Changing consumer perceptions about chocolate have fostered growth Spain, offsetting a weaker performance from sugar confectionery. But, writes Francisco Redruello of Euromonitor International, some of the factors negatively affecting sugar confectionery, such as market maturity and an expanding own-label sector, are also expected to restrict value growth in chocolate over the next five years.
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The confectionery sector in Spain has been boosted by growing consumer awareness about the health credentials of chocolate, which have been key to the growing premiumisation of this sub-sector of the market. According to Euromonitor International’s research, retail sales of chocolate rose by 7% in 2006, making the most significant contribution to an overall increase in confectionery sales of 6%.
Chocolate is already the largest category in the Spanish confectionery market, with a share of 46% of total retail value sales, followed by sugar confectionery and gum, which account for 39% and 15% respectively. But chocolate is also one of the most dynamic areas of the market, witnessing both changing consumer perceptions and considerable innovation and new product development.
Euromonitor International’s research reveals that chocolate confectionery sales have been driven by the launch of new flavours of chocolate bars, the increasing proliferation of sugar-free offerings and rising sales of high-quality and premium products. The perception of chocolate has undergone something of a transformation and is now increasingly seen as a healthy product. Adult Spanish consumers are demanding more products that are considered healthier and natural, leading to an upturn in sales of dark chocolate and high cocoa content products. Indeed, health-oriented consumers are returning to chocolate amid claims that offerings with a high cocoa content contain considerable amounts of antioxidants, and can also help to reduce high blood pressure.
Euromonitor International’s research also shows that the impulse channel remains crucial to sales of countlines and other chocolate confectionery offerings designed for snacking. Impulse purchases in convenience stores, confectionery outlets and petrol forecourts accounted for two thirds of Spanish chocolate confectionery retail value sales in 2006. Given the generally higher retail mark-up in such convenience outlets, this helped underpin value growth in the market as a whole.
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By GlobalDataHowever, Euromonitor’s research also revealed that retail unit prices of sugar confectionery continued to decline in 2006, albeit slowly. Although the market has seen increasing sophistication in new product offerings, including sugar-free and fortified products, these have still failed to prevent further price declines.
Sugar confectionery lagged slightly behind market growth in 2006, with a 4% rise in retail value sales, partly as a result of market maturity, fierce price competition and the increasingly negative health perception of sugar-based snacks in the Spanish market.
Sugar confectionery remains very price-sensitive, with Spanish consumers displaying very little brand loyalty and easily switching between competing products. This was particularly evident in products such as turrones (typical Spanish nougat), where consumers continued to switch to lower-priced private label products. Meanwhile, brands are launching value-added offerings at the same price as standard versions in order just to maintain sales.
Sugar-free confectionery continued to make gains in 2006, particularly products such as toffees, Christmas turrones, medicated confectionery and mints. With the exception of products specifically targeted at children, most other products were also available in sugar-free versions for the rising number of older consumers who are increasingly demanding healthier alternatives to traditional offerings.
The introduction of a nationwide smoking ban at work and in most public places from 1 January 2006 has provided a boost to the gum market, with many Spanish smokers turning to gum to calm their withdrawal anxiety. Furthermore, the growing presence of functional gum and the declining popularity of sugarised formats led to a slight increase in average prices in 2006. Spanish consumers continue to buy into the functional gum concept, especially products that promote oral and dental health. Indeed, functional gum represents a growth area in the Spanish confectionery market, registering retail value growth of 6% in 2006. While sugar-free and functional gum have performed well, retail value sales of bubble gum declined by almost 4% during 2006.
In general, new ingredients, new packaging and new products continue to maintain the interest of Spanish gum consumers. The introduction of ever larger multipacks directed at heavy users from both Wrigley and Perfetti was one of the most noticeable changes in 2006, and clearly indicates that consumers are demanding value for money.
Looking ahead, in spite of the growth in certain gum categories and chocolate, Euromonitor International forecasts a slowdown in overall confectionery value growth over the 2007-2012 period, principally stemming from an expected decline in the key sugar confectionery segment. Sugar confectionery is predicted to see a drop of 4% in constant value terms over this period with its retail value performance constrained by continuously mounting price pressure from private label and the increasingly negative health perceptions these products carry particularly among young parents.
Moreover, market maturity and the increasing importance of private label are also expected to lead to a slowdown in value sales of chocolate confectionery and gum, with these categories forecast to grow by just 4% and 2% respectively in constant value terms over the 2007-2012 period.
Moreover, Euromonitor’s research shows a trend towards increasing price polarisation in these two segments. On the one hand, mid-priced brands are likely to struggle to compete with private label ranges, which are set to continue to gain importance over total sales. On the other hand, manufacturers are expected to step up investment in premium and healthy lines to achieve product differentiation.
In terms of innovation, Euromonitor International’s research highlights that new cocoa-intensive dark chocolate confectionery, often with a fairtrade and/or organic positioning, will increase in prevalence over the coming five years. In turn, this should sustain the value sales performance for the category as a whole. Meanwhile in gum, Euromonitor predicts an increased focus on new lines featuring energising and antioxidant properties, most likely available in juice-filled versions and moving away from the traditional functional focus on teeth whitening and oral care.
