Ritter chairman Andreas Ronken on growing in challenging environment - the just-food interview
Ronken believes Alfred Ritter meet trends including demand for clean labels and simple ingredients
German chocolate maker Alfred Ritter is a family-owned company that produces the iconic Ritter Sport square chocolate tablets. The Waldenbuch-based group hopes to the product's unique appearance and the quality of its chocolate to drive growth in Europe and the US. Katy Askew speaks to chairman Andreas Ronken about Ritter's aspirations.
Chocolate group Alfred Ritter has come a long way since it was founded by Alfred and Clara Ritter in 1912 at a small factory in Stuttgart. The company – which is still owned by the Ritter family – now generates an annual turnover of EUR380m (US$404.2m) and is present in 103 countries.
Ritter's largest market is still Germany but the company also has a strong presence in other European countries and has been operating in the US for more than 25 years, chairman Andreas Ronken tells just-food.
Outside Germany, Russia is Ritter's biggest international market and is "very important" to the company, Ronken says. To date, Ritter has "not yet" been impacted by the embargo Russia has placed on certain foodstuffs imported from European Union countries in response to sanctions over the Ukrainian crisis. And, while Ronken concedes operating in Russia presents some specific risks, he adopts an upbeat outlook on the group's prospects in the country, where the group has a Moscow-based sales office.
"In Russia there is a risk of embargos etc. The currency, the rouble, is a concern – as is the [overall economic outlook] because inflation is quite high. But Russians like the products we run there. Overall I am quite positive about Russia, we see [the market] quite positively. We have been in Russia for a long time, we have a very good performance in the market. Russia is a big country."
Other key markets for Ritter include Italy, Hungary, Denmark, Austria and the Netherlands, as well as US, where Ritter sells 2,000 tonnes of chocolate annually. The company is also eyeing growth in the UK, which is a "relatively new market" where Ritter has recently opened a sales office. "We have big hopes for the UK," Ronken suggests.
Ritter is firmly focused on growing its sales across Europe and the US, he continues. "Europe and the US are both very big chocolate markets with a large growth potential. We see growth potential in Europe and for us in the US. Our strategy is Europe and the US... The US market is really big so there is some room for growth. Of course, the US is a very competitive market and there are a lot of players."
So how does Ritter stand out in this crowded market? Ronken says the unique square tablet helps the company's brand, Ritter Sport, differentiate itself on shelf. But the main point of difference for him is the group's chocolate-centric focus and pursuit of high quality products.
"What makes us different from the other chocolate makers out there? First of all we have the square. We are very focused on chocolate. We only make chocolate, we don't make cookies or any other products. We are just about the chocolate from all our knowledge... we think we know quite a lot about chocolate and our people are experts.
"We want to make the best chocolate for the consumer. The differentiation for us is we have a really different kind of chocolate. In our portfolio we have 14 or 15 different kinds of chocolate masses. We don't just have one kind of chocolate mass and then just add different ingredients. Every chocolate mass finds the right combination with the right ingredients. That is different for nuts, for cornflakes. We try to match the chocolate to the ingredients."
Ritter's products are also on-trend across its markets, Ronken says. They offer clean labels, simple ingredients and a wide variety of flavours – from chocolates containing fruit or nuts to cornflakes, pralines, mousses and yoghurt.
Ronken says consumer trends driving innovation differ between Ritter's markets, but the company sees a number of areas on which it expects to capitalise. "For the US, I see a deep trend into tablets, dark chocolate and classic ingredients. For Europe, I see that there are different kinds of trends – you see trends in the region of bite-sized products. But we also see trends driving dark chocolate, tablets. We have choco cubes. It is a smaller unit - classically bite-size is one bite, I would call this two bites. We are looking at a lot of areas."
While consumer trends differ between markets, Ritter has made the decision to maintain a consistent global taste profile for its chocolate portfolio. "You see it in the UK and US, there is a harmonisation of taste... We don't want to make different chocolate for countries. So we adapt to [global demand], we don't want a Germanisation. Of course, in some markets, some of our bigger markets, there is a specific need – dark chocolate or whatever – we have to think about that," Ronken explains.
Ritter Sport is primarily available through "classic retail channels". It has a strong presence in the supermarket sector and is growing in impulse channels. "We are quite big in Germany and Europe-wide in terms of gas stations, so that is an important market. It is very convenient for consumers so [our chocolates are popular in impulse channels".
Ritter is feeling the impact of rising price sensitivity, particularly in markets like Germany where the massive and still growing popularity of discounters are putting supermarket pricing strategies under pressure, Ronken concedes. "We are seeing [pressure on pricing] a little bit more than usual. The discounter retail is growing and is strong. Prices, especially in the German market, are somewhat pressured."
Ronken is coy on Ritter's strategy around pricing and promotion, insisting it is primarily a "retailer decision".
He says: "We have to make good chocolate. The consumer makes the choice. We don't have any influence on the price. Retailers [come to us with] the price that they will pay, we ask 'can we deal with it?' That is our business.
"We don't have any influence on the retail prices. This is by law. If the retailers cut their prices, what can I do? Nothing. We have a one-year deal, which is standard in this business. During that contract for one year our prices are fixed. We don't give any special discounts. The retailer decides what kind of consumer price he will go for. Certainly we don't always like it, but it is their responsibility."
While many of Ritter's largest customers are finding themselves squeezed by the discount retailers, Aldi and Lidl, Ritter is finding ways of working with the discount sector. Ronken says Ritter has products listed in Aldi's German stores and with Lidl "Europe-wide".
"We have to offer our products where the consumers are going to shop. I think in five or ten years we won't be talking about discount and non-discount, we are just talking about shops. Some shops have a variety of 500 products, others 5,000. The consumer will decide [where to shop]. We have to make sure that our product is available for the consumer. I see us in the discount. I see trends going a little bit more upscale – also in their shops. And we have to make sure we are available where the consumer wants us."
Pricing pressure, on the one hand, is proving a challenge to Ritter's margin profile. On the other, Ronken says the company is facing rising input costs in areas such as cocoa and hazelnuts. To Ritter, taking direct control over its supply chain as well as developing sustainable sources of supply is one answer to the complex problem of commodity price volatility. Read part two of the just-food interview to find out more.
- Danone's Q1: four things to learn
- Who will buy Danone's Stonyfield business?
- Column: Why snacking is the new meal
- Interview: Sir Kensington's on sale to Unilever
- Nestle Q1 update: four things to learn
- Tyson shops Sara Lee bakery, Kettle and Van's
- Nestle to cut UK confectionery jobs
- PepsiCo affirms full-year target as Q1 hits mark
- Icelandic to sell Saucy Fish Co. owner Seachill
- Tyson to buy burger-to-entree firm AdvancePierre