chocolates.