Blog: Dean BestDoes the recession mean posh chocs are out?

Dean Best | 29 January 2009

In recent years, the story in chocolate has been: go premium.

High-end Swiss chocolate firm Lindt & Sprungli has enjoyed double-digit growth on both sides of the Atlantic – even if currency fluctuations meant the company's 2008 sales missed its own heady expectations.

Upmarket chocolatier Godiva was gobbled up in a US$850m deal by Turkey's Ulker Group at the end of 2007.

And the likes of Mars have swiftly moved to broaden their chocolate portfolios from the mainstream to the pricier ends of the market.

The trend towards premium chocolate, and particularly dark varieties, has been held up as one of the more buoyant trends in confectionery – as this just-food report on the category highlights.

And while chocolate makers have been scrambling to tap into the demand for posh chocs, one major manufacturer has been criticised for being too slow to enter the market – Hershey.

Hershey moved into the premium space in the US last year with the launch of Bliss and its venture with Starbucks. However, industry watchers have claimed that Hershey's late entry into the category means it is playing catch-up with the like of Mars and Lindt.

For some, the economic downturn and falling consumer confidence should have little effect on chocolate – and the buoyancy of the premium end of the market. Chocolate is, after all, seen as one of the more defensive consumer good sectors in times of recession.

This week, however, came claims that the once-buoyant demand for premium chocolate in the US is starting to wane.

Upon announcing Hershey's 2008 results on Tuesday (27 January), the company's CEO Dave West said US consumers had begun to trade down when buying chocolate – a trend that has helped the oft-criticised Hershey.

West said US consumers had begun trading down from the "premium" and "trade-up" segments of the chocolate market to more "everyday" products, particularly among gifting and novelty products.

"We saw a significant slowdown in both premium and trade-up and a shift more down toward everyday in the fourth quarter to the point where both the premium and the trade-up segments were pretty much flat for the fourth quarter – which is a significant slowdown versus historical growth rates," West told analysts.

According to West, premium chocolates sales rose 9% last year but the stagnation in the last three months is likely to last into 2009.

"What we'll see in the category next year is a little bit of space at retail will shift out of premium and trade-up as those parts slow down and are less productive. They'll move back into things that are everyday," West said.

And Hershey, West insisted, is likely to benefit.

"We're relatively well-positioned in the category for that kind of a shift because of the strength of our core brands. We did see some of that happening in the fourth quarter and we think we'll see it through the beginning of 2009 as well."


BLOG

Danone closes WhiteWave, who will acquire Stonyfield?

Danone completed its US$12.5bn acquisition of WhiteWave Foods this week. The move will roughly double Danone's presence in North America, where WhiteWave is a top four dairy player. ...

BLOG

Premier Foods pension news offers cheer but challenges remain

Premier Foods plc revealed today (28 March) it has secured a deal with its pension scheme trustees that will see the UK food maker reduce its pension burden....

BLOG

Another reshuffling of pack at Hain Celestial

Hain Celestial, under the scrutiny of the investment community in recent months and facing some challenges in its domestic market, has announced another shuffling of its management pack....

BLOG

FrieslandCampina looking to sell final non-dairy asset

FrieslandCampina, which today served up higher profits but lower sales for 2016, is ready to offload the last non-dairy business owned by the Dutch cooperative giant....

just-food homepage



Forgot your password?